Grapes of Wrath – Again?

The Grapes of Wrath was a John Steinbeck novel made into a movie in 1940 starring Henry Fonda about really hard times. Drought in the State of Oklahoma forces a farming family into foreclosure and they go off to California with other families to find jobs and new lives. Instead they find more and more difficulties including the death of their child. The movie ends with a poignant scene where the mother suckles a starving old man. In another poignant film, The Starman, an alien being who visits our planet, says to a scientist at the end of this movie, “Do you want me to tell you what we find special about your species?” “Of course,” he says. “You are always at your best when times are at their worst.” I believe today’s challenges will bring out our best.

The world’s media is transfixed by tumultuous & shocking financial events. The world is having a daily conversation on how bad things are and wondering how bad can things possibly get. We have gone from worrying about our money & investments to actually worrying about putting food on the table for our families. What to do? Read on…

Allan’s Take: focus on the physical world not the paper world. Every day a rice farmer awakens in China and plants, a construction worker in Canada wires up some rebar and
a pearl farmer seeds his oysters off the Gulf Coast of Abu Dhabi. We are all still producing things and we will all find ways to help each other make it through this series of crises and bring out our best.

Inside the vortex of any change it is almost impossible to see things clearly as so many things are swirling around us. I offer a counter perspective for your reflection and action below:

Most of the recent financial problems precipitated from the collapse of the housing market in the US. The housing market is now improving:

• Mortgage applications are up 17% this week from last week.
• Sales of houses are up 5.5% this month from last month.
• Housing inventory is down 7.1% from last month.
• Capital infusion into banking for mortgages is just getting distributed.
• The national home retention program has stopped foreclosures and loan modifications will be issued by 01 December 2008.

Stop, I know you are thinking what about all the excesses, all the inappropriate risks, all the wrong doing, etc. Yes, you are right there is much that needs to happen from government policy changing to regulatory transformation, from banking policy changing to more diligent oversight, and so on. This will happen during the coming months.

Is the worst over? No one knows! All those who have so far fathomed an answer have been wrong. I believe there will be more discoveries, more bad news, more financial pain. It’s like getting cancer. It’s bad. It’s awful. But you go see the Dr. and you start treatment. It’s difficult. It’s painful. But it works 97% of the time. We are all experiencing a sort of financial cancer. Trades were engineered, then packaged & leveraged and exploded just like cancer cells grow rampantly and if unchecked will also explode.

What to do?

1. Put your customers into groups: (a) those that produce 80% of your profits usually a third, (b) those that contribute significantly to overhead usually half, (c) all the others. Set up a Customer Retention Team with your best relationship people and ask them first for their ideas for retaining every single customer in the first group the first week. Then spend their time on fostering ideas for retaining customers in the other two groups the following week. You personally take the top sales person job and meet face‐to‐face or at least online including audio & video with as many customers as you can taking them in order of how much each contributes to your cash flow.
2. Set up two ‘Find New Business Teams of your most creative people & your most knowledgeable people. Ask one team to develop at least three action plans to capture new business from new customers in current markets. Give the other team the assignment to develop at least three action plans for finding customers in new markets.
3. Set up an Opportunity Team. Give them the challenge to think beyond the usual cost cutting. Ask them to come up with a list of as many ideas as they can; good ones AS WELL AS bad ones that can improve business even if it means spending more money to get much better results. This will surprise them from the usual, ‘let’s get out our knives and start carving’ approach. Challenge them to produce as long a list of ideas as their time allows without consideration of viability or feasibility. You decide which of their ideas are best for implementation.

Give them some food-for-thought:

There are always companies who thrive during downtimes. There are also always companies who are hiring and growing during bad times.

They must be doing something right. Find examples of companies in your industry & your community that are performing well. Ask them to use the following examples as stepping stones to their thinking.

1. Raymond James, a financial services firm is adding 250 brokers to its 4,900 advisors across the globe.
2. Wal-Mart leads in hiring thousands although most of them are clerical jobs many are not.
3. Others hiring in the US include: Accenture, Berkshire Hathaway, Dell, Emerson Electric, IBM, McDonald’s, Microsoft & Oracle
4. Across the globe: Flextronics, Hitachi. Paribas, Saint-Gobain, Tata, Wipro just to name a few.

Iowa’s Business Boom: With almost a 50,000 job surplus, you might need to change Iowa’s nickname from the “Hawkeye State” to the “Hiring State.” Iowa Governor Chet Culver talks about his state’s business boom.
Click here to watch a video: http://www.cnbc.com/id/15840232?video=844089500

Jon worked on an egg farm as a youngster and learned that paper egg cartons had many problems. Later in life he decided to start a company to make plastic egg cartons. He built an extrusion plant in the Midwest and later another on the West coast. Things were going well until the oil crisis hit in October, 1973. He got a call from Dow Chemical telling him that after 60 days they would no longer supply his styrene. Their long-term customers were to get all their supply.

He was out of business and being a responsible businessman called his customers so they could make other arrangements, informing them that he would no longer be able to supply them after 60 days.

Then he looked up from his desk and saw the huge book of all the world’s chemical companies on his shelves. He opened the book on his desk and began calling each and every chemical company looking for polystyrene. His calls revealed no one had polystyrene for sale but then one company offered him urethane. He then put an 8-way trade together to get the polystyrene he needed.

He even made an extra US $70,000 at the end of the day. He continued making large amounts of money trading chemicals.

He asked some purchasing managers why they called him to do deals they could do themselves. The answer, “Jon, by the time we get things worked through our company these product dislocations are gone. You are providing a needed service to the chemical industry.” During the next year Jon made enough money to acquire company after company.

Today Jon is the Chairman of Huntsman Chemical and along with his 14,000 employees produces 22 billion pounds of product like McDonald’s clamshell hamburger containers & L’egg containers for women’s hosiery generating US $12 billion in annual revenue from operations in 24 countries.

I was hired to prepare the first financial proformas for Huntsman as a graduate student back in 1974. Jon is an inspiration not only to me but to the world of what can happen when you persevere.

This entry was posted on Thursday, November 20th, 2008 at 8:06 pm and is filed under Global Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.