In 2009 Ram Charan wrote a book entitled, Leadership In The Era Of Economic Uncertainty. Charan wrote this book right after the financial crisis had begun in 2008 as a guide on providing advice on managing during an economic downturn. While the points of emphasis Charan explained were particularly applicable in a financial crisis, I believe that certain lessons Charan taught are needed at all times in all situations by every company, good times and bad. The five critical areas are:
- Cash – Charan said, ” protecting cash flow is the most important challenge almost all companies face today whether they realize it or not.” He went on to say that cash is the most important metric and that you should know your cash position every single day.
- Rethink Growth – The point here is that market share should not be obtained at all costs. Charan stated, ” you should pursue that kind of growth only if it is profitable and cash-efficient. Cash efficiency means that gains in market share do not consume disproportionate amounts of cash in the form of more inventory, extended duration of accounts receivable, or increased complexity.”
- Management Intensity – Charan had much to say about this but in a nutshell he defined management intensity as , “a deep immersion in the operational details of the business and the outside world combined with hands-on involvement and follow-through.”
- Protect The Core – What did he mean by this? He explained, ” Ask yourself: What is it that we cannot afford to lose? The answer is your core. Look for ways to sharpen or strengthen the core and drop the rest.”
- Reassess Your Top Team – As always your people are your most important asset. Charan said, ” now more than ever your top people are crucial to the success of the company. Every senior manager must have both the skills and the psychology to cope with hard conditions and remain optimistic and focused on the future.”
I cannot recommend this book highly enough. A company leader needs to obtain a copy of this book, read it, and manage their company using the principles Charan suggest at all times and in all conditions.