By Alan Beaulieu on Mar 30, 2020 9:31:12 AM
I learned a valuable lesson from my father-in-law 40 years ago, and it has served me well in life and in business. I hope it helps you. He taught me the value of staying calm when it would be all too easy to overreact (it probably helped that he was an engineer from Maine who grew up on a farm – stoicism probably came easily!) Now, when a problem or catastrophe comes my way, I look out the window and say, “The world is still spinning, and the air is still breathable.” And with that grounding I can begin to tackle any problem.
Step two is to apply analytics to the situation. We love numbers here at ITR, as they have no emotional content and they never lie (though they may be misapplied and misunderstood). We use the 3/12 and 12/12 rates-of-change in most of our work, especially at the company level (see our website for a video and written tutorial on how to use them for your company). These tools work wonders in normal times in terms of giving leaders a view of their future, most often long before anyone else sees it. However, these extraordinary times require something faster than a 3/12. The situation is much more fluid, and you, as a leader, must often respond on a daily or weekly basis.
We suggest that you use a rolling 10-day metric of orders or RFQs or whatever measure best serves your firm. This will be particularly helpful for manufacturers or distributors who work nationally or at least in a large region or who are exempt from shelter-in-place orders. The 10-day metric will give you a quick window into your immediate future and thus guidance into layoffs and/or utilization of government programs to keep employees on paid time off and/or two-thirds pay for an extended period. It will also give you a metric to discuss with your banker, and we suggest that you become very friendly with your banker, as they do not like surprises. It will also give you a solid grasp of your future cash flow. We suggest you do this extra work, even if all feels and looks fine in your firm at the moment. This is a very fluid situation, and it could change quickly. Use the 10-day method to keep agile and ahead of the curve.