Cash Is King In These Tough Times: Management Guru Ram Charan

Management consultant maven Ram Charan is out with a new book with an impeccable sense of timing. "Leadership in the Era of Economic Uncertainty: The New Rules for Getting the Right Things Done in Difficult Times" (McGraw-Hill) offers key points for survival in what Charan says is a "100-year" economic event.

The lifesaver that CEOs should look for is cash in these difficult times. Cash must be monitored, reported and massaged. Contractors should be reviewed for how much cash they take. Customers should be assessed on how much cash they have and how quickly they can pay. As Charan says, "these days, cash is king."
His points:

• If you are a top manager facing this current crunch, you must have faith in yourself. You must assume a positive attitude and focus on what must be done in your company.
• Cash is king. Realize that with financial markets in turmoil and credit tight to non-existent, your business model must now revolve around cash.
• Monitor your cash. If you are leveraged, watch your cash every day. Track it. Assess cash flow in coming weeks and months.
• Take advantage of your human and systemic resources. Convince your workforce that cash is king and have them make their own assessments about how to keep it flowing. Sales, IT and back office folk all can lend important insights on how to improve your cash position. They can provide crucial intelligence about what is really going on and what steps can be taken.
• Review your customers regarding their cash-worthiness. If you have customers who have good cash flows and the prospects of more, work with them and tighten your relationships. Help them grow. If they have little cash, restrict your involvement.

Holliday took notice and on his return called his top managers to emergency meetings. Among the things he learned was that car makers were becoming especially skittish. DuPont makes paints for 30 percent of all new American cars and produces the paint within 48 hours of its application on new car models. Thus, DuPont has confidential production schedules from its car maker customers. Suddenly, Holliday learned, there were suddenly no more production schedules. Facing slumping sales, car makers were cutting back.

This convinced Holliday to take even more intensive action. He created 17 teams to find ways to deal with the upcoming downturn. Within 10 days of their inception, the teams reported on ways to preserve cash. Working capital was adjusted. Outside contracting was re-assessed. Every employee was informed of the climate and brought on board.

All of this happened before the tsunami hit. so far, DuPont is weathering the wave better than most.