"Manage good times for bad."
This message is an excellent one during this time of upheavel. A mistake many business leaders make when things are going great for a company, is not managing that time so when the bad times come they will be ready.
The problem with success and good times, is in the euphoria of the moment, people forget what it is like in the bad times. This doesn't mean we are somber and don't celebrate, on the contrary that's needed, I'm talking about adjusting strategies and not reaching too far in response to great periods of profits and growth. Sometime they will slow down, and we need to manage in preparation for those times.
Take for example Countrywide Financial and its huge problems. They had ridden the housing surge for years, and were responsible in a large part for it happening. Many people started to realize that it was starting to get treacherous in the mortgage market where high-risk loans had been offered all over the place and housing prices rising so swiftly that it would be impossible to sustain.
At the height of this Countrywide should have started doing what they're doing far too late now: readjust its product mix. Rather than try to squeeze every ounce out of the market, they should have rearranged their mortgage portfolio to loans that would only be approved by Fannie and Freddie. They should have taken the opportunity to close the window on the high-risk loans when their profits were solid and the market consistent.
That's one way you would manage for good times for the bad. When things are going too good, you need to be extremely cautious. It is there that some of the worse mistakes can be made.
We at least need to understand business history in the sense of the reality of growth. It's not going to continue on in ways that supercede historical precedents over long periods of time. It'll always average out. The key is to not wait too long on the averages that you end up losing the gains through poor management and even greed.
I'm hesitant to use the word greed, because it can be used wrongly toward people in business a lot, but when you take your eyes off or reality and believe that this time in history it's going to be different for you or your company, you're entering into unreality and delusion. It's never going to be different over long periods of time. Growth will eventually always pull back. It's just how markets are.
We've talked at managersrealm before on how the most dangerous times in business are when you're the most successful. The mortgage companies are giving you a great example of why that's true. They refused to accept the fact that this would come to an end. The market is now showing their folly and we should heed the warning for ourselves; and as Kelleher says: "Manage good times for bad." It's the only way to run a business successfully over the long term.
Other Herb Kelleher Sources:
Herb Kelleher on the Record, Part 1
Belief Model for The Leadership of Herb Kelleher (Southwest Airlines)
Herb Kelleher, Chairman, CEO and President, Southwest Airlines
Remember to Sign up for my feed, bizzbite and digg this!
Sponsored link: The outsourcing every manager requires - Tampa Locksmith
Comment Preview