There have been several high profile stories recently of companies asking for bail out money from their country's economic stimulus funds, only to be refused.  It would see that governments are not to be fooled into helping struggling companies which could have put their house in order before the crisis.  That makes sense: complacency is the biggest risk to companies during boom times as the consequences can remain hidden, only to appear very quickly and dramatically during a downturn.

During my early professional development I had the good luck to be workng for a tough-minded CFO in a company that was doing well.  My job put me in potential conflict with the organisation: it was my responsibility to target reductions in headcount, even while we were growing.  Following the departure of an employee, I would have to review departmental organisation and suggest how we could improve efficiency without re-hiring the position.  Many managers saw my role as a threat to their authority to pick and run their own teams.  Others showed a willingness to understand why we doing this, and chose to actively contribute to reviewing staffing and internal organisation, even where it might reduce the headcount of their team.  Gradually it became clearer who the more effective managers were: thos who rose to the challenge also rose within the hierarchy.

However, I also saw how complacency can set in and the damage it can do.  After several years of 'streamlining' it was increasingly difficult to maintain the enthusiasm for taking tough decisions, particularly while results remained good.  The discipline which we had put in place to restrict headcount began to give way, followed by a much loser policy on who could make hiring decisions.  Somewhat predictably, it was not long before complacency was followed by a loss of control, direction and eventually lower efficiency, feeding into declining performance and results.  That was in relatively benign economic decisions: the delayed costs of similar complacency in other organisations are being paid now even more heavily.

The moral I take from this experience is that the organisation remains responsible for its own results, in good times and in bad.  In sectors that are performing badly there are always companies that are doing much better than the average.  In some cases a 'badly hit' sector can actually have companies that are doing very well.  In a forthcoming edition of 'Red Thread' we will discuss some of the research results on what makes one company perform better than another.  Without ruining the surprise (because it won't surprise you) it has everything to do with good management.