Small Businesses at Risk

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An informal survey of fashion, retail, communications, and innovation gurus suggests to me that if leaders genuinely want the economy to roar back and remain roaring, fundamental change is required. We simply cannot return to our old, pre-Covid default settings. If we are honest, the business of supporting small business has been rattling along for generations, adding factions and fiefdoms to some mythic Rube Goldberg device.

The Machine of Small Business

The machine of  business was not created by a cartoonist illustrating how to make simple tasks impossibly difficult. No, we’ve over-complicated the machine ourselves. It has evolved into the weird, inanimate thing it is, patched together with spare parts, workarounds, standard practices, corporate speak, executive caprice, can-do boosterism and retrofit P&L statements. In its wake float cynical workers, price-addicted consumers, and a fast-fraying ecological ecosystem.

[callout]The post-Covid era offers the once-in-a-generation opportunity to not fall back into old habits. Let’s get rid of the ‘we-do-it-this-way-because-this-is-the-way-we-do-it’ shrug mode.[/callout]

When the Supreme Court agreed that “corporations are people,” the impact was primarily political. It provided a glossy semantic patina, a fresh coat of paint to the machine. The people part of the equation is getting lost, especially in the tenuous relationship between big and small businesses. Brutal big business practices are squeezing out even trusted partners. The executives I talk with are dismayed at how futile it is to improve or even repair this flywheel corporate machine. How it catches them up in its maw. They recount telling creative agencies and suppliers corporate mumbo-jumbo, kick-the-can foolishness to dodge paying bills, on time or at all.

  • “We’ve moved to 120-day payment cycle.”
  • “That general purchase order doesn’t work for our division. You’ll have to submit the documentation again.”
  • “I approved it. You’ll have to find someone in accounting to check on it.”
  • Or a recent favorite, said by a senior executive in a global packaged goods firm to an agency colleague: “It’s a small brand for us, but if you solve it, you’d get a ton of business. They have no budget — but do it for free and I promise there will be more work.”

Trust and Accountability

There’s a cost to such chicanery. When a manager says false words and gets away with them, they eventually become inured to their impact. They do not see how such falsehoods trickle through the entrepreneur’s world, their chain effect cascading to employees and gig workers who won’t be paid as agreed. The payday delay also affects those artists and writers and their families. Pretty little lies make victims and perpetrators of everyone in the supply chain. It is, as one colleague tells me, the business equivalent of the fat bully who steals the skinny kid’s lunch money. It is, he says, why the term common courtesy has become an oxymoron in the lexicon of most corporations.

Fiduciary Responsibilities

And, of course, there’s also the basic reductionistic term ‘vendor’ to consider. When management says, “This is our policy with all our vendors,” it means “You consultants were brought in to help us crisis manage a nasty moment which could bring down our CEO and you will be paid according to the schedule we’ve negotiated with our suppliers of raw materials, insecticides and cleaning services.”

Thus, the number-one order of business: If economists and politicians value the engine of small business as much as they say they do, they need to help corporations wean themselves off the business-as-usual cycle of hiring firms for one assignment while making them also perform as their bankers. Large-scale global companies and even ones which compete only domestically rely on outsourcing the intellectual capital needed to unsnarl knotty issues, communicate their points-of-difference and identify new products and services for future growth. But these companies are also the ones which pay brilliant boutique firms according to a schedule which is the equivalent of J. Wellington Wimpy’s, “I’ll gladly pay you Tuesday for a hamburger today.”

The number-two order of business must be to pull out the stops on fresh thinking that happens in real time, on the fly. After all, we got through 2020 by flexing such mental muscles. Be prepared to lead while catching up. A fashion expert I know and admire complained recently about the cost increases about to gobsmack American consumers. “Inflation is coming.” Why? Because factories in Asia shut down during the pandemic and are not yet back up to capacity. Because shipping costs from Asia are skyrocketing, containers costs four times what they did just 18 months ago. Because Italian mills closed for a year and are backlogged.

Can we think perhaps about using domestic mills and manufacturing? If the issue is about the radical increase in cost of producing goods overseas, coupled with delays caused by lack of capacity, why must we produce them overseas? Could this be the moment when those few clothing mills and plants limping along in the Northeast and South could have a resurgence? Dust off the machinery, get some private equity help and investment capital and make a strong case: Not having to pay $50 to import a container from Vietnam roughly the size of four shoe boxes that cost $12 pre-Covid provides a bit of headroom.

The number-three order of business, according to my colleagues, is to ‘call the question early.’ Businesspeople within their own hierarchies have lost their ability to say “yes” or “no,” when they can say “maybe.” That capability keeps projects and potentials simmering, but never coming to a boil. Do away with meetings about meetings. Try to excise the word “exploratory” from the vocabulary. Zoom has taught us a great deal about what it takes to get to a decision in an efficient straight line, on screen.

Small Businesses at Risk

Consultants and agencies alike have had to put ‘hurry up and wait’ thinking into their own P&Ls. Over and over I hear stories of major competitive pitches being launched by brand name companies which then pause the process, only to restart it six months later with new information and goals, thus requiring the agency to recalibrate and redo its approach. All for free. Then, when the firm gets the business, the project is put “on hold,” with the excuse, “I’m afraid we got a bit ahead of ourselves.”

One experienced retail executive told the exhausting story of a project she’d been involved with and felt strongly about, working to ensure better career potential for the marginalized and under-represented. It was supposed to be a two-month initiative, which six months later has still not come to fruition. Lots of meetings and documents, of course. Many, many telephone discussions about the importance of the work. Just nothing to show for it.

There is a lost opportunity cost sunk into this process and it cuts both ways. What young professionals could have been helped by this work and have not been? But also, for my colleague and the others working on it, what else could they be doing if they hadn’t been sitting through this exercise in futility? It happens daily and most probably at every division of every company. There is excess capacity being wasted. Good plant managers wouldn’t allow this much cereal or chocolate or crackers to fall off the line and hit the floor. Why is it acceptable to waste professional lives?

We’ve seen a clean slate through our shared pandemic experience. We learned to accommodate a new reality. We had to invent new systems and processes that met the new unsettling moment. The post-Covid era offers the once-in-a-generation opportunity to keep working those new muscles, to not fall back into old habits. Let’s get rid of the ‘we-do-it-this-way-because-this-is-the-way-we-do-it’ shrug mode.

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