March 21st, 2011
Views of the Recession from Other Industries
I attended a presentation last week with keynote speakers from industries that couldn’t have been more different from the door and window industry. However, their insights have direct bearing on our industry. The speakers were the senior executives of companies that included a newspaper and new media publisher, an automotive supplier, a sandwich chain and a metal processor. All of the companies have come through rough patches in this downturn. Two of the companies underwent and successfully emerged from bankruptcy.
There were several key concepts in the presentation that resonated with me regarding the door and window industry. The first was that there was no play book for this recession. No one gamed out a sufficient decline for their emergency plan to serve them well in this downturn. The automotive supplier’s “doomsday” plan looked at steps to take if their unit volume ever dropped from 15 million units annually to, gasp, 12 million units. When they entered bankruptcy, their unit volume hovered around 6 million units per year. When times are good, it makes sense to plan for Armageddon plus a tornado, just in case.
Another key point from this presentation was that it’s important to cut costs in a way that you push resources to the point in the organization that is the closest to the customer. Trim the headcount at the corporate office before you fool with the (customer facing) product itself. Maybe you’re thinking that everyone knows that. How many companies have cut R&D in this downturn and have yet to increase that budget again? Where is that going to leave customers that are hungry for new products two or three years from now?
A final point that reminded me of the door and window industry is that all of the companies indicated their headcount was too high as they headed into the downturn. All slashed headcounts dramatically and all of the companies agreed that their headcount will not return to previous levels even in the recovery. They’ve learned to do more with less. Of the door and window companies that have reported to us that they were strongly profitable in 2010, almost every one of them indicated that their 2010 earnings exceeded those of 2009, although their revenues were lower. They cut costs prudently in 2009 and they are now positioned to profit handsomely from a recovery of any strength.