It’s time for part two in our series on “Navigating the Current Economy”. If you have not read part one posted on July 19^th you may want to take a moment to do so prior to reading part two. You can find part one by scrolling down the posted blogs.

In part one we discussed the dangers associated with the common tendency of over reacting to the current economy. In part two we are going to examine the second emotion based component tied to the current economy. It is “Inaction & Business Paralysis”.

As you read my blogs you will find that I like to use stories and analogies to make some of my points, in this case I am going to begin my discussion relating to “Inaction” by using the classic analogy “THE OSTRICH SYNDROME”.

The story goes that the ostrich when frightened or panicked will stick his head in the sand assuming that since he can’t see anything no one can see him. Of course, while his head is in the sand other parts of his body remain available to attack.

In business the “Ostrich Syndrome” may take several forms; let’s discuss three of the more common ones:

•         Denial – To deny implies the refusal psychologically to admit or acknowledge that an adverse condition or factor exists. Denial is common in small and medium businesses in adverse times. Why is this? When you have your whole heart and soul invested in a business it becomes very personal, and the reality is that we simply don’t want to deal with the emotions tied to negatives circumstances in our lives or businesses. We tend to cling to statements like “We will be alright.” “We have made it through tough times before.” The problem is that in most cases there is very little in the way of facts to back up these statements. The denial leads to inaction and inaction often leads to business distress.

•         Overoptimistic – Being overoptimistic is closely akin to denial; the difference is that the overoptimistic owner will acknowledge the current economy but then by being overly optimistic he or she fails to evaluate their situation and take the appropriate actions necessary to protect their business. They tend to say things like “We’ll just have to wait this whole mess out, but I am sure we will be alright.” “This recession can’t last forever, I am sure next quarter will be better.” Having a positive, i.e. optimistic outlook is a good thing; however, all of the optimism in the world without action may lead to business disaster.

•         Lack of Reality – Being out of touch with reality can often lead to a condition where the business owner starts ignoring customer concerns, vendor concerns and key business indicators.  Instead they adopt a “business as usual” attitude”. The current environment is anything other than “usual” so the relevant factors tied to the current economy and their impact on small and medium businesses must be identified, evaluated and acted upon. Getting real, if you will, doesn’t mean that we are turning cynical or negative; a healthy dose of properly placed positive thinking in conjunction with reality can be a good thing.

In many instances the various emotion based forms tied to the Ostrich Syndrome may shift or combine based on the condition of the business. One day the business owner may be in denial and then the next he or she shifts to being overoptimistic. A minor setback may trigger a period where a lack of reality exists, while a positive occurrence, however minor, may trigger a period of optimistic euphoria. A balanced approach to viewing, understanding and acting on business circusmstances and challenges is called for.

Let’s now take a look at an additional element tied to the second emotion based component – “Business Paralysis”.

So what is business paralysis? Here are two common forms of business paralysis.

§         Decision Paralysis - It's a terrifying feeling. It can strike any business person at any time. That moment of panic, when it seems almost impossible to make a crucial decision, can render helpless even the most confident owner or manager. When that instant of decision paralysis strikes, it's time to take a positive course of action. Decision paralysis results from having a prior course of action turn out badly. The business owner or manager becomes afraid of making another mistake. Rather than risk a potential terminal business decision, the owner errs on the side of safety. The problem for the company is that choosing inaction is really making the decision to do nothing. This lack of action can be even more disastrous for the organization.

§         Analysis Paralysis – This form of business analysis may be tied to decision paralysis or may stand on its own in a singular form. Analysis paralysis usually takes the form of the owner or manager’s inability to make a decision based on business information and/or options tied to the business as a whole, or to a particular business challenge.

Here are some examples:

o       Available information strongly indicates that one or more employees are simply not performing. Rather than counsel the employee on their deficiencies or take stronger action, i.e. probation or termination, the owner rationalizes how the information may be erroneous or that now is not the time to make such a decision. In essence he or she is afraid of the consequences tied to the action. They think or may say things like "What if I need them next month or next quarter?" "They've been with me since the beginning, I hate to let them go." "The numbers don't mean everything -- loyalty stands for something."

o       The business owner is losing money each month and has limited cash reserves to sustain long term business operations. He or she may have one or more viable solutions available to them, but out of fear that the solution(s) may not work they repeatedly evaluate and re-evaluate each solution and ultimately take no action. The tendency to over-analyze combined with the fear to make a decision, i.e. commitment -- will result in the demise of the business based on the simple fact that the combination of ongoing operational losses combined with limited cash reserves leaves no other alternative.

o       Sales statistics tied to sales by product or market clearly point out that the market and/or product focus must be narrowed in order for the business to return to profitable operations. Another term for this is retrenching. The word is derived from the French term “retrenchment” and dates back to 1590-1600. It simply means “the act of retrenching; a cutting down or off, as by the reduction of expenses.” The emotion tied to this action triggers feelings of inadequacy, embarrassment, self-doubt et cetera. Retrenchment can be a bitter pill to swallow, but the failure to act in terms of withdrawing from non-productive markets or eliminating poorly performing products or services has even more dire consequences.

In closing this segment, I acknowledge that “inaction” and “business paralysis” are hard to avoid given the current economy. We are after all “human”, therefore our emotions play both a positive, and in some cases, a negative role in our daily lives.

If I could definitively define the exact steps necessary to master the current economy I would be headed to Washington or Wall Street and would make billions! I don’t personally believe that any single person or firm has all of the answers to the many complex problems tied to the current economy. We are in uncharted waters! But, having said that I do know this, if a business is starting to slide backwards in terms of revenue, profitability and performance – and if the business owner takes no action -- then the demise of the business is a foregone conclusion. Of course, as discussed in part one, taking the wrong action also has associated dire consequences.

In the next part of this ongoing series I will begin to introduce and discuss positive steps that can help you determine if your business is sliding backwards, or if already in free fall, I will discuss some time proven steps for not only analyzing the problem, but also how to stop the fall and return the business to a stable position.

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### End of Part Two – Navigating the Current Economy ###