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Proactive Management Vs. Reactive Management

By Edited Nov 2, 2015 0 0

reactive management example

proactive management should be considered

Based on my experience, many businesses are not properly managed.  CEO's, CFO's and COO's wait for concerns to arise and then deal with them.  This can be largely due to time management, lack of resources, etc... however we have seen this time and time again where companies miss opportunities or reactively manage customer complaints or buying decisions.

For this short, I will use energy buying as my specific example.

In 2002 the electricity market in Ontario deregulated.  Many people were not sure what to do and companies were meeting with countless door knocking type sales people week after week.  In short, people were getting burned out meeting with so many uninformed energy sales people that many decided to do nothing.  As it turned out, this was a good decision.  

We then reached 2005, energy prices were starting to soar, businesses were becoming aware of the fact that their budgets would be blown out of the water by end of Q3.  The first thing many people did, called up the same door knocking people and asked them for their forward outlooks.  Executives and Managers were asking commissioned sales people what they believe was going to happen to the energy markets...  and being a commissioned sales person they produced endless supply of newspaper articles showing that the market prices were increasing and that the sky was the limit.  Some well known newspapers were reporting what would have been the energy apocalypse.   If what they were saying was true, the result would have been endless companies closing up shop...

Managers were now under the gun... Executives asking them why they would not have managed such a large cost by having fixed rates in the past?  The orders were then given to the Managers to secure rates for as long as possible.  

That is exactly what people did.  Managers then presented the Executives with 5 year fixed price energy contracts so that they could manage their costs and the Executives gladly signed them - only thinking that they now had that cost under control.

- This is the perfect case of reactive management.  The result: Companies overpaid for their energy by 150%-250% for the next five years. 

It is now 2011.  Energy prices are at record lows.  Executives are seeing that their costs are well below the numbers they had budgeted for and have no interest in controlling their costs.  After all, prices are  now at levels they have not enjoyed for 7-10 years. Surely this will continue forever :)

Now there will be those people who argue that they have other items taking up time - such as simply ensuring the company makes it through these slower times.  Fact is, can you imagine if during the slower times energy costs increased?  Can you imagine how your business will be doing in a couple of years if you considered fixing a portion of your energy requirements at record lows during the slow times?

Now lets remember, I have used energy as an example, but "What other areas do you feel are managed in this way in your business?".

Another area where I can see this happening is Customer Management.

Ask yourself, how can you proactively manage the business you work for? 



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