The Case For A Slowing Economy (& how to deal with it) PLUS The Case For Flexible Strategic Planning & Quarterly Performance Reviews
5 November 2023 Newsletter
“No, that is the great fallacy: the wisdom of old men. They do not grow wise. They grow careful.” — Ernest Hemingway
Hope you’re Thriving!
It’s been a full week with a pair of 2-day offsite meetings and a few other meetings. It’s now November, and around six weeks until the end of the work year here and the traditional break at Christmas.
I encourage you to make the most of the next six weeks!
The Case For A Slowing Economy
(and how to deal with it)
Often, I’m asked, “What are you hearing across your clients?” It’s anecdotal and a tiny sample, but for many who are in the general economy, we’re noticing a slowdown. As the RBA intended, the interest rates are slowing inflation, but the slowing economy results from actions taken last October. Such is the lagging impact of interest rates on the economy.
Consider the quote below published this week from this article:
“AMP chief economist Shane Oliver believes the RBA should hold off longer before considering another rate hike, saying leading indicators point to a resumption in easing price pressures and more rate rises “will further ratchet up the already high risk of recession next year.”
Things to consider include:
- Enough cash to weather the storms. Change your dividend, spending or cash-collecting policy to try and achieve your Core Capital Target
- Consider your policy toward bad debtors, especially if you’re B2B. Consider which clients might be troublesome
- If necessary, review your budget and how a slowdown might impact it. Recut the budget if necessary
- Consider how to shorten your Cash Conversion Cycle, which is the time from when you pay suppliers for something until the time you receive payment for that same thing
- Review the 7 levers to improve cash flow
Remember, the first job is to survive!
The Case For Flexible Strategic Planning
On several occasions this week, I was reminded about a cornerstone of our work. First and foremost, we should always ask what’s the most important thing for the business. What does the business need right now?
It’s easy to think that an agenda for a strategic planning workshop should always be the same: to follow the process no matter what.
Equally, it’s easy to think that the agenda should change often to remain entertaining for delegates.
But the job to be done in contemplation by the coach is to utilise experience, observations and data to bring the right agenda for the business at the right time.
This means that sometimes the agenda needs to be adapted to solve cash issues as above, sometimes people issues, other times execution issues and sometimes strategy issues. The discipline of consistently reviewing all elements is essential, especially as teams gain a deeper understanding of each. But sometimes, the business needs flexibility, and the coach must do what the business needs right now.
On a few occasions in recent weeks, I’ve had to adapt to suit what each business needs right now. Each for their own reasons, but necessarily focussing on what matters.
The Case For Quarterly Performance Reviews
One of the most disliked meetings from both managers and direct reports is the annual performance review.
HR would instruct the pair that a meeting needed to be held whereby the manager would say things they otherwise wouldn’t about the employee’s performance, and the employee would sit through, probably disagreeing, with both likely begrudging HR.
Equally, in mid-sized businesses owners would be reluctant to hold performance reviews, anticipating that employees would use it as a platform to ask for pay raises or, worse, resign if challenged about areas of improvement.
But it doesn’t need to be this way.
The performance review process should be a separate and different from the salary review process. Employees should know each and why they are different.
The performance review should review the role scorecard and both the manager and employee should rate each element of the role scorecard, then review it together.
The salary review should review the salary relevant to the market. The more reliable data, the better.
If the company plans quarterly and sets priorities quarterly, and some people are also setting individual priorities quarterly, why then should performance reviews not be held quarterly?
If the leader approaches this with the mindset of a coach rather than an authoritarian, the performance review becomes much easier. For the job of the coach is to help the employee become better.
This means helping them to see their blind spots.
Helping them to re-align with what the role demands through the role scorecard. For the role scorecard identifies what the business needs from that employee right now.
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