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Not long after World War II, our country found itself in
conflict with a substantial part of Eastern Europe. This
hostility began to grow, and it became obvious that it was not
going to ease or end at any time in the foreseeable future. We
realized that it could, and in fact, did pose a serious threat
to our safety as a people. The threat included possible use of
atomic weapons, which could have paralyzed most, if not all, of
the governmental services. No one, however, knew if or when
these threats would become real events.
As the "Managers" of our society, the Legislative and Executive
branches of the government realized that some forces over which
we would have little or no control could put the country in
great jeopardy at any time. What they had to do was to think
about "What Do You Do If?" and create a "Plan" that would
address, as best as possible, the various scenarios that could
come into play. The first step in the creation of the "Plan" was
to identify the possible actions or forces that could come into
play and to establish goals to offset them. As a result of the
identification process, many actions were taken, including the
building of deep underground shelters to act as centers for
various government departments to operate. A civil defense force
was created; shelters for citizens were built etc. Fortunately,
it was not necessary to implement the "Plan", but it was there
if it was needed.
As business operators or managers, we must realize that we will
be exposed to Threats and Opportunities at any time and must
have a "Plan" in place to answer the question "What Do We Do
If?" One of the highest priorities of a manager is Planning for
the future of your division, department, or the company. The
process begins with identifying what possible factors could
arise that will have an effect on your business. The list of
possibilities could include new competition entering the arena,
price squeezes by one or more of your competitors, technology
advances etc. Each business will have to identify different
threats or opportunities, determine how to recognize them when
they occur, and outline what action the business must take to
address the situation as it arises.
Despite what some managers may think, all businesses are subject
to cycles that may not be immediately visible when they are
occurring. Some of these cycles occur on a regular basis and are
predictable and easy to plan for. Others may be more difficult
to recognize and may be created by the company as a result of
internal problems, politics or policies. Many, however, are
created by external forces which can include competitive
pressures, problems with suppliers of raw materials, government
policies or a turn down in the general business climate of the
country. These external forces are difficult, at best, to deal
with unless a plan is in place to assist the company in
recognizing them and outlining how to operate through the period
of time that the problem exists. What we are really trying to do
is to attempt to identify the unexpected and then make a "Plan"
to deal with it.
Issue
None of us enjoy focusing on negatives, and many executives
refuse to do so for whatever reason. However, as uncomfortable
or difficult as it may be, we must look at "worst case
scenarios" if we are to going to be able to develop effective
plans for our organization. We must be able to develop the
answers to the question "What Do We Do If".
Facts
As we noted earlier, there are many different threats or factors
that can adversely affect your business. In order to more
clearly discuss the process that will answer the "What Do We Do
If?" question, let's examine one possible scenario.
At some time, sooner or later, for example, we will enter a
period of economic decline, which may, in fact, evolve to be a
recession. This recession may be wide spread, or specific to
certain industries. If it is wide spread, it will probably
affect your business to some degree. If it is specific to your
industry, it will certainly have an impact on your results if
you are not prepared.
There may be a time when foreign forces have a great impact on
businesses in the United States. When the dollar gets stronger
versus foreign currencies, we are able to purchase products made
overseas for fewer dollars, and if we travel abroad, we will be
able to buy more units of foreign currencies for the dollar,
making our out of pocket cost less. As a consumer, that's good.
If, however, we are engaged in a business that sells a major
portion of its products across a border, or supply materials to
that business, that's not good.
Assume that we are in a period of time when the Dollar has
become very "strong" versus foreign currencies. When a business
that is based in the United States sells its products or
services across a border, in Europe, Asia, South American, for
example, it will not bring as many Dollars back to the United
States when it converts its foreign revenues to Dollars, if the
selling price of the product or service has not increased in the
foreign marketplace.
There are two basic problems that occur during these times.
First, you must be able to recognize that a change is happening,
and second, you must have a Plan of action already in place to
deal with that change.
This may appear to be a problem that affects only large
companies. Not so. Threats or Opportunities can influence all
organizations, regardless of size, at any time. Besides the
consequence that an outside or inside factor can have on a small
business, they have the added threat of being effected by the
events that occur in a larger organization. If they are a
supplier of materials to the larger organization, they may, in
fact, be seriously effected if that larger company loses a
substantial part of its product distribution. In its planning,
the smaller company, the supplier of materials to the larger
company, must examine the threats to the companies that buy
their materials. If the smaller company relies on the larger
company for products used in their business, possible threats
that would adversely effect this factor must be included in
their Plan of action.
Some company executives wait until a change is recognized to
develop a Plan of action and put it into effect. This may mean
that they and their management staff will have to "scramble" to
meet the goals and objectives of their plan no matter how good
it is. Smart managers know that a contingency plan to meet these
possible conditions must be available on short notice to meet
the demands of the situation. They also realize that an
effective Plan of action will evolve from good management
practices already in place.
Dilemma
If you are not able to predict when a downturn in the
economy will occur, or when outside forces will effect the
economy, you probably will not have time to adjust inventory,
cancel materials that are on order, or reduce costs associated
with the production of product etc. to combat the effect of the
economic change. The costs related to these parts of the
business process can, of course, be adjusted, but the
implementation of a plan to do so may take considerable time. As
we commented earlier, it is sometimes difficult to recognize
when the downturn is coming even with the best financial
analysts giving their view of the future. Most often, we are
able to identify when a change occurred by looking back in time,
not looking forward. For these reasons it is imperative that
your Plan of action include strategies to deal with these
unpredictable events.
What Do You Do?
The first step in the process of preparing a Plan of action
is to allow yourself to explore all the possibilities that may
arise in the future including Opportunities as well as Threats.
The first decision to make is to decide to develop a Plan of
action that will address the potential opportunities and
problems you have identified so that appropriate action can be
taken if and when they occur. An effective Plan of action is the
end result of a strategic planning process that will identify
opportunities and potential threats, which may lie in the
future. In his book An Introductory View Of Management,[1] Peter
Drucker stated that planning "is the application of thought,
analysis, imagination, and judgment". Certainly the process we
have noted insists on thought and analysis of the possibilities
that may arise. The imagination and judgment of the effect of
the possibilities is what will create your Plan of action.
The second step is IMPLEMENTING THE PLAN. Trust your judgment
that created the plan and let it work for you realizing that any
Plan must be monitored closely and can be modified at any time.
[1] Drucker, Peter F., An Introductory View of
Management, Harper's College Press, 1977.
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