Spying Storm Clouds on the Horizon

Since I moved to Chicago from Montreal I have switched gears when it comes to watching the horizon for rough weather. In Montreal, you had to look out for snow, ice and sub-freezing temperatures. While Chicago also has winter, we have discovered that we need to pay much closer attention to spring weather because you never know when high winds might arrive. My wife learned this particularly well when she wound up standing on someone’s front porch while tree limbs flew by! She now knows not to walk home from work as the sky darkens.

Businesses must also know how to spy storm clouds on the horizon. Sometimes the storm comes from outside your business; the economy over the last few years is a good example. At other times the storm comes from within your business, so you must be able to look within and accurately predict problems that may occur. Business owners can get incredibly busy and often fail to step back and evaluate how things are going.

Pay close attention to your financials, even when it seem like things are going well. A strong economy and great sales can often mask problems within your operations. Some questions that you might ask are:

• Are you keeping your costs under control? Is your overhead keeping you from being profitable?
• Are you allowing your cash cycle to get too long by not collecting payables in a timely manner? The bottom line of a P&L is not enough, what does your cash flow budget tell you? Do you have a cash flow budget?
• Are you allowing too much debt to build up? Leverage is a two edged sword; it can be great in a rising economy but deadly when revenues fall.
• How do your financial returns compare to your competition and industry? Are you a leader or a follower? A little research here can go a long way.

If you discover clouds on the horizon of your financials rather than hope the storm goes the other way, you need to take action to correct the problems in your operations that are creating the clouds. An easy way to begin analyzing the problem is to ask the question why, and continue asking why until you find the root cause. I have heard it said that it takes at least 5 why’s to get there. Once you have found the root cause, you must plan action to correct the basic problems.

As a business owner or executive, it is incumbent upon you to stay focused on these areas and see the problems through to a solution. While it is true that you will often delegate work to others, it is important that you keep tabs on work as it progresses to ensure that change happens. Be vigilant to ensure that you are ready for the storm!

3 thoughts on “Spying Storm Clouds on the Horizon

  1. Spot-on Kevin!

    The gathering clouds and high wind warnings tell us about the increased risk but as Edward Lorenz identified, with such complexity comes uncertainty and you just don’t know when a branch is gonna come crashing through the (metaphorical) roof!

    If it is 6′ from the premises there is a risk (known known) – particularly in the windy city but, a sudden extreme gust can carry unforeseen dangers (known unknowns) from further afield i.e. beyond the “risk horizon” deemed appropriate in more benign conditions.

    Hence “fitforrandomness”: You MAY model, manage or mitigate aspects of risk…but you MUST prepare for uncertainty!

    You have illustrated a very important lesson for a turbulent economy.
    Thanks,

    David

  2. Hi Kevin,

    Love the analogy and agree with your take. Looking inward and outward to understand exactly where is this storm coming from? What do we make of it and how as a leader do we best approach an oncoming storm? I would like to offer an article I wrote when I used to have a blog. This now appears at my site but I have copy and pasted it here.
    ________

    Much has been said about the eagle. When you think about this magnificent creature what comes to mind? Regardless of what the eagle signifies to you there is something important you should know about this amazing bird.

    Most people don’t know this but when a storm is in its early approach the eagle’s senses, like those of many animals, are alerted. It hits their internal radar and they begin to respond before the storm is barely evident. What they do is go to the highest point they can find, usually on a mountain. They perch there and observe various aspects of the storm, e.g. what direction it’s coming from, its speed, its feel, etc. And then an amazing phenomenon happens: The eagle adjusts its feathers so as to use the storm’s wind gusts to allow it to fly despite the force of the storm. Think about that. The eagle uses the power of the storm to stay above it and make the most of it instead of just getting blown around or being at the mercy of its force and duration. Instead of running for cover on the ground and living in fear, hoping the storm will blow over soon, the eagle readies itself…observing, making adjustments, even minor ones, in order to make the best of what he cannot stop from happening.

    We more often than not, have no control over the circumstances that blow in and out of our lives. Some people just shrug their shoulders and wait for the inevitable believing that there is nothing they can do about it. Yes, decisions are made without our input, events happen with little warning. Yet we must deal with them. We must deal with the storms that rage against all that we’ve worked for, the goals we seek to achieve, the values that define us. We must deal with what gets in our way. That’s life. Always has been; always will be. The question becomes, how will you choose to handle it? How can you use these times to your advantage like the eagle?

    As a leader, do you think about how you could use the components of what certain untimely or unpleasant events bring to your advantage? The first place you need to look is how you are thinking about it. What kind of internal chatter goes off in your brain when you get the first hint of an approaching storm? Do you operate from a place of fear and swoop down to the ground, get the troops fired up and try to “batten down the hatches” protecting against losses as soon as possible? Do you hunker down and hope it passes over you with the least amount of damage? Or do you go to the mountaintop so to speak. Do you seek out higher ground to take a look at the entire landscape, considering the big picture and all its options? Do you first try to get a sense of what’s going on to get on top of it and ride the most favorable currents? Do you do both? When? Do you adjust your leadership “feathers” in a way that inspires and shows the way or do they just get ruffled? What do storms look like in your world and how do you currently respond to them? How is that working for you, your team and your organization?

    When “bad weather” is approaching, here are just some questions you should consider:

    “Do I have clarity about the reality of this situation?”
    “How can I make the best of what’s coming this way?”
    “Is there another way to think about this situation that I/we haven’t considered?”
    “Where is the opportunity here?”
    “Should I be the one to lead us through this?”
    “If I am going to lead, how can I best prepare myself to lead the way and who else should I engage?”
    “What will success look like after the storm has passed?”
    “How can I help my team/my organization in their thinking about this situation?”

    Next time you get wind of an approaching storm, how will you prepare to harness the best of what that event has to offer?

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