Extraordinary times call for extraordinary leaders and flexible strategies. And where there is chaos or change, there is always opportunity. You can tell a lot about a company and their leadership by observing how they navigate through tough, uncertain, out-of-the-ordinary times.
This pandemic definitely falls into the “chaos” category. There are a few key decisions leaders have to make to make sure they maintain a semblance of control and assurance today. Leaders need to make keep their people, production and product stable while the outside world seems to crumble around them.
Here are some things I learned during the last few months that can help you lead in a crisis.
Don’t Wait for a Pandemic to Handle Your People Problems
We’ve talked to corporations that have found ways to react to the pandemic. (Because let’s be honest, it was difficult to predict any of this and take a proactive approach.) Some reduced their head count by 5-25%. Others reduced their leadership or overall employee pay by 25% or more. Some forced week-long furloughs with no pay, while others modified working hours.
There is no right answer, but we do know that no matter what your company needs to do, you must communicate it clearly to your team. Be honest and open with your employees. Everyone understands that we’re going through tough times and most people want communication. If they get answers, most of the time, they will feel better about the situation.
Another trend we saw during this time with almost all companies (about 90% of companies we talked to) was using the “pandemic” as an excuse to handle performance issues in their organization.
My question is why did it take a pandemic to address a performance issue that you (and everyone in your organization) already knew needed to be addressed? If you know there is a performance issue, you can be assured the rest of your team knows it and wonders why the under-performing member is still an employee. It’s actually more dangerous to keep an under-performing employee than to go a year with no one in that role.
If you keep that person on-board, the rest of your employees may start to assume it’s okay to under-perform, and therefore your organization and business performance are impacted by not addressing obvious issues. Use what you learned during these times to handle performance issues more quickly and don’t wait for another pandemic, housing shortage or an unprecedented event to happen.
Look at Your Industry Trends and Plan Ahead—Despite Current Events
Almost every company in the industry either shut off or majorly curtailed production at the start of the COVID-19 pandemic. At first glance, this makes sense—uncertain times leads to uncertainty with orders, and as a result, the “safest” option was shutting down plants.
We did talk to a few C-suite leaders that kept production moving. Why? Because housing data was in their favor. Home inventory is the lowest it’s been in years. Also, new construction demand in Q4 2019 and Q1 2020 was strong and R&R 6-7% CAGR over the last 8+ years. All the data showed housing and home improvement projects weren’t stopping anytime soon.
Most companies in the industry were cash-rich right as COVID hit, as evidenced by heavy M&As happening over the last few years. Our challenge to companies 5 months ago was: “If you have the cash, you can carry the inventory costs, and you know there is short- and long-term demand there. Keep producing and either stockpile inventory in your DC (even if you have to rent more space – which was cheap at the time), or better yet, push it out to your customers with extended terms (aka winter buys).” We predicted that companies with inventory would see big wins, and we saw this play out in the last few months.
Promote and Sell Your High Value Mix Products
The number one reason contractors are struggling right now is not insufficient leads, not even labor shortages (although that’s another big conversation)—they’re suffering from lack of available materials.
Almost every conversation we have with building product companies starts with, “We are on allocation and cannot keep up.” We always ask, “What mix of product are you currently producing?”
A telling conversation we just had shocked us. The VP of Sales of a Fortune 1500 company told me, “Our revenue is really strong vs. last year at the same time, but we are really struggling on our profit dollars.” I asked him to clarify why that was (already knowing the answer), and he stated, “We are so busy trying to produce orders for our commodity offering, we cannot even get to our high mix products.” Their commodity products are double the number of weeks out compared to pre-COVID days, but their high value products are four times longer than that. That doesn’t make any sense.
Right now, you have the opportunity to drive a different mix in your category. Whatever you make will be purchased. Overall demand is so high in every building materials category that it’s almost a guarantee.
Start producing a higher percentage of your high value mix and give your customers (and their customers) the tools and story to promote and sell these products. This will force the channel to get experience selling your high value mix. You will make more profit dollars, and so will the rest of the channel. By doing this now, there will be more comfort selling a high value mix; and when the pandemic subsides, you will retain some of the change you created.
The most successful companies lead from a place of possibility. They don’t get stuck in “hunkering down until it’s over” mentality. They are proactive, reading all the tea leaves, looking for data in all sorts of places to fuel their thinking. These companies find new possibilities in the change happening around them and define a way to leverage it to continue to advance their company and the category. They retain the best employees as they treat their teams well, challenging and rewarding them to think differently. They communicate deeply and frequently internally and externally to demonstrate that they’re always listening, thinking and doing.
In essence, they lead from a place of mastery. We can all learn to find this place if you’re always willing to grow.