2011: A Year to Focus on the Balance Sheet

The late Sir James Goldsmith, an outspoken corporate raider in his times, used to humorously call himself the “Ajax” of corporate America. Claiming that he knew of no well-run company that had been subjected to a corporate raid, he would posit that corporations under attack end up adopting the very ideas advanced by the corporate raider even in cases where the raider does not succeed. His point was that stagnant corporations become inefficient and complacent unless external forces cause them to change their old ways. And, he was that external “Ajax” of corporate America.

A depressed economy, such as what we have experienced over the past couple of years, might be a less threatening, but equally painful, Ajax.

Most corporations that survived the economy became more lean and efficient, and are, in some sense, the better for it. If, as most economists predict, the economy should turn for the better in 2011, your income statements should take a positive turn and a healthy and growing business can forgive a lot of sins. Watch out. Don’t let the balance sheet slide.

I am not referring to the financial balance sheet, but rather to the non-financial intangible assets that you have created. (See Food for Thought: April 2010 for a discussion on this topic.) A lean operation running efficiently is an intangible asset, not represented in your financial balance sheet. Further yet, if business gets healthy and begins to grow, make sure you focus on building new intangible assets that will serve you a long time. Consider a more efficient supply chain or more streamlined business processes. Invest in your people. A growing business is the best time and place to grow people. Give them stretch opportunities.

What non-financial balance sheet goals do you have for 2011?

My friend and colleague, Dave Coreson, who has run global, billion-dollar manufacturing operations, has a simple rune: He wanted new people in old jobs. So, one time, when he took over a new manufacturing operation, at his staff meeting he asked his staff to stand up, move over one seat and sit down. He told everybody that they had a new job: the job of the person whose seat they occupied. Clearly, he had to make some minor adjustments. But, he sent a clear message. Both people and positions have to grow. He always left behind a richer set of intangible balance sheet assets than he inherited in any assignment he undertook.

So, ask yourself how you will be enriching your intangible balance sheet assets in 2011. While the income statement job might be easier in 2011, it is what you do with your balance sheet that will speak volumes in the years ahead.

Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.