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The Third Wave – a ‘must’ for the 2nd half of 2009 and beyond

July 15, 2009

The Great Recession

Jobless Recovery

The Great Slog

True Unemployment is now, nationally, exceeding 20% and climbing

7 out of 10 Americans are now afraid of loosing their jobs

No matter what you call it, this economy is in trouble and even if you are a B2B oriented business, let alone a B2C, consumer’s inability to take on more debt are clogging your sales channels. Even medical equipment is being affected due to reduced credit, cost pressures and reduced endowments.  Nothing is completely safe.

Companies have gone through multiple waves of cost to revenue alignment.

The First Wave – 2nd half, 2008

Most companies saw it coming and held a series of internal meetings to reduce expenses.  The top level cost take out was easily accomplished based on your own employee’s deep internal knowledge of what could be safely and quickly cut.

The Second Wave – 1st half, 2009

Revenues declined and the underlying cost base had to follow suit.  Since most of these changes had a minor political component, or were not evident, a wave of benchmarking and cost take out recommendations was performed by the Big 4 and the boutique Management Consultancies.  This is an easy ‘gig’ for  marginally experienced people to deliver because it requires no operational experience, just pre-formatted template based data gathering so it could be compared, via a PC based application, to their own or purchased benchmark data.  These programs even issue the ‘report’ in near-finished form.  Consultancies love this process since they charge you 2.5X these people’s salaries to simply gather data and it’s easy to hire a ton of new grads each year.  The big consultancies make a ton of cash and you get to align yourselves with the Benchmark Best Practice, which means you’re about as good as everyone else.

And now it is time for the most meaningful Wave,

The Third Wave – 2nd half, 2009, looking at 2010 and beyond

There will be no true recovery without a return of the consumer (which is over 60% of our economy) and so you have to re-realign revenues and expenses for the Long Slog.  Given that you’ve already taken out the most obvious and the next levels after that, the next step of cuts can be difficult to find, can affect your strategy and in some cases, have you enter or leave businesses or markets. At the least, they have major political impacts which can lead to widespread undermining if change management is not handled properly.  This also assumes your employees and customers respect the people doing the Third Wave.

To properly design this level of cut requires more than legions of  data gatherers, it requires a tightly focused team of seasoned operating experienced executives, each a SME in a particular domain such as Finance Transformation, Lean Office, Supply Chain and Contract Manufacturing, IT as a Business Partner, Operational Excellence, etc.  Based on years and years of hands-on execution and management experience, finding these cuts and then developing a coherent implementation plan has to be based on a balance of insights, deep data dives to the non-obvious and human change management.  The results of the Third Wave are profound, long lasting and have the highest ROI of all the waves.

The Third Wave will probably make our older workers even more valuable.  They know how organizations operate and have seen a lot of intentional and unintentional consequences from various management actions over the years.  Someone else has already paid for their lessons.  They know how to coach executives to change core behaviors so change sticks and employees see verbal and execution alignment.  Put these people into a-political SME based organizations, focused on results, and you have a new form of consultancy – more numerous, smaller, more focused and willing to share risk/reward.  The new consultancies have case studies written about them for others to study.

A few years ago, the American Cancer Society had an ad campaign saying the 5 most dangerous words in English were “maybe it will go away”. Perhaps we can rephrase it in 2009 as “I’ll do Third Wave tomorrow”.

Rich Eichen is a Managing Principal of Return on Efficiency, LLC, who’s website is and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years of operating  experience reshaping companies and key initiatives as well as operating units of Global organizations. He can be reached at

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