The global credit crunch in the last two years has hit companies in all sectors of the economy. However there is one sector where the impact has been unusually significant and that is with mid-market companies. These companies provide a significant number of jobs in the economy. However these companies tend to make changes more slowly that their competitors who are larger public companies and the smaller, often mom and pop type businesses. In the US and Canada these mid-market companies have also struggled to keep or secure additional financing to cope with the credit crunch.
According to a white paper prepared by IBM titled The Enterprise of the Future: Implications for Mid-size Organizations published in February 2009, it was stated that "mid market leaders must cover a much wider front and cope with much greater uncertainty. They must 'master complexity' ... for everything is important and change can come from anywhere".
A study of private companies by Deloitte Consulting in 2006 found that most leaders in Canada thought the top three strategies that would increase the value of their companies were: (1) focus on revenue growth by increasing the volume of business; (2) upgrading their management team; and (3) product and service innovation. However we find that in the tough times it is often very difficult for mid market organizations to make progress in these three areas. Rather mid-market companies can be more effective if they focus on: (1) rationalizing their product and service offerings and pricing; (2) improving asset utilization including selling surplus assets and non strategic business units; and (3) restructuring overhead costs to stabilize and then rebuild the business. However this alternative approach requires more planning and detailed costing information than is readily available in many mid-market organizations. We find that unless companies can bring together the key people to share the key information and agree on the most important issues to focus on during tough times - the company quickly becomes dysfunctional both internally and in the market place.
In the good times, doing nothing can often be the best solution. Management of mid-market organizations hate to make changes - especially when the changes are controversial. Therefore delaying a decision pending more information or delegating so an employee can solve the problem on their own works well in the good times. In the tough times it is a different situation. Now the company needs to focus on what will change and when and by how much will they change. In the tough times the challenges come by the bucket load rather than one at a time and they are seldom the challenges you expect!
Tough times usually mean it is time to button down the hatches and wait until the storm passes. CEOs who practice this approach find that when the good times return, there are competitors who have shot ahead and now dominate the market place. These successful companies decided to dance in the rain rather than run for cover. The successful mid market companies know that making a decision, even when it is a leap of faith has a better chance of success than doing nothing when the businesses is heading for disaster.
Why are CEOs of mid-market companies so surprised when they lose key customers? One explanation is the temptation to spend more time focusing on the state of the general economy or industry trends rather than getting to know their key customer's business better than the customer even knows their own business so they can see the challenges coming long before the customer even realizes the issues. Or the other issue is the CEO sees the changes coming but is reluctant to act until the customer acts and by that time the mid-market company is left scrambling to recover before it is too late.
The two worst situations facing a mid-market business are firstly when the leadership loses interest or enthusiasm for the business because they no longer see the potential upside or benefits of struggling through yet they won't step aside or secondly the leadership becomes obsessed by short term issues and ignores the bigger issues facing the business. We also face situations where the leadership does not know what they want to achieve with the company or they cannot pick a direction for the business. This is easier to rectify if the ego of the leader is such that they can step aside. However, too often the leader can't bear the thought of giving up control and the shareholders or board of directors will not make the tough decision and replace the leader.
Leaders of mid-market organizations often need more outside help than leaders of larger companies during tough times, as the workload increases dramatically when they are dealing with unusual circumstances plus these mid-market companies often lack the management depth to be able to delegate the extra work. - 31960
According to a white paper prepared by IBM titled The Enterprise of the Future: Implications for Mid-size Organizations published in February 2009, it was stated that "mid market leaders must cover a much wider front and cope with much greater uncertainty. They must 'master complexity' ... for everything is important and change can come from anywhere".
A study of private companies by Deloitte Consulting in 2006 found that most leaders in Canada thought the top three strategies that would increase the value of their companies were: (1) focus on revenue growth by increasing the volume of business; (2) upgrading their management team; and (3) product and service innovation. However we find that in the tough times it is often very difficult for mid market organizations to make progress in these three areas. Rather mid-market companies can be more effective if they focus on: (1) rationalizing their product and service offerings and pricing; (2) improving asset utilization including selling surplus assets and non strategic business units; and (3) restructuring overhead costs to stabilize and then rebuild the business. However this alternative approach requires more planning and detailed costing information than is readily available in many mid-market organizations. We find that unless companies can bring together the key people to share the key information and agree on the most important issues to focus on during tough times - the company quickly becomes dysfunctional both internally and in the market place.
In the good times, doing nothing can often be the best solution. Management of mid-market organizations hate to make changes - especially when the changes are controversial. Therefore delaying a decision pending more information or delegating so an employee can solve the problem on their own works well in the good times. In the tough times it is a different situation. Now the company needs to focus on what will change and when and by how much will they change. In the tough times the challenges come by the bucket load rather than one at a time and they are seldom the challenges you expect!
Tough times usually mean it is time to button down the hatches and wait until the storm passes. CEOs who practice this approach find that when the good times return, there are competitors who have shot ahead and now dominate the market place. These successful companies decided to dance in the rain rather than run for cover. The successful mid market companies know that making a decision, even when it is a leap of faith has a better chance of success than doing nothing when the businesses is heading for disaster.
Why are CEOs of mid-market companies so surprised when they lose key customers? One explanation is the temptation to spend more time focusing on the state of the general economy or industry trends rather than getting to know their key customer's business better than the customer even knows their own business so they can see the challenges coming long before the customer even realizes the issues. Or the other issue is the CEO sees the changes coming but is reluctant to act until the customer acts and by that time the mid-market company is left scrambling to recover before it is too late.
The two worst situations facing a mid-market business are firstly when the leadership loses interest or enthusiasm for the business because they no longer see the potential upside or benefits of struggling through yet they won't step aside or secondly the leadership becomes obsessed by short term issues and ignores the bigger issues facing the business. We also face situations where the leadership does not know what they want to achieve with the company or they cannot pick a direction for the business. This is easier to rectify if the ego of the leader is such that they can step aside. However, too often the leader can't bear the thought of giving up control and the shareholders or board of directors will not make the tough decision and replace the leader.
Leaders of mid-market organizations often need more outside help than leaders of larger companies during tough times, as the workload increases dramatically when they are dealing with unusual circumstances plus these mid-market companies often lack the management depth to be able to delegate the extra work. - 31960
About the Author:
Stuart Morley MBA is a world renown expert to mid-market companies during their turnaround phase. Find more information on his website turnaround Middle Market Companies which includes video clips, articles and order his recently co-authored book.
