As we come to the close of the year, leadership teams are trying to make plans for 2023 and beyond. In mid-December, we polled our team of Business Execution Specialists to find out what they are hearing from the leadership teams they are currently working with. Specifically, what are the current challenges, and what’s keeping business leaders up at night?
Here are the top answers to those questions from business leaders:
- Profitability: The biggest concern for leadership teams is margin erosion and low profitability. The cost of everything is on the rise – employee compensation, capital (interest rates) and supply of materials. This ‘perfect storm’ affecting business inputs has hit organizations before they’ve had time to react, and earnings are down. Many companies are seeing low or even negative earnings.
- Talent: We predicted 18 months ago that we were about to see a Talent Tsunami and now it is here. Companies are losing key employees to competitors or retirement and having a difficult time filling vacant roles. Leaders in some sectors, like energy and construction, are seeing waning interest in careers in those industries, and this is compounding the labour shortage.
- Fatigue: Both employees and leaders are feeling tired. The emotional roller coaster of the past two and a half years, both at home and at work, combined with trying to do more with less people and resources, has left everyone exhausted.
- Financial: Beyond profitability, companies are facing several other financial stresses including higher-than-normal inventories to hedge supply concerns, increased costs of borrowing, and inflated accounts receivable as customers are taking longer to pay. There is hesitancy to invest in the future even though the opportunities seem to be there.
It’s also worth noting what is not a challenge right now. Many western Canadian companies are going full speed. Opportunities are abundant and companies are struggling to keep up with demand. It’s unclear how long this will continue. Many leaders are more uncertain about revenue in the mid to longer term (two to four years) than in the next twelve months.
Navigating These Dangerous Waters
In the face of these challenges, leaders need to focus on these four areas:
- It’s time to take a closer look at the numbers; your prices need to reflect recent and expected cost increases. Be extra diligent with quotes and contracts. The market would be more surprised today if your prices were not changing than if they are.
- Talent needs to be job one for leaders. In every industry, the competition for talent is greater than for customers. Leaders must make attraction and retention of talent a strategic priority. They need to build and maintain a virtual bench, hold ‘stay’ interviews, invest in people’s development, review and adjust compensation, and undertake talent mapping to ensure a healthy pipeline for all roles in the organization. Remember that today’s employees are looking for more than just a paycheque; they want to work in a place with a healthy, positive, caring culture, and want to grow by doing meaningful work.
- Threats are often opportunities! Sean Fitzgerald, our Chief Transformation Officer, has recently coined the term “thropportunity” to help leadership teams understand that in every threat, there can be opportunity. In the case of economic downturns, research shows that it’s easier to jump ahead of competitors and steal market share than in when times are good.
- Resilience will separate the winners from the losers in these times. Organizational resilience has several facets including keeping debt low and maintaining a healthy cash position, maintaining a firm yet flexible strategic planning rhythm, staying close to customers, and constantly scanning the environment for new information.
Like a ship’s captain, you don’t have to be a good navigator when times are good - “high tides float all boats.” But today, the tide is not high, the threats are significant, and leaders need to employ these strategies to successfully move towards their desired destination.
Unleashing the Potential of Your Organization
This is the path to better results, and it’s not a quick fix. Companies that have developed and stayed disciplined to the strategies above are now in the best position to take advantage of these current times.
If you’d like to learn more about how to build your company’s resilience and discipline, or other ways you can take the simpler path to creating a great business, connect with us or consider attending one of our upcoming leadership events.