The first time I heard department stores referred to as dinosaurs (e.g. facing extinction) was at least twenty-five years ago, and even then it was old news. So when Terry Lundgren, CEO of Macy’s, gave an interview to the Wall Street Journal talking about how he was using the downturn to improve operations, I thought it wise to pay attention.
First and foremost, Lundgren is a realist. When asked if he “worried about” customers holding out for discounts, he replied: “I’m not worried about it. I’m counting on it.” Leaders need to face facts and adjust expectations to those realities. That is something that Macy’s, along with every other retailer, does. In other words, you don’t count on a turnaround, you make a turnaround happen.
How you do that varies from business to business. Leaders such as Lundgren teach us how you can use the downturn to your advantage. Not overnight, but over time. Here’s how:
Make tough choices. Now is the time to get rid of anything and everything that does not add value to the bottom line. Adhering to the principles of value engineering will help an organization optimize operations, but that is not enough. A leader must look to kill old habits. Reduce practices that “feed the monster,” that is, projects that inflate egos rather than earnings. For example, reduce the number of staff and skip-level meetings. Let people do their work rather than prepare for meetings with senior staff.
Look for the up and comers. When times are flat or in a downturn, look for new ideas. Challenge your best and brightest to make suggestions to improve operations, attract new customers, or work more collaboratively with vendors or each other.
Live resilience. This is the first significant downturn that younger employees have faced. Keep spirits high by emphasizing self-determinism. Show them how seasoned leaders respond to tough times by focusing not simply on the business, but also on the people propelling the turnaround. Good leaders use these opportunities to describe what is going right as well as what is going wrong. Acknowledge the obstacles, but show people how to go around them or climb over them.
Reality dictates that business turnarounds require economic rebounds. No leader can tweak his operation into success; you need customers to buy what you offer. But if you do not improve what you offer and how you offer it, you may miss the upswing.
Preparation for the upturn should be well underway at most organizations, but turnarounds cannot rely upon what those at the top tell financial journalists and analysts. Leaders must shepherd the spirit of the turnaround through every level of the organization so employees not only see the possibilities, but more importantly, discover what they must do to make them real.