We need great leaders in the current crisis.
Below is the kind of speech I’d like to hear from my CEO – delivered in person – if I worked for a chemicals company.
Everything that now follows is fiction and any resemblance to an industry leader, either living or dead, might sadly be purely coincidental:
“Things are really bad – there is no disguising it, and they will get a great deal worse. This is at least the worst global economic crisis since 1980-1982. Conditions are a lot worse than during the Asian financial crisis of 1997-98 when markets fairly quickly recovered.
“The financial security of hundreds of families depends on our company. Many of the main breadwinners of these families work for us.
“I have been through this myself – I was made redundant. It’s not just the money that counts, it’s the loss of self-esteem – because work for many of us goes to the core of how we define ourselves, of who we are, of what we mean to ourselves and others.”
“I will do my very upmost to avoid having to tell anyone to leave for economic reasons. The only reason I will willingly let anyone go is if they make a careless mistake.
“We are all in this together, we must watch each others backs, support each other, encourage each other – and try not to make any mistakes.
“I would rather see volumes go down substantially than for us to acquire raw material from suppliers or sell product to customers in difficult financial positions.
“We need excellent market intelligence on the viability of all our suppliers and customers. How strong are their business models and credit positions? This knowledge needs to be constantly revised.
“I am not asking you to take any risks out of anxiety to achieve unrealistic sales targets. I will be revising those targets down, and will revise them and down even further if necessary – regardless of the initial impact on our share price.
“I believe that caution over business conditions will earn us the long-term support of our banks and our shareholders. I really don’t care about my share options in the short term – all that matters is that we survive this together. And anyway my share options – and those of the fellow directors – will be worthless if we go bust.
“We cannot afford to make the mistakes of overbuying raw materials or over committing on sales because of our own credit position, the extreme energy-price volatility and the uncertainty over what is ‘fundamental’ demand’.
“Inventories have been run down because the industry was living in chemicals ‘parallel universe’, as Paul Hodges of International e-Chem so rightly pointed. Stocks were built-up earlier this year as crude prices soared on anticipation of further price rises up and down the product chains.
“This flew in the face of clear signals that the economic crisis was deepening. These signals included the collapse of Bear Stearns and the US government rescue of Freddie Mac and Fannie Mae. We were also guilty of this and I take the responsibility for following the herd.
“Once bitten twice shy and so everyone is as a result keeping stocks low. And as I’ve already mentioned, energy-price volatility and the uncertainty over demand is depressing buying and selling activity. Inventories are also being kept to a minimum due to the financial year-end.
“This means that I do not see our raw-material costs and finished-product prices moving up by anymore $20-30/tonne until at least the New Year and so there are no substantial gains to be made out there. But pricing hasn’t necessarily hit the bottom and so declines could be much bigger than any temporary and slight increases – so the danger of taking a risk for the potential of a very small gain is the risk of a huge loss!
“But I am telling my sales team to be prepared for sharp upward price corrections at some point – possibly as early as January 2009. Demand is still out there, if only at very-much reduced levels, and once the end-user demand re-emerges, our prices could literally double overnight from very low levels.
“This creates an even greater risk for us and so the policy will remain the same: be cautious, don’t take risks and if you miss targets and there is good justification for doing so, you will not be penalised. I would rather lose the odd upside deal when prices start rising and falling in large amounts than run the risk of a disastrous mistiming of raw-material buying and an increase in our operating rates.
“And finally, let’s forget about the crisis for the rest of this evening. DINNER’S ON ME – LET’S GO AND GET DRUNK.”