There has been much discussion in recent months about whether the United States is in a recession. Based on the general definition – two consecutive quarters of negative gross domestic product (GDP) - that marker was achieved in the summer of 2022. Then there are those who adhere to the theory that a recession requires a significant decline in economic activity lasting more than a few months. In their world, the economy is not yet in recession and it may not even reach that point.
Semantics aside, the ‘R-word’ is certainly appearing in a lot of headlines of late and not just in the U.S. There is a growing unease that a global recession is on the horizon, with many C-Suite leaders asking their teams to prepare for how they plan to navigate a potential financial storm.
Amid such fears though, it is crucial to remember that ‘recession’ does not need to be a dirty word. Look no further than ananalysis of the recessions of 1980, 1990 and 2000 that found 9% of the 4,700 public companies studied flourished, outperforming competitors by at least 10% in sales and profits growth. Then there was a more recent analysis of data from the Great Recession (2007-09) that showed earnings by the top 10% of companies not only rose steadily during the downturn but continued to climb afterwards.
Ultimately, it is all about positioning one’s organization to be in the best place to tackle any hurdles that a recession may put in front of it and ensure that when the dust finally settles, it has not only survived but is thriving. On that note, here are six strategies that executives can implement to lead their company through challenging times.
Focus on the future: it is understandable that some businesses get overwhelmed by the here and now during economic downturns but successful companies never lose sight of where they want to be in a post-recession world. Having a clear view of the end-goal and an optimistic outlook for achieving it helps businesses pinpoint where they need to invest their time and resources and acts as a reminder to team members that a recession is an ‘event’ rather than a ‘crisis.’
Don’t rush to lay off: labor is one of the greatest expenses for a company but there is a far greater risk in indiscriminately laying off staff at the mere mention of the word ‘recession.’ Along with the cost of payouts and entitlements, a significant reduction in staff numbers can have a devastating impact on morale and productivity at a time when it is arguably more important than ever. Given the costs associated with recruitment, onboarding and training, there is also temptation to not rehire when the pressure eases. If there is a need to reduce labor costs, it is much better to look at options such as reducing hours or encouraging the use of leave.
Practice smart cost-cutting: aggressive mindsets have no place in the boardroom, particularly when it comes to cost-cutting. Companies that take a slash-and-burn approach to reducing expenses at the first sign of economic uncertainty often end up compromising the backbone of their operation. The likes of research and development, marketing and technology infrastructure may seem like easy targets for reducing expenses but the impact of scrimping on such vital areas can be devastating in the long-term. Certainly undertake a critical review of operational costs but remember many companies cruel themselves by choosing extreme cost-cutting over prudent budgeting.
Consider outsourcing: recessions can be stressful but they can also inspire companies to think outside the box, especially when it comes to workforce resourcing. Outsourcing has long been an attractive option for companies that want toreduce costs,increase efficiencies and boost productivity, all of which are on the wish lists of C-Suite leaders during economic downturns. The lower cost of living indestinations such as the Philippines can save companies up to 70% on labor costs, while outsourcing repetitive and time-consuming tasks can ease the pressure on in-house employees and allow them to focus on higher value responsibilities.
Invest in technology: recessions are not a time to walk away from embracing tech. Sure, money may be tight but the risk of being left behind by more creative and innovative rivals is not worth it. If anything, tough economic times are the ideal time to adopt digital innovations that can make businesses more efficient and flexible. As an example, improved analytics and data can help managers better understand the sector, how the recession is impacting the business and where there is potential to pivot or improve.
Be transparent: less of a strategy and more of a general rule for C-Suite executives confronting any difficult period, let alone a recession. Teams look to their leaders in times of uncertainty and are savvy enough to know when they are presenting a fake façade. Avoid the temptation to be overly positive and insist that all is well with the world. Workers not only respect honesty but gain confidence from seeing the people in charge acknowledge the reality of the situation and being told straight up how they are collectively going to address it.
How to survive and thrive in uncertain times
Just as there are few tougher tasks than managing a business during recession, there are few greater opportunities for true leaders to step forward. While the previously mentioned analysis of the 1980, 1990 and 2000 recessions found 17% of the companies studied went bankrupt, went private or were acquired, there were countless others that emerged stronger than ever. No doubt their fortunes were guided by C-Suite executives who found the right mix of dealing with today’s concerns while keeping one eye firmly on tomorrow’s rewards.
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