Evaluation of your company’s strengths and weaknesses can help reduce threats while maximizing opportunities.

Our industry faces uncertain times as we prepare to enter 2008. The housing industry remains in a depressed state and sub-prime issues continue to have a negative impact around the world. Indeed, the short-term direction of the U.S. economy is in doubt at best, with many predicting it to further decline before its recovery and return to a robust state. All of this is negatively affecting the wood products industry.

Furniture, cabinetry and millwork are tied closely to the health of the housing industry. When there is a strong demand for new homes, there is demand for our products. The opposite is true when the market falters as it has recently. When consumers cut back on retail spending, the store fixtures and other value-added wood products companies suffer as well.

As we turn the calendar to 2008, what are we to do? What are we going to do if there is indeed a recession ahead? The fictional story below will help provide you with some direction.

Don’t Focus on the Rear View Mirror

2006 and 2007 were not good years for Ajax Cabinet & Millwork Co. Owner Chuck Wright was lamenting about how bad the past two years had been and how he didn’t know what he was going to do. He talked about the drop in sales, the erosion of profitability and how he had to let some of his workforce go. “Things have never been so bad,” he said to Jerry Stovall, his operations manager.

Jerry said that if they were going to lead Ajax around the curves, bumps and potholes in the road ahead during 2008 and beyond, then they must keep focused on what was in front of them, instead of what they saw in the rear view mirror. While it is possible to learn from the past, he said, “When we do look back, we must be brutally honest and look for miscalculations and missteps that may have kept us from changing strategies in order to reach our potential.”

Chuck replied, “That seems like a contradiction to me — not looking back in the rear-view mirror, but looking back and learning from the past.”

“By spending the better part of a day reviewing the past, you and management could lay the foundation for a powerful and valuable exercise of planning for the future,” Jerry said. “Once we have glanced in the rear-view mirror, we could shift the focus to planning ahead, so we can move forward during the uncertain years ahead. To do this, we must continue analyzing our business and setting goals and objectives for 2008 and beyond.”

According to a column Jerry had read, one of the best ways to look at where a company is today, and to begin planning for its future, is to conduct a SWOT analysis of the company. A SWOT analysis is an objective analysis of the company’s Strengths, Weaknesses, Opportunities and Threats.

“The column I read recommended that you conduct a weekend retreat of key managers and supervisors to review past performance, and then conduct a SWOT analysis together,” Jerry said. “After such an intense evaluation, you will gain insight into the current state of the company and then be prepared to formulate goals and strategies that can propel the company forward in 2008 and beyond.”

S: Identify Company Strengths

The first step is to look at the company’s strengths. “This does not mean our perception of what Ajax Cabinet’s strengths are, but its actual strengths. For example, most companies will state that one of its strengths is that it produces quality products. However, we need to make sure we have our sales manager and customer service manager participating in the meeting to make sure we get the ‘rest of the story’ with regards to quality and service. Likewise, we must include knowledgeable people from all critical disciplines at Ajax to adequately conduct all phases of the SWOT analysis.”

Chuck replied, “So we should be able to identify those core competencies that are the backbone of Ajax. These and our other strengths are what set us apart from our competition.”

“In addition,” Jerry said, “the core values of our company and the spirit of our people can be a source of strength within Ajax. If not, they will be weaknesses and potential threats to our success.”

The goal, he added, is to identify genuine strengths so that a company can build upon them. “There’s no way we can navigate the future without this knowledge because it must serve as the starting point from which to successfully plan ahead.”

W: Check for Weaknesses

“Looking at our strengths is a good place to start because it is easy and will build confidence. However, then it will be time to look at the weaknesses within Ajax. The column cautioned the readers not to think for a minute that they could skip this exercise,” Jerry said.

This is a time when they must expose the company to objective scrutiny. The goal is to find the weaknesses that are constraints and eliminate them. Otherwise, they will provide the doorway through which the competition will enter to steal market share. Jerry challenged, “All of us must be willing to expose the company and ourselves to criticism — even encourage it. It is imperative that you, as owner of the company, set an example of how you want everyone to be honest and open while at the retreat.”

O: Look for Opportunities

“Now that we have identified the positive strengths and the negative weaknesses at Ajax, what next?” Chuck asked.

“Well,” Jerry replied, “as a team we need to identify opportunities to build on those strengths and find ways to counter our weaknesses. Look at this step as the ‘what-to-do-now’ exercise.”

“You’re right,” Chuck said. “It is a waste of time if we identify our strengths and weaknesses and don’t do anything about it. We have to look for positive changes we must make. To stop now would be accepting things as they are. We can leverage our strengths to use as a competitive advantage and remove our weaknesses to become even stronger.”

T: Identify Threats

The next step, Jerry said, is to identify possible threats — how outside forces coupled with the company’s weaknesses could threaten the future of Ajax — then develop strategies to neutralize those threats.

“If we don’t analyze the threats to our company, we will just be chasing our tails, going round and round, with no continuous improvement goals at all,” Chuck agreed.

“All of us at Ajax need to realize that there is still business out there to be had, albeit a smaller pie. We just need to come up with a plan to get a bigger slice, and a plan to become more profitable no matter how large the slice. Just because the forecast for 2008 does not look that rosy, we don’t have to accept it lying down,” Chuck added. “I can’t wait to share this retreat idea with the rest of our staff and get the ball rolling!”

Tom Dossenbach is the managing partner of Dossenbach Associates LLC, a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail [email protected]. Visit his Web site at www.dossenbach.com. Past Management Matters columns are archived on www.iswonline.com.