Sheet Metal & Air Conditioning Contractors’ National Association

The Importance of Identifying Risks and Developing a Strategy

Ron_Magnus_high_res_photoIn the last issue we looked at the tendency for senior leaders, particularly founders, to stay involved in the myriad details of their organization long after they’ve grown to the point of hiring others who can help carry the load. In this issue, we’ll share first an analogy, then a few takeaways.

In the days of western expansion, wagon trains provided an opportunity for adventurous families to make a dangerous and difficult overland journey to places like Santa Fe, Oregon, or the gold fields of California.

These wagon trains were led by two very different types of leaders (examples are all male because of historical context). The wagon boss was responsible to do whatever it took to travel an average of 12 miles every single day. In order to make that goal, he had to take care of all the details—lame oxen, broken wheels, and/or quarreling families.

The other key leader was the scout. It was his job to ride ahead and look for opportunities to exploit and dangers to avoid. A river crossing that was normally too swift was safe to cross this year—they could shave a day and a half off the journey. Distant sightings of native warriors painted for war—a need to detour immediately. When he came back, he had important information that would ultimately lead to decisions that determined success. While the wagon boss might have significantly more tangible responsibilities on his shoulders, without the scout the wagon train would soon be another in the long list of casualties on the plains.

I’m sure you can see where I’m going with this. The urgency of wagon boss responsibilities pulls on many leaders like a magnet. That was our focus last issue. But if you are hanging around the wagons, who’s out there looking for opportunities to exploit and dangers to avoid?

While no one can accurately foretell the future, we all know the boom cycle won’t last forever. Like the scout, someone has to identify potential risks on the journey ahead and develop a strategy for managing it. Those companies that survive a downturn usually anticipated a change in the economic climate and were proactive in planning for leaner times.

What’s your plan for those less robust seasons that are sure to come sooner or later? Who are you best clients who will continue to need you even during a down cycle? What other work should you be exploring now that might cycle up when your existing work cycles down? What’s your current ratio of new construction to service work?

What’s your plan for differentiating your best people from your good people should there be a need to downsize? How are your cash reserves? How can you strengthen your banking and surety relationships? Where would a current investment in technology give you the advantage over your competitors when work becomes scarce?

There are a lot of resources available to help you navigate each of these topics. In the space of this short column, we simply want to remind senior leaders that no matter the size of your company, you have a role to play that no one else can fill. If you don’t identify the right questions, and start working on the answers, no one else will. Train others to manage the wagons, then ride out to see what’s coming next. You’ll enjoy the view most because you get to see it first.

Ron Magnus, managing director of FMI’s Center for Strategic Leadership with Ed Rowell, CSL consultant.