Surviving the global recession will require particular emphasis on cash flow, customer relationship management and business process improvement, among other things.
By David Brown
11 Feb 2009
This is not a time for reacting; it is a time for thinking and taking action. It is important that the positives outweigh the negatives, and a time to build and strengthen the morale within the organisation and the dependent communities. It is also a time for focusing on relationships, and further strengthening them, so that all parties mutually benefit from the changes that are planned and implemented.
It is imperative that we also consider the value each party brings to the organisation and how this is passed onto the community of suppliers and more importantly the customers, while continually looking for ways to improve essential business processes. The morale of employees plays an important part in the day-to-day interaction with customers ensuring relationships are strengthened through the highest level of sales and customer services.
Before making any rash decisions, it is worth considering carefully the following steps:
• Assess the current situation.
• Establish a new business plan focused on the three areas of customer relationship, cash flow, and business process monitoring and improvement.
• Assign accountability and monitor closely actual outcomes against the revised plan.
Such a complete assessment of your organisation's potential is needed to determine where improvements can be made. Practical and low or no-cost strategies can then be selected to strengthen the business model.
Surviving the global recession will require particular emphasis on cash flow, customer relationship management and business process improvement supported by a strong business intelligence and performance management programme.
1. Cash flow cycle
The revised business model will take into account the current fragility of the banking system. The emphasis will be on managing the cash flow cycle to ensure there is sufficient cash to support the business operations. According to Ciaran Walsh in his book ‘Key Management Ratios’, the flow of cash through an organisation is sometimes compared with the flow of blood through the body. Cash is in continuous circulation through the ‘arteries’ of the business carrying value to its various ‘organs’. If this flow is stopped, or even severely reduced for a time, serious consequences result.
There is sufficient evidence to support that it is already becoming extremely difficult to obtain short-term loan facilities to manage labour and expenses. It is critical to the survival of an independent organisation that the cash tank does not run dry. One of the main key performance indicators will be monitoring the cash-to-cash process closely, so that appropriate adjustments can be made in a timely manner. A significant area of change should be in identifying more reliable ways of managing cash and working capital so that the organisation is less dependent on the banking system for short-term loans.
2. Customer relationship experience
Profit plays a significant part in the generation of cash. This being the case, a major focus should be placed on generating revenue as a significant contribution towards surviving the economic downturn. The customer base is the most important asset an organisation has, and an immediate source of sustainable income. The cost of retaining and developing new business in the existing base is considerably less expensive than developing new customers.
The most effective way of retaining and extracting more business from the customer base is to focus on strengthening current relationships. It is important that customers can rely on their suppliers, in bad times as well as good times, and that the customer experience remains second to none. Through the developing relationship, customers should be encouraged to recognise the value of the products and services provided. This will establish a competitive differentiator and build a platform for long-term security for the organisation.
The performance metrics to monitor the customer experience should be focused on quality of service which falls into the three main areas: reliability, flexibility and effectiveness. In the longer term, a more collaborative supply chain community will evolve, further strengthening the customer relationship.
3. Operation business process improvement
The next area that is significant is the revision or improvement of essential business processes. This will provide a basis for cost reductions, improved customer service and increased employee morale. It is glue that holds the revised business strategy together and ensures that goals and objectives are met.
Business processes are monitored to ensure they are being executed in accordance with their design and analysed and reviewed as part of a culture of continuous business process improvement. Business intelligence and performance management are integrated with the essential business processes. This is to ensure that a culture of continuous business process improvement is developed. Aligning business processes to the strategic plan and monitoring the processes will provide a platform for accountability and build a more effective workforce.
David Brown is director of Biz Performance, a Singapore-based firm that provides business intelligence, performance management and process management consulting and advisory services.
