Don’t Be Fooled into Cutting Your Budget

The first thing that is taught in crises management class of business schools is to evaluate the situation. That is a smart move. Gather data to determine the existent of the crises and keep gathering even after you have enough to determine what needs to be managed.

The warning here for those students who are reading…do not fall for the solution to improving revenue shortfalls by increasing sales, increase price and cut costs. That is the answer you will get from most crises management classes that deal with how to overcome business issues related to lost profits.

In over 80-% of the cases studied where businesses are having problems with maintaining profits levels their problem is in their operations set-up. They either have a quality issue or a productivity issue that is causing consumer reactions to the product or service the company is offering.

I see too many times the CEO’s of the world switch on the crises management with the first thing they command is cut the budget. That over-reactive solution to the problem usually leads to the operations budget being cut…payroll cut back, inferior products purchased, travel stopped and all business development (networking and customer relations activities) are stopped.

What that premature action does is shut the business completely down. Now, I have seen situations where shutting the business down was the only solution but that was only because the CEO and upper management refused to listen to their employees’ attempt to tell them there is a problem.

Of course all of this is based on a company that has employees and usually in the manufacturing industries, but the same mistake is made in Small businesses and sole proprietor businesses. They react to cutting the costs and raising pricing as the solution when in fact it is an operations situation that needs to be overhauled. Either the delivery of the service or the product itself is questionable. These are problems Direct Marketers and Multi-Level Marketing companies’ experience. Lack of trust from the consumer.

There are solutions to correcting these situations and all are related to establishing a Standard Operations Procedure…yes the ol SOP. Too many businesses have no idea what one is or how it is made because they spend their efforts looking for a slick CEO instead of a ‘kickass and take name’ COO.

The Bottomline: Set your operations up to standard before you start the business and your crisis management will be simple to manage.

To learn more about what else Mr Duke has to offer go to IBGS site.