How many pillows are on your bed?

(Photo Credit: Nicolekiss.blogspot.com)

I just got back from the Business in a Recession Panel Discussion put on by the College of Management and Economics at the University of Guelph. It was a great discussion and a lot of really informative things were said, but I think what I took away the most was the analogy put forward by Bruce McAdams. He had recently attended a conference for hotel owners in Canada and there was a discussion going on about surviving in the recession and the moderator, who was guiding the discussion, stopped everyone and asked the entire room who was giving customers 6 pillows on their beds. The whole room put their hand up. To make this a short story, he asked why? Of the 6 pillows, 4 end up on the ground unused. The 6 pillows don’t add value. They add cost. Basically Bruce was saying that the business won’t be saved by cutting bell hops, people at the front desk, etc. The business will be saved by analyzing all the current processes and keeping the ones that add value and cutting the ones that don’t (having 6 pillows).

This was such a great analogy. Times in the past were so good for almost all businesses that no one was wasting time analyzing the value of certain processes, but were merely hiring more and more people to assit in every aspect of the business. Companies kept adding more and more “pillows to their beds” just because they could as money was seemingly freeflowing. These “pillows” didn’t add value, but because the money kept coming in no one was saying boo about them.

Now that the times have slowed, people need to start analzying these “pillows” and determine whether or not they add value.  Even with the recession, there is room for opportunity if you can find out your business’ strengths and then build upon them.  It is a time to start cutting the fat and building on the muscle.  It may mean lots of time spent analyzing your company’s processes to determine the most integral, but this could pay huge dividends.  If you focus on what you do best and hammer away then there is room for success.

Too many companies right now are not putting any thought into what they are cutting; they are just cutting.  Sometimes its fat, but a lot more times it’s muscle that is truly important to the company.  Now is the time to crunch the numbers and determine what is important to customer value and most importantly profitability.

In the future, businesses need to be much more selective of the processes they choose to implement.  Even if money is freeflowing, companies should always consider whether or not adding this process will add value or if it will do nothing.  If you consistently do this, downturns won’t hurt you as much and upturns will be when you are far ahead of the pack.  If companies only do what they do best, our whole economy will be better as will be exploiting someting we call comparative advantage in economics.