Cause-and-Effect Diagrams

It is difficult if not impossible to solve complicated problems without considering many factors and the cause-and-effect relationships between those factors. Defining and displaying those relationships helps. The first such cause-and-effect diagram was used by Kaoru Ishikawa in 1943 to explain to a group of engineers at the Kawasaki Steel Works how various work factors could be sorted and related. In recognition of this, these diagrams sometimes are called Ishikawa diagrams. They are also called fishbone diagrams, because they look something like fish skeletons.

What can it do for you?

Quality problems are typically not simple. They often involve the complex interaction of several causes. A cause-and-effect diagram will help you:

Define and display the major causes, sub-causes and root causes that influence a process or a characteristic.

Provide a focus for discussion and consensus.

Visualize the possible relationships between causes which may be creating problems or defects. Cause-and-effect diagrams are particularly useful in the measure and improve phases of Lean Six Sigma methodology.

How do you do it?

Decide which quality characteristic, outcome or effect you want to examine. You might consider Pareto analysis to help you focus on the most important issue.

Write your chosen effect on the right side of a paper, board or flipchart and draw a box around it. If you think of this as a fishbone diagram, this is the fish head.

Draw a straight line to the left, the fish backbone.

For each primary cause or category of causes, draw a diagonal line slanting from left to the centerline. Alternate these ribs on the top and bottom of the backbone. Label the end of each rib and draw a box around the label.

Draw a horizontal line intersecting the appropriate diagonal line and label it to describe each secondary cause that influences a primary cause. Alternate these medium sized bones to the left and right of each rib.

In a similar way, draw and label diagonal lines for third level or root causes, small bones, intersecting the secondary cause lines, medium sized bones.

Examine the diagram. If certain causes seem to have a significant effect on the characteristic you are examining, mark them in a special way. Variation 1: Cause Enumeration

Sometime it may be very difficult to determine the primary causes to be included in your diagram. If that is the case, after you have determined the characteristic or effect you are examining, follow these steps:

Use brainstorming to create a list of all the possible causes. The list will contain a mixture of primary, secondary and tertiary (or big bone, middle sized bone and small bone) causes.

Sort the list by grouping causes that are related.

Identify or name each major grouping and make your cause-and-effect diagram.

Machine, Manpower, Material, Measurement, Method and Environment are frequently used major causes that can apply to many processes. The advantage of the cause enumeration technique is that you stand a much better chance that all causes will be listed, especially hidden ones, and your diagram will be a complete and useful picture. The disadvantage is that it may be difficult to relate all the causes clearly to the result, making the diagram hard to draw.

Variation 2: Process Classification

Sometimes it is more helpful to look at causes in the sequence in which they occur instead of considering overreaching logical categories. With this approach, the center line or backbone follows the sequence of the process.

Instead of primary causes as the ribs, show the major process steps from left to right.

Construct your cause-and-effect diagram as before. The advantage of this technique is that, since it follows the sequence of the process, it will be easy for everyone to understand. The disadvantages are that similar causes will appear again and again, and causes due to a combination of factors will be difficult to show.

Hints for Making Good Diagrams

Get input from many people involved in the process. Not only will this make for a more accurate diagram, everyone taking part will gain new knowledge.

Make one cause-and-effect diagram for each Critical-To-Quality (CTQ) characteristic you are considering. Trying to include all CTQs on one diagram will make it too large and complicated to be of much use as a problem solving tool.

Avoid generalities. Express each cause as concretely as possible.

Since you will use your diagram to direct the examination of specific cause-and-effect relationships with data, the characteristic you are considering and all the causal factors should be measurable. If they are not, try to make them measurable or find substitutes.

The objective of the cause-and-effect diagram is action. Be sure your causes are broken down to the level at which they can be acted on. Now what?

· Use your diagram to develop a common understanding of the factors potentially influencing or causing a quality problem.

· Use your diagram as a road map for collecting data to verify the causal relationship of various factors to the characteristic.

· Continue to annotate and modify your diagram as you verify relationships and learn more.

Using a cause-and-effect diagram this way will help you to see which factors in your process need to be checked, modified or eliminated.

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Managing Change - The Wrong Approach

I often ask clients how they would handle challenges associated with leading change. Questions like: how would you get started? How would you know that you had made a compelling case? What would you do if resistance threatened to stop the project?

And typically, people respond in ways that show they really understand what it takes to lead change well. For example, they know that you need to make a compelling for change in order to get people interested and committed. They know what it takes to get started. They know what it takes to get back on track. And, not quite so often, they know how to keep change alive so they get real results from all that effort.

Given their responses, you'd think that most changes would go relatively smoothly and their organizations would get a great deal of benefit from these changes. But, you'd be wrong.

Experience - and research - indicate that only about one-third of all major changes in organizations succeed. Most go way over budget, miss deadlines by a significant amount, or just die before completion. And many of the changes that do get implemented never deliver on the initial promise.

I wondered, why is there such as big gap between what people know about leading change and what they actually do?

I think I found the answer - it's fear. When the pressure is on to produce, leaders (and the rest of us) get scared. This "I'm late, I'm late for a very important date" urgency leads people to make bad decisions.

Imagine your organization needs to cut costs significantly over the coming year. Leaders get scared. They know they should get people involved in grappling with this crisis. The leaders even give lip-service to doing so, but the urge to do something quickly takes over. Senior leaders meet behind closed doors and work out plans. In my experience, most of these leaders mean well, and are not, on average, brutish louts. They just get scared. Fear that opening things up - allowing people to help shape the future - could result in chaos and dissension. And they know that will just make things worse. Without considering the consequences of making command decisions - the leaders make command decisions.

They announce the plans. Other stakeholders wonder what all the fuss is about. Nobody took the time to include them in the loop so that they could see the looming crisis. So all this just sounds like a flavor of the month idea to them. Leaders try to get things moving, but others know all types of ways of avoiding this work. As a client once said, "all I got was malicious compliance." At this point in the article I could recommend that you read a book on change. And, as an author of such books, that might be what you would expect. But, no. I'd like you to try something else. Close the door, sit back and consider times when you've been on the receiving end of an organizational change that didn't go so well. Ask yourself, what went wrong? What would I have liked leaders to do?

Would you have liked them to make a compelling case for change? If so, what would have helped? How would you have liked them to get started? Would you have liked to have been involved? If so, what would that involvement look like?

Major changes can take months, even years, to see results. What type of leadership and support would you have liked that could have allowed you and others to make real progress?

In the event that things started to go off track and stakeholders started getting angry, how would you have liked leaders to have handled things?

My hunch is that this simple exercise will give you a fine foundation for what it takes to lead change effectively. I wish you well.

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Six Sigma and Change Management - What to Do and What to Avoid

Getting people to support Six Sigma can be challenging. However, if you are a leader or consultant trained in Six Sigma, you probably believe in that process. And that excitement may make it difficult to grasp why others might not be so wild about it. In my experience, the people who do the best job building support for Six Sigma understand people - and how they react to change -- as well as they understand the technology.

Here are some ideas and access to resources that can help in your planning.

First, you've got to understand why people might support - or why they might resist - Six Sigma. I've identified three reasons why people resist (or support) change. Level 1: I don't get it. People simply don't understand what this Six Sigma stuff is all about. Level 2: I don't like it. This is based on fear. And cannot be ignored. Level 3: I don't like you. At this level people don't have trust or confidence in the people leading them.

Then, ask yourself, where are the stakeholders with regard to the three levels? That exercise alone should start to give you ideas of where you need to focus your attention.

Let's say you need to show people that it makes sense to measure quality out to the sixth standard deviation. Take a look at the articles that show you how to make a compelling case for change.

Maybe you need some way to get started. You can't do much better than Kaizen events. However, let's say you are more inclined to create your own format for getting people moving forward, then you need to think seriously about who you want to involve and how you want to include them in the process? In other words, your planning, can't be focused just on Level 1 issues. You must attend to the emotional (fear versus excitement) and people's level of confidence in leaders.

Holding an event - deciding where to focus, setting targets, and so forth - can be exciting. It can make you believe that success is inevitable. Ah, if it were only so simple. You still need to do things to keep the process alive so you get real tangible results for all that effort. Too often, leaders shift their attention to other projects, only to see all the work that went into that Kaizen event go down the drain.

And sometimes, the unexpected happens and the train starts to derail - and you've got to do something to get the process back on track. During these times, it is especially important to pay attention to the people. It is too easy to pile on the specs and hope that turns things around. That seldom works. Things derail for a reason. And often understanding resistance is key to getting back on track.

You can access many free articles and tools on applying these ideas on all manner of organizational change including Six Sigma projects.

http://www.beyondresistance.com/change_management_library_menu.htm. And be sure to read my article, Resistance to change - Why It Matters and What to Do About It.

Good luck with Six Sigma in your organization.

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Are You Addicted to Being Late?

Are you really busy juggling work, home, friends, daily tasks, and taking steps toward your goals?

I've heard many people say, "I go, go, go all day long and don't even know what I did all day." Does this sound familiar? How can you eliminate the chaos when your schedule seems to have a life of its own?

The key is understanding that even though your schedule may seem like it runs without you, you hold the power in this chaotic relationship. Being late is a commonly ignored addiction. You've crammed two more appointments into your schedule, and now you don't have time to eat.

I have been late my whole life. It began when I was a teenager and I wanted to rebel against my mother. I would purposely oversleep; I would take 30-minute showers just to drive her crazy. These habits served as an outlet for my independent self-expression. But, as an adult, it hasn't served me well. A few years ago, I was forty-five minutes late for an appointment that ended up changing my life. I had health issues that weren't going away, and I was broke. Despite the monetary setback, I felt a strong urge to meet with a medical intuitive that I had read about in a magazine. She miraculously agreed to conduct a trade with me even though that wasn't her normal business practices.

This incident made me realize that I could have gotten so much more out of the appointment if I didn't encourage my addiction to tardiness. I could have started the personal relationship off on a better footing if I didn't walk in with guilt, shame and anxiety emanating from my face. I vowed to change my relationship with time. Now, when I'm late, I'm calm. And I'm late much less often.

But even still, I occasionally choose to feed my addiction to adrenaline and end up being late to something that's important. That urgent, anxious feeling we get when we are late is a nice hit of adrenaline.

Here are 3 signs that you might be a "tardy addict:"

Do you judge yourself for being late and then obsess over what people will think when you finally arrive? By doing this, you're just making matters worse. It's like carrying an unnecessary luggage case full of guilt, shame, and fear. If you are late, simply acknowledge your mistake and apologize. You will feel better. Don't drain your energy by making lame excuses or being a victim to circumstances you've created. Take responsibility. In addition, once you realize your late arrival is not worth the stress, you will likely be on time more often.

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Which E-mail Type Are You?

There is a common assumption in our society that technology is makes life easier for us. What I find is that most people have a hard time 'unplugging' and become overwhelmed by the interaction technology provides. We are constantly bombarded with information from so many directions I can't even begin to name them all. I even have a hard time remembering what it was like before cell phones and e-mail....and it hasn't been that long.

The question than becomes how do you stay connected in a balanced way? I've discovered that people have one of two relationships with e-mail. Read on to diagnose yourself and begin your path to peace of mind!

Which e-mail type are you?

Type 1: The Avoider- You put off checking e-mail until you have so many e-mails that it is beyond a 2 hour job to deal with. You basically spend everyday avoiding e-mail.

Symptoms:
1) When people ask you "Did you get my e-mail?" you tell them, "Oh, I haven't checked my e-mail in ___ days." You feel either cool or stressed about the unknown items in your inbox.

2) Your inbox is HUGE. You have hundreds or thousands (no I'm not exaggerating) of e-mails in your inbox because when you do check it you just graze over them rather than dealing directly with them.

3) You think about how you 'should' check your e-mail and you worry about what's in there that you don't know about. This the most challenging part because you've missed important things in the past.

The solution:
- Face the facts. E-mail is not bigger than you. Tackle it twice as much as you do now. If you check e-mail once a week and it's a big dramatic, dreaded task, do it more often. The more times you do it, the quicker you realize that email is not a technological monster meant to defeat you.

-Reduce the amount of useless e-mail. When you check it, be sure to mark junk as junk so you get less of it in your inbox and get off of mailing lists that you don't utilize. If you feel dread when you see a certain e-mail, unsubscribe. If you get unwanted e-mails from a relative that you always delete, gently e-mail them requesting personal e-mails only and no forwards. -Do an internet spring-cleaning. Schedule a specific time to clear out the build up and unread spam.

Type 2: The Obsessive- Does 'Crack-berry' mean anything to you? For those of you who aren't urbanites, this is a term for people who use a Blackberry and can't get off of e-mail.

Symptoms:
1) Thoughts of what lurking e-mails are resting in your inbox haunt you throughout the day...but unlike The Avoider, you like the idea and want to check it immediately to quell the rising pressure to read it.

2) You check it every chance you get. You check it when you want to procrastinate, when you get bored, when you are suppose to be paying attention to anything else that is not email.

3) You have multiple e-mail accounts.

The prescription:
-DON'T check your e-mail first thing in the morning. Take care of your self first.
-Go to a caf?ithout internet so you can get other work done. (That's where I am while writing this; I am a self diagnosed Obsessive.)

-Set a timer so you'll know when it is appropriate to take a break. While being on the information highway is a good thing, it can go beyond the necessary amount of time and you unconsciously get lost. Office mates I had in Santa Cruz used to warn me, "Back away from the computer."

-Check e-mail two times per day rather than constantly being distracted by the alluring sound notifying you of another email being sent to your computer.

-When all else fails, simply pick up the phone and call someone instead of e-mailing.

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How Do Six Sigma And BPM Concepts Blend Together?

Are you ready to unleash the power of business process management (BPM) combined with Six Sigma within your organization? Companies are just starting to realize how synergistic the two process systems are, and have effectively joined the processes to increase their organizational workflow and efficiency. BPM integrates technology into the Six Sigma processes, creating a more cost effective and profitable organization.

Are you sure that everything that's written here is feasible?

Read on, then visit our library to comment...

Business Process Management

BPM is characterized by four steps: map the process, execute the process, manage the process and analyze the data. The key to BPM is automation and its ability to blend people, technology and machines together so that the organization is more agile, more efficient working with real time information. A significant short coming to BPM is that the process does not have the analytical skills to solve complex problems.

Six Sigma

Six Sigma is characterized with 5 steps: define, measure, analyze, improve and control. Six Sigma was fundamentally designed to improve workflow process and to decrease production defects within organizations. The shortcoming of Six Sigma is that it does not blend the power of technology within its principles, making it challenging to maintain the process controls over the long term.

The combination of Six Sigma and BPM processes will create an organization that is better equipped for workflow optimization, ultimately increasing the profit margin of the organization.

Each of the 5 Six Sigma steps needs to seamlessly blend with BPM in order to gain the necessary leverage within your organization.

Define:

In Six Sigma, the Define stage is when a team is chosen, the team charter is developed and a project plan is outlined. The team will then participate in mapping exercises to determine the high level processes that they are evaluating and any current gaps. Adding BPM to this step involves the blend of technology with the team's mapping exercise. Technology will allow for team members to rapidly share ideas, content, documents or important communication. Technology will also allow team members to make quick modifications to the model processes through the shared interface. When communication barriers are removed, team members can discuss quicker and more freely using tools such as discussion boards, dynamic workspaces and message boards.

Measure:

The Measure step of Six Sigma is where the team will define metrics, collect data, establish a baseline and validate their measurement system. BPM integrates technology into this step, allowing the group to integrate their data, documents, web information or reports into their processes. The technology solution will also allow the team to manage their documents easier through tools such as a workspace portal.

Analyze:

The Analyze step of Six Sigma is where the team will define performance objectives, identify process steps and determine the causes of the defects that were located. BPM technology can provide a secure dashboard for web based reports that will measure process performance throughout the project.

Improve:

The Improve step of Six Sigma is where the team discusses and develops potential solutions, the solutions are tested and the final solutions are refined and then implemented. BPM technology can help the team by simulating potential bottlenecks of each solution discussed, creating "what if" scenarios. BPM technology also supports the function of the administrator by allowing them to manage and update configurations.

Control:

The Control step of Six Sigma is where the team will monitor and document the implementation as well as institutionalize the improvements throughout the organization. BPM technology can ensure consistent implementation as the improvements are rolled out across the organization. BPM also allows for process control with the ability to monitor and analyze real time data.

When the power of Six Sigma and BPM are combined, your organization becomes better equipped to optimize its workflow, reduce its costs and increase its annual profit margins for shareholders.

How To Handle Change In The Work Place - 10 Steps Towards Success

Change is inevitable! The world seems to be changing so fast that no one could stay wrong all the time, even if they tried. The simple fact is nothing in life can overlook it, especially us human beings. We may try our best to avoid it like a plague, overlook it like FLS (first love syndrome) where we hear no evil, see no evil, feel no evil; or at best, pretend that we are "OK" and it's nothing but an undetectable glitch on the radar screen. So we fool ourselves to believe that our short-comings are minuscule; therefore, undetectable and will eventually work themselves out. Wake up folks! One wise man said that "Even nostalgia isn't what it used to be." Surely our faults will find us out. Don't you know they are usually the cause of our demise?

Charles F. Kettering said that "The world hates change, yet it is the only thing that has brought progress." As individuals with various degrees of business acumenical skills, we MUST realize that the "C" word is unavoidable. Let's be realistic, time waits for NO man. The seasons change for a reason; the old becomes new and the new becomes old. It's a process that comes about because of TIME, and friend, TIME is no respecter of persons. It waits on no man, neither is it in the business world. We can fight it with all our might, but we will eventually loose the battle, get an extension or become extinct if we are not careful.

Change is the mother of all directional process in the business world. We can accept it, lay in bed with it or leave it. It makes no difference who or what we are. Everyone MUST make a choice, it is up to us. Sometimes it is like a runaway train that waits on no man; young or old, bond or free, experienced or inexperienced, great or inadequate; much less small, medium or large places of business. Take for example, the current Presidential race. President Hopeful, Senator Obama believes that the present government has made such a "muck" of things; he is calling for a regiment of CHANGE. Americans are listening and they believe him. The question is-what is our disposition when change is inevitable in our lives? How do we handle it?

Here are ten (10) steps or recommendations to help combat change in any place of business:

1. Envision a plan for success and implement it.

2. Keep a journal or a portfolio (or both) of your accomplishments (personal or business). It acts as a thermometer to inform you whether or not you are on track. If you are not, it will remind you to take action.

3. Review and update it frequently.

4. If you decide to make and keep a portfolio, it can be used as a tool to 'show and tell' when you are on your next promotional interview.

5. Tell yourself that technology is your friend. In spite of what others may say, keep up with it and stay ahead of your office counterparts. Use it when you can. It will only make you look more credible to the powers that be.

6. Whenever there is a strong resistance to CHANGE (you or others), examine yourself carefully and look back at your goals or objectives for life. If these changes are inevitable, there must be a reason for your opposition. Maybe the type of change necessary is not part of your overall goal. If this is so, then incompatibility exists, so you must move on. However, if there is none and these changes are for the best, then muster-up all the courage you can to improve yourself. Part of being successful is changing with the times.

7. Know the type of change you are dealing with and how best to handle it.

8. Never compromise your values. In the end, you must live with yourself, no one else.

9. Change MUST be for 'the best'. Anyone who experience 'the worst', must remove himself or be removed from the equation. There is incompatibility.

10. Change is best served when it is 'bought into' not when it is forced upon. Collaboration is the best way to go.

Copyright 2008 - All Rights Reserved Worldwide

How to Successfully Navigate Your Business Through an Economic Downturn

An economic downturn is a phase of the business cycle in which the economy as a whole is in decline.This phase basically marks the end of the period of growth in the business cycle. Economic downturns are characterized by decreased levels of consumer purchases (especially of durable goods) and, subsequently, reduced levels of production by businesses.

While economic downturns are admittedly difficult, and are formidable obstacles to small businesses that are trying to survive and grow, an economic downturn can open up opportunities. A well-managed company can realize the opportunity to gain market share by taking customers away from their competitors. Resourceful entrepreneurs capture the available opportunities, from an economic downturn, by developing alternate methods of doing business that were never implemented during a prior growth period.

The challenge of successfully navigating your business through an economic downturn lies in the realignment of your business with current economic realities. Specifically, you, as the business owner, need to renew a focus on your core clients/customers, reduce your operating expenses, conserve cash, and manage more proactively, rather than reactively, is paramount.

Here are best practices that will help you to successfully navigate your business through an economic downturn:

Goals:

The primary goal of any business owner is to survive the current economic downturn and to develop a leaner, more cost-effective and more efficient operation. The secondary goal is to grow the business even during this current economic downturn.

Objectives:

• Conserve cash.

• Protect assets.

• Reduce costs.

• Improve efficiencies.

• Grow customer base.

Required Action:

• Do not panic... History shows that economic downturns do not last forever. Remain calm and act in a rational manner as you refocus your attention on resizing your company to the current economic conditions.

• Focus on what YOU can control... Don't let the media's rhetoric concerning recessions and economic slowdown deter you from achieving business success. It´s a trap! Why? Because the condition of the economy is beyond your control. Surviving economic downturns requires a focus on what you can control, i.e. your relevant business activities.

• Communicate, communicate, and communicate! Beware of the pitfall of trying to do too much on your own. It is a difficult task indeed to survive and to grow your business solely with your own efforts. Solicit ideas and seek the help of other people (your employees, suppliers, lenders, customers, and advisors). Communicate honestly and consistently. Effective two-way communication is the key.

• Negotiate, negotiate, and negotiate! The value of a strong negotiation skill set cannot be overstated. Negotiating better deals and contracts is an absolute must for realigning and resizing your company to the current economic conditions. The key to success is not only knowing how to develop a win-win approach in negotiations with all parties, but also keeping in mind the fact that you want a favorable outcome for yourself too.

Recommended Best Practice Activities:

The Nuts and Bolts... The following list of recommended best practice activities is critical for your business' survival and for its growth during an economic downturn. The actual financial health of your particular business, at the outset of the economic downturn, will dictate the priority and urgency of the implementation of the following best practice activities.

1. Diligently monitor your cash flow: Forecast your cash flow monthly to ensure that expenses and planned expenditures are in line with accounts receivable. Include cash flow statements into your monthly financial reporting. Project cash requirements three-to- six months in advance. The key is to know how to monitor, protect, control, and put cash to work.

2. Carefully convert your inventories: Convert excess, obsolete, and slow-moving inventory items into cash. Consider returning excess and slow-moving items back to the suppliers. Close-out or inventory reduction sales work well to resize your inventory. Also, consider narrowing your product offerings. Well-timed order placement helps to reduce excess inventory levels and occasional material shortages. The key is to reduce the amount of your inventory without losing sales.

3. Timely collection of your accounts receivable: This asset should be converted to cash as quickly as possible. Offer prompt payment discounts to encourage timely payments. Make changes in the terms of sale for slow paying customers (i.e. changing net 30 day terms to COD). Invoicing is an important part of your cash flow management. The first rule of invoicing is to do it as soon as possible after products are shipped and/or after services are delivered. Place an emphasis on reducing billing errors. Most customers delay payments because an invoice had errors, and therefore, will not pay until they receive a corrected copy. Email or fax your invoices to save on mailing time. Post the payments that you have received and make deposits more frequently. The key is to develop an efficient collection system that generates timely payments and one that gives you advance warning of problems.

4. Re-focus your attention on your existing clients/customers: Make customer satisfaction your priority. A regular review of your customers' buying history and frequency of purchases can reveal some interesting facts about your customers' buying habits. Consider signing long-term contracts with your core clients/customers which will add to your security. Offer a discount for upfront cash payments. The key is to do what it takes to keep your current customers loyal.

5. Re-negotiate with your suppliers, lenders, and landlord:

i) Suppliers: Always keep your negotiations on the level of need, saying that your company has reviewed its cost structure and has determined that it needs to lower supplier costs. . Tell the supplier that you value the relationship you have developed, but that you need to receive a cost reduction immediately. Ask your supplier for a lower material price, a longer payment cycle, and the elimination of finance charges. Also, see if you can buy material from them on a consignment basis. In return for their price concessions, be willing to agree to a long-term contract. Explore the idea of bartering as a form of payment.

ii) Lenders: Everything in business finance is negotiable and your relationship with a bank is no exception. The first step to successful renegotiations is to convince your lenders that you can ultimately pay off the renegotiated loan. You must point out to your lenders why it would be in their best interest to agree to a new arrangement. Showing them your business plan and your action plan that includes your cost-savings initiatives, along with "the how" and "the when" of the implementation of your plan is the best way to achieve this goal. Explain to them that you will need their cooperation to insure that you can survive, as well as, grow your business during the economic downturn. Negotiated items include: the rate of interest, the required security to cover the loan, and the beginning date for repayment. A beginning date for repayment could be immediate, within several months or as long as a year. The key is to realize that your lender will work with you, but that frequent and continual communications with them is critical.

iii) Landlord: Meet with your landlord. Explain your need to have them extend the term of your lease at a reduced cost. Make sure you have a clause in the lease agreement that entitles you to have the right to sublet any or all of the leased space.

6. Re-evaluate your staffing requirements: This is a very critical area. Salaries/wages are a major expense of doing business. Therefore, any reduction in the hours worked through work schedule changes, short-term layoffs or permanent layoffs has an immediate cost saving benefit. Most companies ramped up hiring new employees in the good times, only to find that they are currently overstaffed due to slow sales during the economic downturn. In terms of down-sizing your staff, be very careful not to reduce your staff to a level that forces you to skimp on customer service and quality. Consider the use of part-timers or the current trend of outsourcing certain functions to independent contractors.

7. Shop for better insurances rates: Get quotations from other insurance agents for comparable coverage to determine whether or not your present insurance carrier is competitive. Also, consider revising your coverage to reduce premium costs. The key is to have the right balance-to be adequately insured, but not under or over insured.

8. Re-evaluate your advertising: Contrary to the other cost-cutting initiatives, evaluate the possibility of increasing your advertising expenditures. This tactic realizes the advantage of the reduced "noise" and congestion (fewer advertisers) in the marketplace. The downturn period a great opportunity to increase brand awareness and create additional demand for your product/service offerings.

9. Seek the help of outside advisors: The use of an advisory board comprised of your CPA, attorney, and business consultant offers you objectivity and provides you with professional advice and guidance. Their collective experience in working with similar situations in past economic downturns is invaluable.

10. Review your other expenses: Target an across-the-board cost-cutting initiative of 10-15%. Attempt to eliminate unnecessary expenses. Tightening your belt in order to weather the downturn makes practical, financial sense.

Proactively managing your business through an economic downturn is an enormous challenge and is critical for your survival. However, through well-planned initiatives, an economic downturn can create tremendous opportunity for your company to gain greater market share. In order to take advantage of this growth opportunity, you must act quickly to implement the above best business practices to continue realigning and resizing your company to the current economic conditions.

Copyright © 2008 Terry H. Hill