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RECESSION

Trim and fit in tough time

Sai ma Mazhar
The global financial crisis, brewing for a while, has really started to show its domino effects in the global economy for more than a year now. Around the world, stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations had to come up with rescue packages to bail out their financial institutions.
Is this the first time the world has faced such a crisis? Looking back on the last 371 years (from the Tulip in 1637 to Great Depression in 1929 to the current global financial crisis), a common feature of all financial crises is the collapse of some of the strongest companies that enjoyed meteoric rise in the good times.
The prevailing global financial crisis is expected to hit output in advanced economies by 2 percent in 2009 (first annual contraction since World War II) with USA shrinking by 1.6 percent, UK by 2.8 percent, Germany by 2.5 percent, Italy 2.1 percent and France by 1.9 percent. Growth in emerging economies will halve to 3.25 percent. Both India and China will be hard-hit along with Bangladesh being no exception in terms of facing the global slump in demand.
It is true that Bangladesh has minimal direct exposure to the global financial market. However our country is connected via trade of goods and services with the outside world. Falling world trade implies that Bangladeshi export industries will be hurt and also there are indications for the country to face tough time ahead. Jute and textile spinning units, leather and ceramic Indus tries along with declining foreign remittances arc economic signals in Bangladesh portraying how the economy is getting adversely affected.
Nevertheless, this is the time when some companies adopt a 'Wait and See' approach, the way in which companies respond to the crisis, is what separates the 'living' from the 'departed'. Most organisations tend to indiscriminately cut costs and freeze all forms of developmental works.
By contrast, the smarter companies (trimmed and fit), while being prudently cautious, use the crisis period as an opportunity to critically evaluate every aspect of their businesses, challenging every dollar and every stroke of work as to the value added. They also see the upside of acquiring low-valued
assets, strengthening their market position (given lower level of competitive or marketing activities) and gearing their organisations for the upturn.
MIT Consulting an international strategy consulting firm with a global footprint, has developed and launched a 'trim & fit' model, a per-fonnance-driven consulting solution to help companies prevail (not just survive) during the tough times and seize upside opportunities.
The model has been developed based on extensive international research of successful and unsuccessful tough strategies and how businesses responded to crisis in the past along with Mil's own experience over a span of last 12 years (over
350 projects in 35 countries across a multitude of industries).
Referring to the model during the analysis phase, the risks are assessed, stress tests are carried out and the upside opportunities are considered, all of which proride the inputs for the core strategising phase. This starts with aligning the strategy to meet specific toughtime conditions (specifically in terms of rationalising and de-slacking the business model), followed by taking the 'fat' off the processes before developing a lean structure — all of which are finally driven by ensuring that staffs are motivated (through win-win initiatives like performance based pay).
Explaining two key features of the model, Hilmy Cader, CEO of MTI Consulting stated, “Trim and fit looks first at cost rationalising based on vertical costs (on the basis of a value chain — P&L) as opposed to conventional horizontal cost cutting which runs the risks of cutting off the veins & arteries' of the business model. Most importantly, the head count is considered as a last resort (only after the slack in the strategy, processes and jobs are taken out) and even if head count needs to be cut, retrenchment is the last option."
The final phase is intended to swiftly implement the changes in keeping with the 'trim and fit' philosophy of Direct-2-Bottomline Impact'. This is achieved through the following measures:
1. An inclusive and interactive process that see key internal stakeholders being part of the analysis and solution development process.
2. Based on strong analytics as the foundation of the solution.
3. Extremely lean and effective documentation with the focus being on converting strategy to action and swiftly to implementation.
4. Internal marketing and sensitivity appreciation to ensure smooth executions.
Despite the challenging times, businesses should not get into panic mode rather become "trimmed & fit" by seizing upside opportunities, rationalise, and arrive at a business model promoting a lean, minimalistic and performance-driven culture supported by robust processes and systems.
"Trimmed and fit* companies not only prevail in tough times but also emerge from it stronger than ever.
Saima Mazhar is the country manager of MTI Consulting Bangladesh, and welcomes feedback at sa,ma@mtiwor1dw)de com