Bill Frezza: Good chief executives prioritize spending

Bill Frezza

Competitive Enterprise Institute fellow Bill Frezza recently penned a piece in the Huffington Post in which he drew from his extensive experience in business to explain how CEOs of private companies lead when cash becomes tight.

Frezza writes:

I have worked with many CEOs facing imminent cash flameout. The good ones are a marvel to behold. They halt all unnecessary spending, immediately. They prioritize payables, paying the most essential bills first and on time, as less essential creditors are persuaded to wait. They put long term projects in mothballs, sell off non-strategic assets, renegotiate contracts, and aggressively pursue receivables. They announce furloughs and layoffs impacting all employees not absolutely essential to keeping the business afloat and impose pay cuts for all remaining personnel, starting with the CEO.

Most of all, an embattled CEO will do everything possible to reassure customers, suppliers, and partners. He will not run around telling the world how screwed up his company is and how close it is to falling off a cliff.

Now President Obama has entered his second term in office, he has the opportunity to lead intelligently on the spending issue. Only by realizing the necessity to reduce federal spending substantially will he leave a legacy as a responsible president. On this, he would be wise take some cues from Frezza’s experience with marvelous CEOs who have turned their ships around.