By Wes Ball. Wes is a strategic innovation consultant and author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success (Westlyn Publishing, 2008) and writes for Leadership turn every Tuesday. See all his posts here. Wes can be reached at www.ballgroup.com.

They’re everywhere!  They’re everywhere!

The best opportunity in decades to create growth is being squandered.

Yep, it’s happened… just as it does every time there’s a fearsome economic downturn.  The cost-side micro-managers are back in force.

Forget about creating demand, because everyone knows that as soon as money gets tight people stop spending money.  Forget about inspiring the entire company to work toward a common goal of building long-term strength and market dominance.  It’s time once again to cut everything in sight and micro-manage every decision from top to bottom.

It’s nothing new.  But it is amazing that, despite decades of research that proves that companies who invest in demand-creation during downturn fair better during the downturn and much better afterward, the first thing that happens in most otherwise smart companies is to cut, cut, cut and manage, manage, manage.

It’s happening from the Fortune 100 all the way down to small regional companies.  And it is killing the future potential of those companies.

I just witnessed the most appalling and extreme example of my 30 years in the business world.  The holding company that owns a medium-sized, internationally dominant company fired all of the company’s top managers due to the economy.  We’re talking chief executive, head of international sales, head of international marketing, plus several others.  In their places, they put one cost-side micro-manager to “whip things into shape quickly.”  There’s no real need for much in between, because he is going to be dictating the limited strategies that everyone else will carry out.

I wish I owned one of their competitors who have wanted to overtake their long-term brand dominance, because this is the best time in their history to accomplish that goal.  Employees are demoralized.  They don’t dare try to make any decisions or suggest anything strategic.  All the brilliance that was the reason for their being hired is of no apparent value.  This is a plum ripe for the picking.

Now, this is obviously an extreme example, but the Wall Street Journal is full of examples of just this kind of thinking, as top executives pull back into a cave of cost-side micro-management.  Cari Tuna wrote an article last Monday in the Wall Street Journal about the damage done by micro-managers.  As she notes in a quote from one interview, “Who wants to be in a company where you are not allowed to think?”  She observes rightly that there is a complacency among employees of micro-managers.  But that only touches the surface of the damage done.

Such managers are the antithesis of leadership.  By taking charge to fix everything in sight, they not only demoralize the smart people they paid so much to employ, but they also make the company vulnerable to attack from a broad range of competitors who might never have believed they could effectively knock them out.

We just watched Starbucks decline dramatically even before the worst of the economic downturn was revealed.  That happened due to cost-side micro-management combined with a lack of understanding of what customers had actually been buying from them.

Magnify that exponentially, and you have what we are about to see in the marketplace.  Well-known companies and brands are going to be micro-managed into such weakness that we will see a very different set of leading brands in many product categories in five years.

How can you survive the economy and still maintain your strengths, so you have a bright future 6, 12, or 18 months from now?

1. Don’t lose sight of what your customers really have been buying.  That may take some new research, because most companies don’t really know why their customers buy from them.  Here’s a hint: if you think it’s due to your price, your product’s performance, your quality, your availability, or any other “functional” factors, you are wrong.  Managing those factors will only make you weaker at a time when you need to enhance the ego-satisfaction fulfillment of your customers.  In a downturn, people want to feel better about themselves (I call that “self-satisfaction”) and to believe that other people think better of them (I call that “personal significance”).  Miss those and you are imminently vulnerable.
2. Charge more than you think you can.  Almost every company out there believes they have to charge less than customers are actually willing to pay… even in a time of recession.  Every research study we have conducted (and that is tens of thousands) has shown that most companies in a category are over-delivering on price (meaning they could be charging more).  That’s a lot of money thrown away.  And remember: it takes an average of three dollars in gross income to generate one profit dollar lost.  So every dollar you don’t get is actually worth three that you have to generate later.
3. Stop measuring outcomes; measure causes.  Very few companies measure or track changes in the causes that drive the final outcomes they desire.   By only looking at final outcomes, it is impossible to know how to improve those outcomes.  You must understand and measure changes in the factors that drive greater demand and profitability and customer loyalty in order to affect sales, net profit, stock price, and all the other final outcomes corporate executives are held responsible for.

I say it every time I can.  This is the best opportunity in decades to grow dramatically and to come out on top in the 6 to 18 months a recession typically takes to cycle out.  Don’t allow fear to drive you into cost-side micro-management and undermine your chances to achieve that goal.

What steps is your company taking to remain strong and not become vulnerable?

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Image credit: Ball Group