Managing to Ride the Downturn

 

Robin Kumar Das Dhaka Diaries /Dec 2019

  

In economics, a downturn or recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. When an economy registers negative GDP growth for two or more consecutive quarters, it could be termed as a recession. As an automobile salesman, the economic slowdown had a very simple meaning to me, “not meeting my monthly targets for 3 months in a row”. Besides that, there is the quarterly thrashing at the zonal or national reviews you are called to attend. More scientific – if you are required to make a sales recovery action plan every month for more than 75% of your dealers and for 70% of your product portfolio, you are facing a business slowdown.

According to the IMF, there have been four global recessions since World War II, beginning in 1975, 1982, 1991 and 2009. However, if we evaluate the period between 2009 till 2019, there would be many more periods of shrinking demand if not a full-blown recession. Some Indian sectors now are facing the worst slowdown in months, even years. The Indian automobile sector, the fourth-largest in the world in terms of sales have been facing deep wounds for the last 10 months on account of declining demand, resulting in a significant sales slowdown. The situation is similar, if not so serious, in a few other sectors such as real estate and banking.

In the last 15 years working as an automobile professional, I can confidently say, the interim relief between two good cycles would further reduce to less than 12 to 18 months in the future. This ideally means that in an average productive job life cycle of three decades you will encounter more than 15 to 20 periods of shrinking demand with few being a severe slowdown in your business for longer intervals.

I have witnessed and heard about so many specialized training programs on Leadership, Capability building, Strategic thinking, Execution excellence and so on; but none on “How to manage an economic slowdown. It’s high time to develop specialized training modules to handle the recession! One goes through severe pressure and difficult situations in a recessionary environment, and our ability or lack of ability to handle it further makes things difficult for us.

To put it in the context of this article -Are we “trained” enough to handle slowdown? Based on my years of experience and working with hundreds of dealers in different geographies, we may have many different approaches to the situation. Some have really worked in the situation and some we only keep wishing that will work. Analyzing the various patterns of behaviors in a recessionary environment, I have a strong conviction on some of the actions that have really helped me to ride the slowdown in a better way. This article is my take on a few of the things worth trying when you are in the quagmire of the business slowdown.

1. Managing “Yourself”

This is the most important element of all of what I will discuss. It’s your ability to hold oneself when the times are testing. If you are in crisis, you are more required to display your best of composure. Being composed will help you to negotiate better out of the crisis. When the situation is bad, believe it’s bad for everybody around you are connecting to. Not being able to manage would typically mean irrational response to a situation, inability to work out alternate contingency plans. You start to lose trust in people around you, and above all, you tend to lose your grip on the situation. You are most likely to manage the market better if you can manage “yourself”.

2. Manage your relationship with the Channel Partners

Amongst all the channel management skills, it is your ability to build faith and trust in the Channel that drives the best results. You have spent so much time and effort to positively engage with your channel partner. You have displayed amazing behaviors that had built trust over the years. In this challenging and uncertain business environment, you need to make maximum out of the relationship and work out mutually beneficial strategies. You need to accept that these are difficult and very challenging times and while the intent is always to do the best, it might not be the output. You must hold it strong, because together if you stay, you can make a BIG difference.

3. Everyday communication with the Channel

Communication is the most important tool to reduce the complexity in the environment. You need to build this information bridge that is used frequently and with great intensity and build a common bond of trust. Share real-time information on actions you intend to initiate to ease the situation. Collaborate with the Channel partners in deriving joint action plans. Nurture the partnership so strong that communication both ways is transparent, timely and honest. You need to give the confidence that a win-win resolution to the crisis is more getable when both the manufacturer and channel works in extreme close coordination.

4. Accuracy in target setting, forecasting, and monthly projections

You need to give extraordinary scrutiny to the targets proposed by the management. We do work on an annual target and plan resources accordingly. But in this volatile economic environment, no one can forecast demand for the year. However, the first three things discussed above -managing self, managing relationships with the channel and building those information bridges can help you to tightly link with the Channel partners and help you to better absorb the volatility. Keep the management updated real-time on the monthly projections, do not delegate this work to your subordinate. Don’t be over-ambitious and just put off the situation that’s it's fine and nothing to worry. It may be tough to spell out, but it is always better to preempt shortfall and communicate to management well ahead of time rather than keeping to yourself till too late. Do remember that in good time you would always have 20 to 30% of the channel partners whom you can easily stretch over to 15 to 20% of their original plan. But when time is tough the percentage of dealers ready for the stretch will be very less and quantum of stretch that can accommodate will be even lesser.

5. Identify the right/focus products to bet upon

As in cricket, be it the One days, T20s, or the Test matches, if just 2 to 3 players bat their heart out you have enough runs on the board to defend. The same stands for the product line we have for the market. While each brand by virtue of its birth is there to address a very specific customer need which it feels no other available products can cater, theoretically! But that’s not the reality always. As the chips are down, be very clear on the product and the type of resources you want to deploy for the anticipated result. Do not spread too thin trying to do justice to all products and hoping that all have equal probability to perform. It does not happen that way.

6. High intensity of focus on Retails

This is the most important mindset change needed in you. The biggest task in hand in not just to increase wholesale but engaging with the channel to improve the retails. The challenge to increase the retail momentum may take weeks and months of hard work, while billing can be done in a few hours. Believe me, you have enough work in hand and you have enough stocks till the last retail able vehicle is sold.

7. Keep a tab on bulk deals

Even though the buying sentiments are low and most businesses would conserve cash rather than spend in this uncertain time, still, there would be opportunities in the market space. There will always be those captive requirements, institutional deals that will keep coming. Put the most dedicated and mature resource on this deal. If you or your channel partners can outsmart the other fellow competitors, this will be a good booster to sales and overall confidence. My measure of performance would be that if you have been able to convert 60 to 70% of the last 10 deals you engaged into, you are doing awesome. If the output is less, realign your resources, revisit the strategy, and rework on the proposals offered. 

8. Positive Deviation

This has been the best tool for me to sail through tough times. Uncertain times are also the time to prepare for the good time that’s going to follow soon. Focus on long terms strategic enablers which normally gets missed out when you are busy hunting in the good seasons. Work on strengthening the channel which will be ready to deliver when the uncertainty is through, and normalcy is restored. Spend time on the capability building for self and the team. Recheck on the resource week allocation of the allocated manpower, and if few of the allocated positions are still open its time to complete the recruitment and get them on board. If you are not sure that you would deliver the committed numbers for the month or quarter, why not work to resolve the things you are more sure of and which commit better results for the future.

This article just touches upon a few of the aspects, there would be many others that can be added.