Leadership and Rising Market Situation

by Krishna on March 17, 2007

This is the second in a series of posts regarding how companies and their leaders and managers should change their organizational strategies to suit different market conditions. The previous (first) post was the lead-in article “Leadership in Different Market Situations“.

In this post, let us consider a rising market situation. The most fundamental thing is to understand that the high growth potential is temporary. With increase in production by existing producers, influx of competition and enhanced public awareness, growth will slow down at some point in the future. The length of the high growth period itself is difficult to predict as it is highly dependent on the industry and the consumers in that market. But end it must.

This means that time is the most critical resource. Any wasted time means wasted opportunity. This gives the first indication of what a management team must look like. The members must be extremely dynamic and quick-thinking. They should be able to change direction and make decisions quickly, while considering all the multiple variables floating around. Such a situation demands intelligence, hard work, high accountability and ego-less behavior.

Because of untapped potential in the market, gaining market share has to be a primary goal of the company. This means that marketing should be reporting frequently and directly to top management about strategies and results. All the necessary questions about the right marketing message, the correct target audience, the visibility of the message, etc. should be asked. Once the market settles down, the companies with the biggest market share would have established their brands and it is very difficult to displace them.

Profitability is less important than positive cash flow. Without cash, there will be no money to finance the growth of the company to meet the demands of the market. There will be less investment in necessary infrastructure and technology – This will cripple the organization’s capability to meet consumer needs. Hence, a viable business model is a must. Without it, the company will run out of gas while competitors forge ahead. On the other hand, any sort of misguided emphasis on cost control can be pretty suicidal – it is more important getting the cash in than keeping it in.

Human resources can be challenging in this situation. A company that has good buzz in the market or media can recruit and retain employees with the promise of a lucrative IPO. A company with good cash flow can pay astronomical salaries to hire the best talent. But a business which has neither advantage (perhaps because it started late) finds it extremely difficult to hire good talent. And when a company is losing ground (in reality or by perception) in the marketplace battle, most capable professionals will use the opportunity to jump ship faster than you can imagine.

In my opinion, team and motivational exercises are, for the most part, useless (in this situation) because the staff is only motivated by the success of the organization. If the leadership has a poor business strategy or there is less likelihood of it succeeding, there will be heavy attrition. It is pure capitalism – plain and simple.

A final point is should the organization prepare itself for a slowdown in the market? My primary answer would be “No” because it will take away valuable time and attention from management. This includes wasting time on putting together detailed HR and operational processes and hiring temporary employees or contractors. Many of these activities have unwanted side effects that introduce organizational dysfunctions, reduce business fluidity, flexibility and transparency and finally, send wrong signals to the employees.

Typical human resource departments (even when they mean good) operate in ways that directly conflict with marketing needs. When marketing is the focus, do not put power in the hands of finance, procurement and human resources. If you need high growth, empower the heads in sales, marketing, production, operations and business development, and have the other departments be “support departments” to meet their goals.

When the market starts slowing down, the company which has invested well in its products and marketing will be in a much better condition and have greater time to manage the transition because of more resources (like cash) and flexibility in the marketplace (like raising prices). So every business leader should ask: How can I bring my company to be in that position?

{ 2 comments }

Howie March 18, 2007 at 11:54 pm

I agree. It would be a great disadvantage to the company if it slows down. Fast development is sought by businesses to produce more products and gain fast profit.

Charlie March 19, 2007 at 8:07 pm

It would only mean loss if the company slows down. Time is too important to be neglected. A few hours of stoping production will only leave the company trailing from others.

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