When the Going Gets Tough
Successful Alumni Share Strategies for Managing in a Difficult Economy
By Riley Mackenzie
Hard times teach valuable lessons. It's not for nothing, after all, that they call experience the School of Hard Knocks.
And so, as the United States economy emerges from its harrowing yearlong recession and limps into the beginnings of recovery, there are lessons to be learned-lessons about managing in the midst of economic crisis, lessons in leadership, lessons in keeping your head when all about you are losing theirs.
"You've got to share what you can and speak openly and let people talk about the problems."
Thomas Cogan, MBA '99
Senior Vice President
Most of all, the recession has taught lessons in the essential core of the business world: how to maximize the human capital that is the engine of capitalism. At heart, tough times or not, it's all about the people.
School of Management alumni across the spectrum have learned those lessons, and are only too willing to share their hard-won wisdom.
The human equation
Tough times can ratchet up employees' anxiety, and managers say helping them work past that is key.
"I've been surrounded by folks who have been impacted at the greatest extreme," says Thomas Cogan, MBA '99, a senior vice president in Buffalo for the banking giant Citi. "I've seen folks in our organization who have lost their jobs, their colleagues. But the resilience of people is amazing. In hindsight, you have to communicate. You've got to share what you can and speak openly and let people talk about the problems. To pretend there's not a problem and sweep it under the rug is probably the worst thing you can do."
"I told my people that we would have control of very little, and so the things we did have control of would be key to our survival and success. I think that strategy has helped us enormously."
Sherry Sutton, CEL '94
President and Chief Creative Strategist
Sassy Design Group
"Most of us had not lived through this kind of downtown before, so there were many unknowns," says Sherry Sutton, CEL '94, president and chief creative strategist of Sassy Design Group in Buffalo. "I told my people that we would have control of very little, and so the things we did have control of would be key to our survival and success. I think that strategy has helped us enormously."
Michael Weiner, MBA '90, who left a long career in government service to become president and CEO of the United Way of Buffalo & Erie County, says nonprofits have been squeezed as well, making it imperative to think creatively about how to move the enterprise forward. "We're committed to the notion that you solve problems through teamwork, and work in small teams in order to achieve better success," he says. In addition, he says, "In this environment, there is more value in people having eclectic skills and being cross-trained. That's a good strategy for a small organization like ours, having people who can multitask and are multifunctional in their skill set. You get more efficiencies, and it's also good for employees because they may strengthen their competitive opportunities in the future."
"Even when things were bad, we made sure we didn't let anybody go. We saw pportunity at the end of 2008, and we wanted to be in a position to take advantage of it."
Thomas McManus, MBA '06
Sometimes loyalty to one's employees means making hard choices. "We made the decision to adjust everywhere else except head count," says Thomas McManus, MBA '06, CEO of KegWorks, a supplier of draft beer equipment and bar accessories. "Our managers were tasked with making sure their people were busy. Even when things were bad, we made sure we didn't let anybody go. We saw opportunity at the end of 2008, and we wanted to be in a position to take advantage of it."
And, says Gerry Murak, CEL '91, EMBA '96, founder of the turnaround consulting firm Murak & Associates, companies may find that hiring amid tough times can bring a strategic advantage. "There's a lot of talent out on the street," Murak says. "A lot of companies are saying, 'We can't afford to hire anyone.' In some cases, you can't afford not to hire someone if you want an opportunity to significantly upgrade the talent pool of your company. For example, maybe a company contracted out to an engineering house to do that service, at a markup. But if you use that service maybe half a year, it winds up better to hire a person at a reasonable compensation package."
Indeed, if there's a silver lining in the fallout from recession, it may be that individual employees are finding opportunities to reinvent their careers to meet the demands of the new economy.
"These times have brought us some relationships that we would not have had before, were the economy different," Sutton says. "We have had the benefit of contracting with an intern/entry-level designer almost full time, whom we would hire if things were more clear for 2010. And we are forging relationships with some very talented individuals who have created opportunities for new ways of doing things and expanding our service ability. The opportunity has definitely come about due to the state of our economy."
"We're committed to the notion that you solve problems through teamwork, and work in small teams in order to achieve better success."
Michael Weiner, MBA '90
President and CEO
United Way of Buffalo & Erie County
"The challenge is ensuring we are getting things done with fewer folks," says Catherine Campbell, EMBA '01, senior vice president for government programs at BlueCross BlueShield of Western New York. "I view it as an opportunity for people to shine and be creative thinkers. We make quite a bit of investment in our exceptional performers to make sure they stay with the organization and to make them part of that organizational success, whether through additional new opportunities for advancement or as part of larger self-driven teams."
Sharon Randaccio '76, MBA '81, is president of Performance Management Partners in Williamsville, which provides consulting services for businesses in such areas as executive coaching and succession planning. In her work, she sees downsized employees finding surprising new satisfactions. "It's a wonderful time to be reflective instead of just going into panic mode," she says. "What I'm seeing is a number of people taking a step back and saying, 'Maybe I'd like to give back to the community.' I see a lot of people from the corporate world looking for something more meaningful in their lives."
"In some cases, you can't afford not to hire someone if you want an opportunity to significantly upgrade the talent pool of your company."
Gerry Murak, CEL '91, EMBA '96
Murak & Associates
"For people individually, it's a great opportunity to show that they're capable of doing more," says John Persons, EMBA '00, regional vice president of operations for the food retailer Tops Markets. "When every organization is looking for efficiencies and cutting back on people, there's always going to be that environment of competing priorities. Make yourself available for these tough priorities, and show supervisors you can handle things you haven't been assigned before."
Rethinking the organization
Beyond the subtleties of employee morale and development, managers say the economic downturn has inspired ideas about restructuring that should make their organizations stronger in both good times and bad.
"It's about efficiencies," says Campbell, of BlueCross BlueShield. "These changes have allowed us to shift people into areas like sales and marketing, versus back-end office positions. We've also taken some very specific job descriptions and expanded the opportunities within those job descriptions to give people additional knowledge that will allow them to be much more flexible throughout the enterprise."
Randaccio, the executive consultant, cites statistics indicating that one in five employees nationwide are disengaged from their work-plugging away without passion or a real commitment to their company's mission. "This is a time when you need everybody to be at their peak productivity," Randaccio says. "Everything from compensation to organizational structure really needs to be rethought. The way you traditionally get more status, money and vacation is to move vertically up in an organization. Now that organizations are flatter, even something as simple as how you define promotion needs to be looked at."
"For people individually, it's a great opportunity to show that they're capable of doing more."
John Persons, EMBA '00
Regional Vice President
In the entrepreneurial world, the vital task of identifying and securing start-up capital also is being restructured, says Adam Wallen, EMBA '02. Wallen is CEO of Bio2 Technologies, a spinoff medical device company that is developing tissue engineering scaffolds for use in orthopedic treatments. "The buzzword out there right now is that the current venture capital (VC) model of funding is broken and there needs to be a new paradigm for investment fundraising," he says. "In the next three years there will be a huge culling of VCs, and there will be very few VCs anywhere except the coasts. As we're going out and talking to some venture capital funds that two years ago were cash-rich, now they're having a difficult time raising their next funds, and they're increasing their reserves."
Making it work
Rather than circling the wagons in hard times, managers says that investing in marketing and technology can pay off in the short term and on into an uncertain future.
"I've been through past downturns in the economy where we stopped all investment in moving forward, and that hasn't happened this time," says Cogan, whose group performs a daily reconcilement function to ensure the integrity of Citi's balance sheet. "People in a business are on the cost side of the equation or on the revenue side; we are squarely on the cost side. But our group in Buffalo has been able to work with other parts of the organization and help automate some manual processes, and we've achieved a significant expense savings out of that process. It's not a significant investment for us to do that automation, but it does require someone to say, 'Yes, it takes time to work on this.'"
"This is a time when you need everybody to be at their peak productivity. Everything from compensation to organizational structure really needs to be rethought."
Sharon Randaccio '76, MBA '81
Performance Management Partners
Persons says Tops' data mining through its proprietary bonus card enables the company to respond flexibly to consumers' changing demands. "Customers are looking for more value now," he says. "In many cases, we're seeing our customers move from a national brand choice to a private-label choice. In the past, if a customer was a loyal shopper of Tide laundry detergent, now they might try Tops brand. We've seen that across the board. We've also seen an increase in the use of coupons, and so we're putting more coupons in our ads to capitalize on what customers are looking for."
Reaching out to new markets has paid off for KegWorks, McManus says. "While our competitors were cutting sales force and inventory, we went out into the market," he says. "We went out and starting hustling business while everyone else was holding back." The result was landing the company's biggest customer ever, a balcony fabrication job for a luxury condominium project in the Boston area. "Now we're growing like crazy in that segment," he says. "That's a very radical shift for our company. We're an e-commerce company-business came to us. It's a major strategic shift to come from passive marketing and go to outside sales."
The university edge
Finally, School of Management alumni are quick to note that the university can provide an edge in expertise that is more important than ever in tough economic times.
"I've leveraged the School of Management a fair amount," says Wallen, of Bio2 Technologies. "I've gone back to my professors just to validate what we're doing and do a check of it. It's always useful to get another voice, another opinion, another group of experience, and academia is an underutilized resource."
"The buzzword out there right now is that the current venture capital (VC) model of funding is broken and there needs to be a new paradigm for investment fundraising."
Adam Wallen, EMBA '02
Added Murak, the business turnaround consultant: "This truly is a great time for companies to link into UB and the School of Management. There are so many ways in a university to create new opportunities through research being conducted by faculty and students. It really is a great time for collaboration.
"Every downturn historically has resulted in new businesses. People can't find work, so they go out and create it. It's generating a lot of opportunity for start-ups, and for research grants that can catapult a company to growth-even in this economy."
Riley Mackenzie is a Buffalo freelance writer.
Faculty Advice for Business Success
School of Management faculty have seen what a few economic cycles can do to a business. Here are a few "best practices" based on the functional expertise of our faculty:
Professor Brian Becker reminds both HR professionals and the senior executive team that if you are going to differentiate on the outside, you will need to differentiate on the inside. "This means understanding which jobs drive strategic success, and disproportionately investing in your strategic talent," Becker says. "A differentiated workforce strategy is equally important in periods of growth, as well as in periods requiring workforce reductions."
Professor Arun Jain warns business leaders that during a recession it is very tempting to cut the marketing budget, engage in price wars and grab any live customer who might be even remotely interested in buying your product. "Unfortunately, these will be precisely the wrong marketing strategies," he says. "Instead, the firms should recommit themselves to serve their core, most profitable customers. They need to understand the core values sought by them from the product offerings and emphasize them instead of pushing 'bells and whistles.'"
Operations Management and Strategy
Professor Harold Star says that customers are the lifeblood of your business and recommends that you make holding onto them "priority one" during tough times. "No illusions-this is hard to do," he says. "Holding customers probably means cutting prices at a time when you're working hard to protect your own bottom line. But making customer retention your top strategic priority will leave you well-positioned when the economy recovers. It's far easier to sell to a current customer than to bring a lost customer back."
Professor Kenneth Kim has a very simple piece of advice for businesses in a difficult economy. "Watch your debt," he says. "It's critical to moderate it during lean times."