Tariffs! AI! Remote Work! - What’s a company to do?
Tariffs! AI! Remote Work! - What’s a company to do?
There’s a lot of talk in boardrooms, meeting rooms and in the social sphere about the challenges facing founder-led businesses in Canada right now. We are in the midst of another technological evolution with AI, we're facing economic uncertainty with incoming tariffs from the USA and most companies still haven’t come to grips with the pandemic-forced remote/hybrid workplace environment. These factors, coupled with a workforce that is increasingly looking for flexibility, purpose driven work and has more options than ever through the gig economy to make choices about where they spend their time, has left most senior leaders wondering how they can adapt while still maintaining focus on growing their businesses.
Make no mistake, companies who can swiftly adapt and are putting strategies in place now to safeguard their businesses will have a significant competitive advantage.
Let’s breakdown the challenges faced by businesses right now:
Artificial Intelligence
No longer the realm of science fiction, the AI trend raises questions about job security and is the ubiquitous and pervasive buzzword that every company must jump on the bandwagon to incorporate. Unfortunately the number of true experts in this field for commercializing AI into product driven roadmaps is infinitesimally small. Leaders are feeling the pressure from boards and the C-Suite to “have an AI strategy” and not just for market driven initiatives, but as a replacement to skill sets that cost the company run rate.
The Economy
Extreme volatility in the market and tariff pressures from our neighbors to the south have created fear and uncertainty at every level of an organization. It’s a moving target to know how these uncertainties will create a ripple effect impact to the bottom lines of companies. Many companies are likely to face a deceleration of their growth in the near term.
The Canadian Chamber of Commerce Business Data Lab report suggests that Trump’s tariffs could cause significant problems for Canadian and American businesses, potentially causing a recession. Ontario, Alberta and Quebec could be the hardest hit as these provinces are highly trade intensive and the majority of their exports flow to the United States. The tri-cities, Kitchener-Waterloo-Cambridge, is cited as expected to be the 4th hardest hit city in Canada due to the concentration of agriculture and manufacturing companies operating in this region.
Workplace Culture
Most companies operated in panic mode to ride out the pandemic. Shuttering their offices, figuring out how to keep the lights on when productivity used to be measured by what you could physically see and touch. Remote work wasn’t a “nice to have", it was a health imperative. This mobilized a talent movement that demanded greater flexibility and trust. Companies are still reeling from an evolutionary step in workforce culture that is the most significant change in how we work since WWII. There was no time to thoughtfully consider how we work in this new context, it was survival mode.
Many companies long for the good old days when they understood the operating principles of in person work. Many companies are retreating to the safety of the known with forced return to work policies. Tensions are high between employees and employers and a sizable building infrastructure cost sits unmanned in empty buildings in cities across Canada with no one to take up the leases - what’s a company to do, if not force them back into usability? This kind of mass change, done with no change management, has left a lot of companies with a crisis of culture, and panic hiring of more high cost leaders to ensure oversight for “productivity challenges”.
The Gig Economy
Increasingly, employees are opting out of traditional FTE roles and into the gig space, searching for freedom, flexibility and purpose. Many top performers are parlaying their expertise into consulting and contracting roles, allowing them to impart their wisdom and have a tangible and immediate impact, while removing the headaches of politics, lack of autonomy and confused decision making authority from their working life.
How Can Companies Adapt?
Given all of these forces at play, all at once - How can companies adapt and come out on top? The solution incorporates each of these factors and integrates them into a playbook for managing through adversity. Companies willing to question their assumptions, who don’t take themselves too seriously and are able to adapt swiftly will have a strong competitive advantage.
Critical Analysis
Companies need to assess every aspect of their business against a goal of increasing cash flow, profitability and productivity. Here’s what you should be looking at:
Total Run Rate as a percentage of annualized revenue.
This will vary depending on a company's stage of growth (Seed, Early, Growth, and Maturity). Benchmark this to understand where you sit.
Complete an analysis of your compensation philosophies and your variable incentive programs. Are you incentivizing the right behaviours? Is your compensation program structured to reflect your performance philosophy? Your size and stage?
Analyze your current strategic plan and product roadmap against your 12 to 18 month workforce plan.
What capabilities and skill sets do you urgently require to achieve your strategic plan?
How are these roles intended to be implemented? FTEs? Contract? Consulting engagements? What’s the expected output/outcome delivered by these roles?
Engagement and retention scores in your employee population.
Are the critical roles and high performing employees engaged? Do you have a plan to maintain business continuity if they leave? What’s the cost of attrition if you lose a key player?
Cash flow burn rate.
Analyze OPEX for opportunities to reduce burn and optimize systems and infrastructure.
Analyze your legal employment obligations.
Are your employment contracts up to date? Do you have clauses that cover terminations, layoffs or restructures?
Review collective bargaining agreements, look for opportunities to renegotiate with an emphasis on keeping the workforce whole during an uncertain economy.
Analyze your customer agreements and contracts.
Do you have flexible terms? Opt out clauses?
Take Action
Leverage a detailed critical analysis of your business to identify actions you can implement to adapt to your current reality. Below are some actions to think about.
Human Capital
Employment Agreements - Revise your employment agreements, make sure they include provisions for restructuring, layoffs and terminations.
Staffing Models - Implement flexible staffing models, this includes contracts instead of FTEs, offering employees opportunities to job share, flexibility for employees to opt into a reduced work schedule, etc
Bring in an expert to set up your HR function, your product processes, pipeline process etc. Utilizing contract expertise allows you to invest in the areas that are foundational to the business, but you don’t need to keep a high cost FTE on staff to run and maintain those functions once they’re in place.
Leadership - Critically assess your leadership layer - too top heavy? Not enough leadership horsepower? Make sure you aren’t gap filling with high cost leadership resources when you should be investing in IC’s with the capabilities needed to move the business forward.
Compensation - Update your variable incentive programs to ensure that they are driving the right behaviours and driving performance and profitability.
Communication Strategy - Accelerate the frequency and transparency of your communications; don’t let good employees linger in ambiguity and anxiety.
Retention - Double down on retention strategies, know who your critical talent is and focus on keeping them engaged.
Upskilling - Do a deep dive on the skills and capabilities you have and the gaps in the business, instead of hiring more people look at opportunities to train or retrain and streamline or amalgamate functions.
Hybrid/Remote Work - Implement a hybrid/remote workforce culture using the known best practices of remote companies to optimize for productivity.
Revenues & Cash Flow
Contracts & Agreements - Take a hard look at your agreements and T’s & C’s - these need to provide for more flexible terms to account for tariff and economic impacts.
Expansion - It may seem counterintuitive but diversifying into other markets can offer protection against pressures on your North American business. We’re seeing positive indicators to fortify trade with our EU partners opening up possibilities for Canadian businesses to break into these markets. If you can manage it, this may help to offset a revenue downturn and make you more resilient in the future.
Manage Your Cap Table - For some companies restructuring your cap table may help company’s maintain stability. Check out this article from Astrella on cap table strategies during economic downturns.
Infrastructure - Take a hard look at your business application suite. Your application architecture can balloon into a runaway train of subscription costs for apps that were used as a one off. Get ruthless about what systems you really need and are accelerating your ability to get things done. Strip out all the rest and watch your cash flow increase.
Buildings - With the number of new consultants and at home businesses cropping up across Canada, company’s should consider innovative solutions to recoup building costs by converting space to pay per use options for workshops, seminars or co-working spaces.
Systems & Infrastructure
Here’s where AI can become a game changer. Implementing AI into your existing product suite is a months or even years long venture, however, leveraging it to accelerate the pace of output for certain roles and implementing smart systems that leverage AI can often reduce headcount costs and increase efficiency. Where AI shines right now is in increasing productivity of standard corporate roles. Create an internal use policy for AI and reduce the time it takes for these roles to perform standard tasks for everything from report building, to presentations to answering standard HR questions.
Final Thoughts
Pride in Canadian businesses is at an all time high, helping companies weather the coming storms is a passion of mine. Want to know more? Need a critical analysis of your business and an action plan? AdaptPath can offer a proven method for completing a critical analysis of your business and the strategies to deploy that are tailored to safeguarding your business and helping you achieve your strategic plan.
