Make The Tough Decisions When Times Are Good

Consider the following scenario for Memely Corp.: Sales volume is down. In fact, it’s been down for awhile now and doesn’t show signs of improvement in the near term. The company is developing some new products of its own and is in negotiations to add some new services via joint ventures, but it will take some time before any of this will affect profits. So, Aiden, its founder and president is taking the following steps to improve the bottom line:

• Cutting sales commissions for the field force.
• Terminating its supply contract with its long-term vendor and striking a deal with one of its competitors offering materials at lower costs.
• Eliminating some in-house positions to reduce overhead.

Aiden explained these moves in a memo to the entire workforce citing “market pressures” and “the changing competitive landscape” as the reasons.

But the employees see it a bit differently. In their eyes, the company leadership didn’t do their jobs, which has had negative consequences for the company and now they’re the ones that have to pay the price. How eager do you think they’ll be to get on board for the new initiatives?

And what about the ousted vendor? They say they had no warning their prices were unacceptable and feel ambushed by the sudden decision and denied a chance to “work something out.”

Think about how differently things could have been if management had exercised a bit of foresight — and courage — when sales were booming:

• They could have taken a look at field compensation — the percentages, the break-points, etc. To be a good variable comp plan, it should have been stress-tested for viability in bad times as well as good.  At a time when the sales force was doing well, the field would have been more receptive to a restructuring of the compensation plan if that was appropriate.
• They could have done some business with several vendors rather than put all their eggs in one basket. Buying from only one gives that vendor too much power to overcharge, and sets the stage for hard feelings when their prices start having too much impact on the client’s bottom line.
• They could have done an evaluation of corporate positions, looking for overlaps and redundancies and made changes then.

USE IT NOW: What can you do today to prepare for times when sales are less robust?