Guest: Alan Caslavka, a coach at CEO Coaching International. Alan spent his 35-year career in the global aerospace and defense markets, leading businesses within General Electric Aviation and Rockwell Collins Aerospace.
Quick Background: Running a successful company is never easy. But it’s certainly a lot more fun when the going is good. The true test of a CEO’s skill comes when adversity strikes. How will you lead your company through an inflationary environment where your key customers can’t afford what you’re selling? How are you going to handle a round of painful but necessary layoffs? How will you pivot through the next global crisis none of us sees coming so that your company stays on track to Make BIG Happen?
On today’s show, Alan Caslavka lays out his roadmap for responding to adversity, including lessons he learned from running an aeronautics firm while COVID had his entire industry grounded.
Keys to Conquering Adversity from Alan Caslavka
1. Prepare to pivot.
Looking back on the pandemic, it’s clear that companies that pivoted how, where, and why they did business fared much better than those that tried to wait out a once-in-a-generation disruption. But it’s important to remember that a pivot doesn’t happen all at once. Yes, some companies could redirect resources from brick-and-mortar locations to digital storefronts fairly quickly. But others, like the avionics company Alan Caslavka was leading, had to take a breath and do a detailed analysis to make sure they were pivoting away from adversity and towards BIG.
“You had airlines that were furloughing people,” Alan remembers. “Boeing, Airbus, other major aircraft manufacturers were reducing their orders big time. So we got a pretty good feel that this was going to have a huge impact on us. At that point, I pulled all my business leaders together and said, ‘We have to rethink our baseline. What’s our new business base going to look like going forward? What are our financials going to look like going forward?’ Effectively, we set up a war room and went back and revisited our annual operating plan. We looked at every single product, every single aftermarket or service assumption. We did a lot of detailed sensitivity analysis and tried to, at a very quick, high-level perspective, look at the business to see what we thought it was going to look like going forward. In addition to that, we sent our sales and product line leaders off to do a very detailed, bottoms-up look at the business. So while myself and my direct staff were doing a high-level analysis, they were going into the details.”
2. Reevaluate your costs.
“Once we had this baseline fairly well validated, step two was to go back to each of the major cost centers in the business,” Alan Caslavka says. At the $750 million dollar company he was running, that meant a multi-week evaluation of engineering departments, the supply chain, business development, sales, and every account related to overhead. At this point, Alan was focused on eliminating any unnecessary costs and refocusing the company on what was essential to its operation, and its survival. In part, that was because he knew he would have to make some tough choices about staffing next.
“We assigned project leads and gave them targets ranging from 15 to 25%,” Alan says. “And we just started going through each and every activity that we did in our business, looking at what was critical, what was not critical. We had new product launches that we slowed down. It was really a laborious, detailed look at how do we take cost out of the business?”
This is an exercise you might consider doing as part of your annual planning process, even if you’re healthy and growing. You might uncover divisions you could combine, projects that just aren’t panning out, employees who should be nudged towards leadership positions. The leaner your business is, the better equipped you’ll be to seize a new opportunity, establish an exit strategy, or double down on core competencies — which could also be lifesavers in an unexpected crisis.
3. Reorganize your workforce.
Staffing decisions are among the toughest part of a CEO’s job. When you’re in high-growth mode, a bad hire could slow you down. And when you’re battling adversity, workforce reductions are often unavoidable.
There’s no “good” way to let someone go, especially if the termination isn’t based on individual performance. But there are plenty of bad ways to downsize, as we’ve seen recently in Silicon Valley. Workers finding out they’ve been fired via a social media post, or because they’re suddenly locked out of their company email account, only compounds your problems by making you look cold to the rest of the world — particularly potential customers and top talent.
Faced with hundreds of reductions, Alan Caslavka knew that clear communication would be key. “We tried to be as engaging and forthright as we could through the process,” he says. “We held regular meetings, in some cases with the entire organization at one time, and communicated exactly what we were looking at in terms of the decline in the business and how we were approaching it. We had regular meetings, blogs, emails, functional leader engagements. We were trying to overcommunicate with the broader population. We didn’t want them to assume the worst, and I think that’s the natural instinct when there’s nothing being communicated from the leadership chain. So we tried to engage often, frequently, deeply.”
Alan also understood that even if it’s “just business,” firing someone is always personal. Trying to pretend otherwise just makes the process more painful and adds to the negative energy surrounding your company during a crisis.
“When it came to actually communicating with employees that their position had gone away, we did it in a very intimate fashion,” Alan says. “It was a manager and the employee, one-on-one, face-to-face, explaining the dynamics. We offered placement services and we tried to do everything we could to make sure that they were treated fairly. Severance packages were offered. We gave people the opportunity to say goodbye to their teams, and in some cases, finish critical tasks. It wasn’t, you’re out the door immediately. We gave 30 days in some cases and we tried not to do it before a holiday or things that would fundamentally disrupt some of their life events. And we had a number of employees that were retirement eligible, and we went to those employees first and offered them an opportunity to retire early with full benefits or just retire. The idea was, if we could get those older employees that were eligible to retire, it would be less painful then to the rest of the organization.”
4. Shore up customer confidence.
Clear, consistent communication is key to maintaining trust and forward momentum inside the company. The CEO needs to be just as forthright with external stakeholders too, especially customers. By this point in the process, frustrated ex-employees might be venting on social media, a c-suite exec or high-level manager might have abandoned ship, and your company might be in some unflattering headlines. Key customers are going to know why a shipment is late or a service was rescheduled. It’s the CEO’s responsibility to reassure them that this adversity is temporary and you’re executing a plan that will bring business back to normal ASAP.
“You want customers in the loop,” Alan says. “It’s a bit of a balancing act in terms of the right timing to bring them in and to discuss what your revised development schedules are going to look like. You don’t want them in too early, such that it’s overburdening the team so they can’t come up with a baseline and it slows them down. And at the same time, you want them involved enough so you know what the priorities are from a customer perspective so you can factor those into your new schedule. You have to walk that fine line. You want the customer to be bought into whatever ultimately you end up doing. With that, they gain confidence in your ability to execute.”
1. Acknowledge adversity. Facing your company’s problems is the only way to plan a successful pivot.
2. Always treat your people like people. Whether the news is good or bad, utilize high-EQ leadership to help each person navigate the upcoming transition.
3. Communicate clearly. If the CEO doesn’t explain what’s happening and what the plan is going forward, key stakeholders will fill in the blanks with rumors and paranoia.
About CEO Coaching International
CEO Coaching International works with CEOs and their leadership teams to achieve extraordinary results quarter after quarter, year after year. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 1,000 CEOs and entrepreneurs in more than 60 countries and 45 industries. The coaches at CEO Coaching International are former CEOs, presidents, or executives who have made BIG happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $10 billion, and many are founders that have led their companies through successful eight, nine, and ten-figure exits. Companies working with CEO Coaching International for two years or more have experienced an average EBITDA CAGR of 53.5% during their time as a client, more than three times the U.S. average, and a revenue CAGR of 26.2%, nearly twice the U.S. average.