Find the Costs, Hidden and Otherwise (Sponsor Letter)

Jeff Frederick, Ph.D., President, Drury University

A couple of recent government reports demonstrated the unusual moment organizations and their leaders face in charting a course through this fiscal year, their next strategic plan, and beyond. At once the economy appeared to be steamrolling ahead with a 3.0 percent gross domestic product growth metric for the second quarter. But a Bureau of Labor Statistics report a few days later revised May and June job growth downward numbers to a pedestrian level while posting a much lower than predicted number for July. The markets have been largely positive the last three months, but the aggregate import tax rates have reached a level not seen since 1933. More to the point, fluctuating tariff rates make it challenging to predict not only product and supply chain costs, but timelines as well. How is an organization to make sense of these incongruent indicators?

All organizations crave predictability, and yet this moment features uncertainty in spades, making it difficult to make major investments in plant, property, and equipment with firm timelines for break-even dates. We all track the fixed costs that dot our balance sheets, making the most of every opportunity to reduce expenses or at least slow their growth. Even so, some hidden costs can be just as critical and should be identified and addressed. Are you tracking employee turnover? The time and expense of replacing team members is a hidden expense that can stick to the balance sheet but also impact customer satisfaction and the ability to be nimble. What about marketing return on investment or the cost to acquire a customer? National consumer confidence is evaluated through a Present Situation Index and an Expectations Index; not surprisingly the July numbers were a mixed bag of moderate market reassurance with some longer term ambivalence about interest rates, including on credit cards. These are useful data points, but not as important as formal and informal methods of engaging directly with your organization’s customers and suppliers. What is your strategy to glean direct information from your key stakeholders. How intentionally are you communicating with them and are you getting accurate, decision-worthy information in real time?

In moments of economic unpredictability, employees and customers alike seek confidence, stability, trust, reassurance, and accurate information. Failure to communicate could be the greatest hidden cost of all. We are in a moment that demands overcommunication through the channels most likely to be relied upon by your different audiences: a one-size-fits-all approach like a blanket email is more efficient, but makes it less likely your dart is going to hit the dartboard, let alone find the bullseye. I recently spoke to an executive leadership group, making the point that this moment, more than ever, requires leaders to be active listeners, responsive and visible to their team and customers, and flooding the zone with actionable data. A reactive approach—answer questions when they come—might be missing the larger opportunity to soothe concerns and grow confidence by proactively building stronger personal connections. Nobody understands the strengths and weaknesses of an organization like those who execute the mission each and every day. They have ideas and solutions, and they also have a few worries. There is no guarantee that connecting with employees and customers, students in our case at Drury, will identify hidden concerns, costs, and opportunities. Just the same, those organizations that don’t seek to provide stability by overcommunicating are likely to find that the cost of failing to do so won’t be hidden for long.

Jeff Frederick, Ph.D., President, Drury University