The Step Up debate in brief. This discussion won’t go away…
In a challenging, possibly recessionary situation the board’s role should be limited to discussing the key issue:
“How would the shareholders/owners want to balance the two competing objectives of
1) Minimising the hit to profits versus
2) Capturing maximum growth?”
You should be talking about how the company could, in fact, step up its activities and use the recession or downturn as a chance to gain position and advantage.
A company has almost twice as much chance to dramatically improve its position in an industry during a downturn compared to normal times — most (but not all) of the companies that did step up in the last recession held their gains in subsequent economic recoveries.
The question: “How can your board and management determine whether a step-up strategy is right for your company?”
You should consider three major questions:
1. Are there truly tangible consequences of missing the next year’s earnings forecast by going for growth?
2. In your industry, do ‘temporary’ gains tend to become permanent?
3. What is the potential downside if you simply take a defensive posture?
It would take a lot of effort and courage to tailor a step-up strategy to the company’s specific situation.
It’s important for the board to hold the right discussion, even if the decision ends up in favour of retrenchment. And if the decision is to step up, so much the better.
Need help with starting the discussion in your business? We are the perfect sounding board… Check out our coaching service which is specifically designed to help you over those hurdles.