I believe in the power of positivity. I want to believe that the worst of our nation’s economic times are behind us. That said, I believe that all people in a position of firm leadership or ownership should be proactively assessing their firm’s economic growth and cash management strategies and exploring opportunities to improve both.
That’s why I’ve developed a number of strategic ideas for you to consider in your quest to be economically proactive:
• Get your cash act together. Tighten up your billing and collection policies, bill work in process (WIP) more often, go through all outstanding WIP to more conservatively project its true value, and hold billing managers and owners responsible for the health of their WIP and A/R. Establish absolute measures, like no WIP in excess of 30 days or $X dollars or no A/R in excess of 45 days past due or $X dollars.
• Make every owner truly responsible for their own WIP and A/R. Billing managers and owners who exceed your WIP and A/R standards should be held accountable, including the enforcement of financial penalties and stopping draw payments for partners whose financial house is not in order. If you feel I’m being harsh, think about it this way. When a partner doesn’t bill and/or collect cash for the work he or she performs using firm resources, and they still draw cash, they are really borrowing money from the other owners – maybe without their permission. Cash is a critical success factor in 2009 and those firms who manage cash well should be able to weather things well.
• Bill with higher self esteem and more vigilance. Consider billing retainers or deposits for engagements over a certain dollar amount. Progress bill jobs in process but not yet complete, especially those that exceed certain dollar thresholds. Do a better job of explaining the value you’ll bring to the client and avoid discounting your firm’s services whenever possible.
• Be more conservative when recruiting but don’t miss opportunities to add real talent. The labor pool is temporarily loosening, which means you shouldn’t have to pay the fees you paid in 2007 and 2008 to hire experienced people. If you have specific openings, be creative and use online resources like LinkedIn (www.linkedin.com) to connect with experienced people in your market. If a great potential senior, manager or partner comes along, consider hiring them as the labor shortage will be right back upon us all when the economy bounces. If you’re worried about being over-staffed, consider bringing on more interns, contractors, per diem people or other temporary staff during busy season.
• Refocus on your firm’s marketing and sales programs. As your firm’s backlog reduces, refocus your energy on your business development activities, processes and education. Most firms have not developed their business development muscle, because most partners and staff have been focused on client service and production because the work was overwhelmingly there. In this economy, make sure you have a marketing plan in place that calls for personal marketing activities from every member of your leadership team in 2009 and provide the education and coaching your people need to be successful. For some busy season marketing ideas, read my partner Tamera’s blog entitled, “Must Do Busy Season Marketing Activities” at http://blog.convergencecoaching.com/2009/01/must-do-busy-season-marketing-activities.html.
• Right size if you have to. If your capacity far exceeds the work you have in backlog and in your pipeline and you fear true losses or cash impacts, you may have to right size your team. Consider eliminating overtime, asking certain team members or teams to take a cut in hours (perhaps during the summer months), reducing intern hours or other strategies to manage staffing costs without having to undertake a staff reduction. As a last resort, if you have to undertake a layoff, carefully devise your timing and communications strategy and work to over-communicate with your team members, because such an action is unsettling to the team, impacts morale and can cause good people to fear for their jobs and start seeking alternatives. If it has to be done, do it with maximum compassion and professionalism and your people will remember that you did something very difficult for the health of the organization and that you did it well.
• Keep investing in your firm’s human capital initiatives including retention programs, IT investments, and “soft skills” programs even though you feel like your people have fewer employment options and your retention may be stabilizing. Beware of a false sense of security that enables you to rationalize pulling back on recruiting and retention programs, because you still have to develop your people to ensure they are ready to lead in the future. And, your people are going to reflect on how valued they felt during the “bad times” when the “good times” roll around.
• Continue to follow your firm’s client acceptance procedures and sell to your ideal target clients. Lighter backlogs and pipelines may cause your firm’s business developers to engage with clients who don’t fit your firm’s ideal target just to fill capacity. Later, when the work resurges, this will exacerbate the problem most firms have today spending precious human resources on unprofitable or unsuitable engagements.
• Over-communicate with your team members. Whatever your plans for economic proactivity, be sure to communicate a level-headed, can-do message to your people regularly – even when the news is less than stellar. Your people will have a higher degree of trust and confidence if you communicate frequently and use straight talk to describe the firm’s status and any concerns or focal points you have. Further, your people are your firm’s best hope to perform well in a tough economy. Share the strategies your firm is employing and ask for their support and commitment in implementing them. Show your team where the bar has been set and they’ll help you to clear it.
• Over-communicate to your clients, too. This economic uncertainty provides a wonderful opportunity to add value as a trusted advisor and to supply much needed guidance to clients who can benefit from your financial management experience. Explore the American Institute of CPAs’ new Economic Crisis Resource Center (www.aicpa.org/economy) for some great resources for advising your clients on the economy.
No matter what, remain as positive and future-focused as possible. In the midst of uncertainty, people follow leaders who are willing to develop proactive strategies and affirmatively implement them – without fear, negativity or uncertainty. Differentiate yourself and your firm and take the time now to devise some proactive economic strategies. By doing so, you’ll define your firm’s destiny in a time when proactive leadership is most important.