Why You Should Be Crisis-Scenario Planning

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Trimble CFO David Barnes on how exploring possible outcomes got the company through the pandemic.
David Barnes, CFO, Trimble

Trimble Inc., a Sunnyvale, California-based hardware, software and services technology company, has long engaged in crisis planning. But, like most, it wasn’t expecting the Covid-19 pandemic.

Still the company, which services a variety of industries, including agriculture, building and construction, geospatial, natural resources and utilities, government and transportation, quickly played through various future options as soon as shutdowns hit. That work guided CFO David Barnes’ response to Covid, and helped the company weather the pandemic storm.

Barnes spoke with StrategicCFO360 about Trimble’s crisis planning, how to scale back without stopping your strategic plans and the importance of a strong company culture.

When the pandemic first hit, Trimble went through various scenario planning exercises. How important is this kind of work and how did it help Trimble ensure its own business continuity?

While the Trimble leadership team normally has a number of scenarios that we’re prepared for, like the rest of the business community, “pandemic” wasn’t on that list. Because we were unsure of how things were going to play out, we developed a variety of scenarios, ultimately implementing measures that would enable Trimble to stay strong even if the worst-case scenario came to fruition. This meant that we needed to reduce costs.

Trimble is like many companies in that our biggest cost by far is the compensation of our employees. To prepare for a potentially dramatic recession, we knew we needed to reduce our payroll in the short term, but we also knew that the crisis was likely to be relatively short lived, so we were determined not to take actions that would harm the company in the long term. We also wanted to mitigate the personal impact on our employees and their families to the greatest extent possible. All of these principles guided our approach.

We didn’t do a large workforce reduction—instead, we implemented a temporary salary reduction, with those employees at the highest end of the pay scale taking the biggest reduction, which we were able to reverse as soon as we had the confidence that we could do so without jeopardizing our financial health. We also scaled back initiatives that were less critical to our long-term success or had less urgency to our strategy and continuously monitored the health of our end markets and forward-looking business indicators. Collectively these actions had exactly the impact we hoped for as they kept our business strong while accelerating the momentum of our strategic transformation and maintaining the faith and trust of our employees.

Scenario planning is critical for any business facing uncertainty, which is nearly universal in our rapidly evolving world. It provides a leadership team with insights in how uncertain changes in the environment can impact the highest-level metrics that businesses are measured against. And when one source of uncertainty fades away, another usually emerges to take its place. At Trimble see this change occurring now, as vaccination is becoming more widespread and the economies of the world reopen, we see more supply constraints and cost pressures. Our scenario planning helps prepare us for these uncertainties as well.

What were some of the key components that enabled Trimble to weather the last year successfully, and what can other companies learn from that?  

Trimble came into the pandemic as a strong business, so we had an outstanding foundation to build on even in tough times. Our business model is all about digitizing critical end markets such as construction, agriculture and transportation—and more specifically using technology to connect the physical and digital worlds that our customers operate in. These industries mostly remained open as essential businesses, but they needed digital technology to adapt to the Covid constraints so in some ways the crisis put a greater emphasis on digital technologies and accelerated the adoption of our services.

We were also fortunate to have a strong culture that encouraged commitment and shared sacrifice. There is nothing like a crisis to test the cohesion of any organization, and the strength of our culture shown through in these difficult times. We also benefited from the strong support of our customers and dealer partners. Many of these businesses have been connected to Trimble for many years so we had a history of working together that helped us work through a tough market.

The clarity of our strategy and the shared commitment of our leaders and colleagues around the world helped us make the necessary changes called for in our plan. Having that clear vision was invaluable in assisting our company in making the tradeoffs required when times are tough and priorities need to be established. This gave us the confidence to keep spending on strategic initiatives even in the most difficult moments of economic contraction.

In some ways, the path we selected involved taking risks. We didn’t do a large-scale layoff, which would have been the quickest path to a big cost reduction. But we also didn’t put our transformation on hold, even knowing that transformations are difficult and expensive. As a team, we recognized that the crisis presented an opportunity to strengthen our business for all of our stakeholders—shareholders, employees, customers and communities—and we took some risks to ensure that this opportunity was realized.

Trimble is a company that helps various industries connect the physical with the digital worlds through integrated hardware and software services. Did Trimble’s focus on software play into the company’s own decision-making at all?

Trimble is somewhat unique in having a rich and diverse portfolio of hardware and software offerings. We view this diversity as a key to realizing the potential of connecting the physical and digital worlds. Our solutions connect the workflows of these critical industries by collecting data from hardware in the field, sending that data into the cloud where it can be analyzed and refined in the creation of an optimal plan, and then transmitted right back into the field where connected machines are doing real work.

Optimizing these workflows in construction, agriculture and transportation requires that the data be connected in an end-to-end workflow. This connectivity of the whole process—with data at its core in an ecosystem of both hardware and software—is at the core of our strategic intent.

Do you credit any cultural factors for Trimble’s success today and if so, what can other companies learn from your experience?

Absolutely, yes. The strength of our culture, including a shared commitment to our common purpose, the trust we place in one another and our shared values have been essential in enabling us to weather the storm. It’s a testament to the strength of that culture that we are even more cohesive as a group than we were when the difficult times began.

As a new leader at Trimble, I have been amazed and gratified to see the spirit of our company. A culture like this takes time and commitment to develop. It doesn’t just come from slogans or words on a website. It emerges through the daily interactions people have with one another over an extended period of time. The strength of the shared beliefs is tested when things are tough, and we have done well on that test. For this I credit the leadership of the company over the many years before I joined the company, my colleagues in the leadership team today and the countless employees around the world who work hard in solving exciting and important challenges even when the world around us is uncertain and difficult.

“Culture” is not typically something that CFOs are trained to think about day-to-day, yet it’s something that impacts our work in more ways than we realize since it’s ultimately what binds us together to work towards a common goal. If your company actively invests in your employees and makes them feel heard and cared for, it can be significantly easier when tough decisions need to be made, such as temporarily cutting salaries or benefits. Because Trimble had such a strong cultural foundation, most employees were very willing to make short term sacrifices for the common good, which we were able to quickly restore once the business stabilized.

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