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Investment vs expenditure, closed ham fist or open hand, relevance – leading in turbulent times

By Mark P. McDonald | July 05, 2022 | 3 Comments

Signs of weak managementManagementLeadershipEconomy

Change is inevitable. All change is not equal. Today companies and their customers face change generated by the broader economy – change coming from the outside.  How leaders choose to respond to that change will determine how they lead in turbulent times. Specifically, how they look at expenditures and investments and how they manage relevance in times of turbulence.  As Peter Drucker is quoted as saying, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”  That logic starts with you hand and how you handle uncertainty.

Ham fisted Financial Management

The CFO and Finance take center stage when the economy gets rocky everything becomes a managed expenditure. By managed we mean cut or curtailed with corresponding under investment in the future. It is a ham-fisted approach. In times of relative calm, Finance finesses expenses and investments with an open hand, using their fingers – an open approach.  Ham fisted is the opposite.  Close your hand and you can only do one thing – pound things down.  Everything, expenditures, and investments are the same with little subtly.

Across the board cuts, moratoriums, restrictions, freezes, increases in the number of approvals are all ham-fisted approaches. These old policies and plays are from a time when an organization had only two speeds – full steam and reverse. Then the only way CFO’s could slow things down was by creating friction, throwing sand in the gears of operations, and turning a company inward.

CFOs employing these strategies may use different words, but it is all the same things.  It is treating everything as an expenditure, there are few to no investments.  These strategies all come at the worst possible time.  There is no good time for ham-fisted approaches because a company cannot cut or will itself to success.  Success, even in turbulent times, requires customers.

Customer Relevant Management

Turbulence occurs outside of your company. The traditional approach to managing in a downturn puts the company at the center of all consideration. This approach may be effective in keeping the company alive, but too often the result created zombie companies – kind of living but wandering in search of strategies.

Turbulence changes a company and customers context.  Context changes outside of a company or its customers control. No individual firm, no matter how big, creates or resolves inflation on its own, puts or pulls an economy out of recession, flubs or fixes the global supply chain. Where some see external challenge requiring internal compromise, others know that navigating change is different than battening down the hatches to ride out a storm.

Relevance should be your guide

Turbulence requires leaders and navigation.  An open hand, selective actions and guided decisions replace the closed ham-fist. Turbulence is a time of constant discernment and decisions not about the company but about its customers.  Discernment and decisions that constantly evaluate the company’s relevance to customers and to its future.

Using relevance as a guide brings two things to the table.  First it turns a leader’s focus outward – to their customers and their challenges. Asking how we can remain or increase our customer relevance. Understanding how turbulence changes customer context requires listening and engagement that prove you are there for them. It also raises the value of your products and services – the more relevant, the more essential.

The second is relevance drives action. Ham-fisted management exists because companies do not know what else to do. Relevance informs their decisions.  With relevance as a guide you know customer and company priorities, where to curtail spending and where to make investments.

Some thoughts on how you know you are relevant:

  • Customers engage with you, they ask your opinion, they bring their challenges, they seek your input and take on a situation.
  • Customers see you as part of the solution to their situation, they may need to reduce expenditures, but they see working with you as an investment
  • Customers continue to invest with you, when you demonstrate such investments are the most relevant to them
  • Companies create relevance by listening and adjusting their products, sevices policies and operations to align with customer values
  • Companies create relevance by truly meeting customers where they are and working with them to get them to where they want to be.

Relevance is a guiding light in turbulent times. It is the only thing that matters, particularly when change comes from the outside, from the broader economy.  Those who remain relevant remain in the game when the winds calm down and the economy moves from recession to recovery.

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