by Ron Robinson, “Resilient Business Practices: Overcoming Disruption with Compassion, Collaboration, and Knowledge“
The ability of business leaders to design strategies that anticipate and manage disruption determines whether their business fails, survives, or thrives. Creating resilience in the face of disruptions, including those related to political actions, ensures their ability to prevail in adversity.
It could be argued that much of the disruption in the 21st century comes from government actions on taxation, free markets, interest rate policy, and regulation. In other words, politics.
A concrete example: the three recessions of this century were caused by similar legislation and policies during the three collapses:
Dot Com recession, March-December 2001 – In 2000, the Taxpayer Relief Act and the FED’s actions reducing interest rates made debt financing readily available. The injection of capital into World Wide Web startups has created a frenzy of startups created by entrepreneurs without a business plan or management capacity. The FED raised interest rates in March 2000 and the music stopped with 40,000 business bankruptcies in 2001.
The Great Recession, December 2007 – June 2009 – The Gramm-Leach-Bliley Act overturned the regulation of banks combining commercial and investment functions. The Department of Housing and Urban Development (HUD) opened mortgage lending to low-income borrowers, and unregulated commercial banks consolidated subprime mortgages into mortgage-backed securities. A slowdown in the real estate market led to a loss in value of securities, a loss of value of banks and business experienced a staggering 60,837 bankruptcies in 2009.
The pandemic recession, February-April 2020 – The Tax Cuts and Jobs Act (TCJA) of 2017 reduced the corporate tax rate from 35 to 21 percent. The Economic Growth, Regulatory Relief, and Consumer Protection Act reduced the number of banks subject to stricter federal supervision and reduced regulation of small and medium-sized bank holding companies. The stage was set for federal and state governments to shut down the economy to stop the COVID-19 pandemic and experience the deepest recession this century.
In their studyWilliam G. Gale and Claire Haldeman of the Brookings Institution concluded that the TCJA had the effect of reducing Treasury revenues. “Growth in business formation, employment, and median wages slowed after the enactment of the TCJA. International profit transfers declined only slightly, and the increase in repatriated profits primarily led to increased stock buybacks rather than new investment. Much of the increase in investment was concentrated in oil and related industries and appeared to be a response to rising oil prices, not lower rates Indeed, other investments did not increase much, and even overall investment growth petered out at the end of 2019.
The common thread across three recessions connects policy actions to cut taxes, services, and regulation to corporate bankruptcies. The government’s remedy has been to tighten regulations and increase taxes and services to revive the economy. When the next bubble bursts, the trend toward cutting taxes, cutting services and imposing regulations will have to be challenged.
At the same time, to cope with the changes that political actions can have on the company, it is necessary to implement tactical internal strategies. Tools and talents used to strengthen finances include dashboards, engagement, problem solving, and positive reinforcement, as demonstrated in the following activities:
My neighbor Roy invited me to visit his veterinary clinic. The first thing I noticed were two graphics on the wall next to reception. One chart was titled “Sales” and the other “Expenses.”.“In the grooming area and operating room, two charts were displayed titled “Number of Clients” and “Client Satisfaction.”
I looked at the two charts behind the front desk. Each chart presented weekly data over a year and tracked seven years of comparative data. The sales graph shows that for each year, revenue is higher than the previous year. The spending chart tells a different story. Lines grew steadily over the first few years before leveling off and remaining relatively stable over the last four years.
“Weren’t you worried that your staff would know how much money you make? I asked.
“No, they thought I was rich,” he laughed.
Roy has enjoyed seven years of consistent revenue growth while controlling costs. He had defied the predictions of many entrepreneurs. He shared the importance of keeping everyone focused with charts and using positive reinforcement. Its reinforcement – 10 cents on every dollar earned by the clinic during the same period of the previous year became a monthly bonus. Employees choose how to spend their bonus.
“We really started moving forward when we started annual planning sessions,” he explained. “We meet every year outside of work to update our plans and make changes. » I could see the pride written on his face.
The combination of dashboards coupled with positive reinforcement (bonuses), decision-making and problem-solving by staff, as well as full inclusion in annual plans and weekly business meetings, has resulted in everyone being part of the company and seven years of consistent revenue growth.
To increase sales, reduce waste and costs, and ensure customer satisfaction, verbal and visual feedback is a way to strengthen the financial component of a business and create resilience to avoid disruption. At the same time, business leaders and managers must do their part to elect responsible representatives who bring greater stability and economic growth through responsible tax and regulatory policies.
