by Ken Vincent, Featured Contributor
Okay, before someone says that it isn’t recent and points out that it is continuing, I’ll concede that point. The economy in general and many businesses in particular are still trying to claw their way out of the economic ditch.
But, the question still begs answers. What did you learn as you watched sales sink with every setting of the sun?
Managers of any seniority have been through it before in varying degrees and had to re-institute those dreaded steps leaned before.
- Reduce staff to meet lower demand.
- Let inventories decrease.
- Simplify menus so that kitchen staffs can be cut.
- Perhaps close one of the three dining rooms.
- Abbreviate or even eliminate training programs.
- Defer optional renovation and upgrade plans.
Well of course the list can go on and on.
In any case we all knew that before. But, with the depth and duration of the latest recession we should have learned some new lessons.
Lesson number one is that it isn’t likely to be the last recession nor the worst, so it is wise to plan for the next one before it is upon us. That includes stashing some money to weather the next economic storm.
Lesson number two is that the classic division of expenses doesn’t work in really bad economic times. The usual classification of expenses as variable, semi-variable, and fixed have to be revisited..
During the recession of the 1980s I ran an executive seminar stating that all expenses are variable in times of economic stress.
As bad times get worse, semi-variable expenses get more variable. Department head position get combined. Assistant department head jobs get eliminated. Salaries get frozen. Even wings or floors of a hotel can be closed. Thermostats get reset.
But, what about those high ticket fixed expenses. Well, they need to viewed as variable too. Rent or debt service need to be re-negotiated. Work rules and programed raises in union contracts need to be re-considered as do insurance coverages and premiums. Real estate taxes need to be challenged with dropping real estate values.
Now before someone says that their bank won’t renegotiate their interest rate, try missing a couple of payments and try again. The last thing your bank wants is to own a hotel. The last thing the building owner wants is an empty building.
If you think the union won’t reconsider suspending some work rules to give you more staffing flexibility, give them a list of likely layoffs to consider.
Talk to your utility company about how your property is classified and is there a better rating category that you can be placed in, even if temporary.
Of course those techniques won’t work in every situation. However, you will never know if you don’t try. That means that you have to have a different mind set.
As a side point, there is nothing unethical about using these leverages for survival. In the long run it is desirable for all parties vs. the alternate of a total failure of the business.
So what lessons have you learned in the recent recession?