Weathering the recession.

• Position: Management Strategy

As some indicators reveal signs of improvement in the economy, many companies have yet to feel relief. They continue to struggle with cash flow problems, declines in quality, reduced workforces, and, often most damaging, low employee morale.

Is there a formula for being a good executive during bad times? Three financial, executives share the lessons they've learned from managing their finance departments through this latest economic lull. Their thoughts were adapted from a presentation to FEI's Baltimore Chapter.

Managing a finance function in these times is a good news/bad news story. The bad news is that companies, and therefore departments, are suffering from poor profits; the good news is we're reviewing the way we do business to help us improve.

Every company is different. If you're a bank in serious trouble, you try to focus on certain areas. You have to motivate the people in the finance department, without relying on profitability to drive anyone. And you have to reduce expenses. The company asks everybody in the firm to contribute to the effort. That means staff reductions, salary freezes, and benefit reductions, none of which helps with your first objective, to motivate.

We finance managers are asked to produce more information--at the same time we're asked to reduce our costs. After all, when things aren't going smoothly, people ask a lot more questions.

When I returned to MNC Financial in July of 1990, after a short stint consulting, it was a very decentralized, very line-driven, and somewhat undisciplined company. The finance organization was geographically dispersed throughout Baltimore and Washington, D.C., and it was very culturally diverse. The companies making up MNC had many different attitudes about how a function like finance ought to work.

How do you meet such challenges? First, you must maintain your professional standards. When you're going through a tough period, it's very easy to relax your standards to get the work done. The people in my organization have been working harder than ever, but that can't become an excuse for mediocrity. Maintain a set of expectations that people understand and can strive for.

Second, centralize your organization functionally, organizationally, and physically. MNC was scattered all over. In July of 1990, the company had at least five separate organizations, consisting of 250 people, headed by managers with the title of CFO or something comparable. Today, there is essentially one organization, which consists of about 150 people, including 15 or 20 employees in a new organization working on troubled real estate. So we're down about 100 people from some 15 months ago.

The challenge is substantial. So my third most important point about managing a function in that kind of environment is that you can't communicate with your people too much. I'll give you an example: American Security Bank, a bank in our consolidated group headquartered in Washington, had a finance function that consisted of about 30 people. Three months after I rejoined the company, we decided to...