Dollars and Sense—Worthwhile Moves for Tough Times

Posted by Bill - October 21st, 2008

There may be a shortage of banks willing to make loans and a shortage of investors willing to buy stocks, but there’s no shortage of advice on how CEOs and other business leaders should respond to these uncertain times. Silicon Valley’s venture capitalists, famous for moving in lockstep with one another, are now busy sending emails and making presentations to their portfolio companies, filled with advice on how to weather the economic storm.

Two weeks ago, the partners at Sequoia Capital organized a meeting of their portfolio companies to offer their advice on surviving the financial crisis. Among their words of wisdom: use zero-based budgeting, review salaries, spend every dollar as if it were your last. Shortly thereafter, Benchmark Capital sent an email to its portfolio companies with advice such as: don’t spend money until you have to, don’t hire incremental employees until you can’t stand it, don’t move out of your office until you are sitting on top of one another.

It’s all perfectly unremarkable, utterly predictable, and thoroughly unsurprising—as if leadership in difficult times is best practiced with a green eyeshade and a calculator. So, with apologies to my friends in the VC community, here’s some additional advice that I hope makes sense, even if it doesn’t obsess about dollars and cents.

1. Don’t just remake your balance sheet, reassert your mission statement. This crisis is as much about values, trust, and business integrity as it is about declining stock prices and limited credit. Be sure to remind your colleagues, your customers, and the world at large why what you do matters, why you started the company in the first place, and what kind of impact you’re trying to have on the world. Here’s a question I always ask CEOs to think about: “If your company went out of business tomorrow, who would miss you and why?” Well, since plenty of companies may go out of business, remind everyone around you why staying in business matters.

2. Have a fresh and original take on what’s happening now, and be sure to offer as much hope as you do fear. No one’s going to be surprised to learn that you plan to cut costs, solidify financing, figure out what projects can be delayed. But no one’s going to be inspired by those moves either. Some of the most brilliant leadership decisions have come at the darkest times for the economy. How did Milton Hershey, the candy giant, respond to the Great Depression? With a “Great Building Campaign” that kept all his people employed, resulted in such legendary structures as the Hotel Hershey and the Hershey Theater—and laid the foundations for a resilient corporate culture. Think more like Milton Hershey than “Chainsaw Al” Dunlap.

3. Sure, you should manage your financial capital carefully. But you should manage your “relationship capital” even more carefully. If you’re anxious and uncertain about the future of your business, just imagine how anxious and uncertain your customers are about the future of their business. Call them. Visit them. Find out what they’re struggling with. Is there a gesture you could make towards them—even a symbolic gesture—to communicate that you have a stake in their success?

4. Invite your people to help figure out the future. There’s something about tough times that brings out the rugged individualist in most CEOs: “It’s up to me to get us out of this mess.” But with economic problems this complex, and the stakes this high, the “lone genius” model of leadership doesn’t cut it. Don’t think of yourself as a problem-solver, think of yourself as a solution-finder. And assume that you’ll find some of the best ideas in the most unexpected places. There is “hidden genius” all around you, from the quiet genius of your colleagues to the collective genius that surrounds your organization. Seek it out, invite it in, put it to work.

Oh, and one last thing: Don’t listen too closely to advice from venture capitalists.

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