Thursday, 3 September 2009

Will you survive the economic recovery?

If you win when the market grows, can you win when it retracts? Many would say you can’t have it both ways yet maybe you can. We know we are in a recession but how deep and when will we come out of it - next week, next month or next year?

Many of us are suffering at this time but not all of us are, as ever there are some ironies. Some of the government strategies to boost sectors of the economy have had the reverse effect, while certain areas have held their own without stimulation. It is as always in a recession very confusing and as the economists always say to us “the following scenario is the most likely…….. But on the other hand it could be the reverse” all very confusing.

For many the temptation is to bunker down, cut the costs wherever possible and hope for some recovery in your customer's fortunes. After all we need their money. The difficulty is that every one goes into the same mode of saving and not even the Bank of England’s fiscal easing can tempt many out.

Not that there is anything wrong with saving and maximising the profit from the market you are in. However markets are tricky places that tend to swing up and down and the more they swing up the reality is the more they will swing down. What we forget is they do not do this of their own accord but because of the activity of the people in them so when it comes to managing our market place, a little more prudence in the good times and a little less in the bad times will often ensure a smoother flow. Not that given the way people behave given an opportunity will we ever put an end to ‘boom and bust’ as some have promised. Still we can all do our part in working smarter to smooth out some of the excessive peaks and troughs.

We tend to forget that it is what we do in our market place that is what affects them most often; far more than third party activity or natural disaster which is often sited as the cause of volatility. This however is often man made or an excuse for some profiteering that starts the swings. In other words if what we do in our market place was done in a consistent manner through the good times and the bad times then we would be able to ease the effects of recession. With the savings made from the good times used to boost us out of recession. Problem is we spend more than we need in growth and we save more than is wise in recession so we add to the problem. The result though is this the over spenders in growth often those in major expansion programmes who have often inflated the market get caught by the recession's arrival. Their income disappears at a point when they are over stretched and they go bust, as the recession bites, that is of course unless some angel bails them out.

On the other side of this coin the cautious and over cautious are those most likely to survive the recession often to find they go out of business coming out at the other side. Why should this be? Well having run business and worked with and developed programmes with major business leaders all of my life I have seen all the boom and bust and industrial strife and changing markets since the 1950’s. To me the problem of how to survive in boom and bust becomes a little clearer if no easier to manage each time it happens.

Just like the speculation, investment and spend we put into our expanding market that make us vulnerable to onset of recession. It is the savings and areas we cut that cause the problem and our likely demise as the economy starts to recover. The irony is like most things in life those best at growth seem worst placed to cope with recession and those most cautious and able to survive a recession most likely to loose out as the economy recovers.

Why should this be? Well it’s often because of the soft flexible areas of the business which we manipulate to try and create growth and then cut to survive in recession like, advertising and marketing, learning and development, personnel and knowledge, innovation and research, stock and modernisation, customer service (quality) and PR.

The chances are you spent too much in these areas in the good times. Now that is as it may be or not I will more or less guarantee the fact that you will now be spending too little in these areas. The danger you will face as the revival starts is you may well be outpaced by your competitors and fail to recover from the recession.

I can see some hackles rising already maybe not because I am threatening the policy of the prudent and cautious but because of the pairings in the previous paragraph. I know that there are many that will make plausible argument that marketing and advertising are two very separate and distinct functions or that customer service has little to do with the public relations department. They will prevail that learning is too open and should be called and limited to job training and there are still many who are told, think or fear that you leave your knowledge in the locker room with your coat and just do the job you are paid for.

Well I stand by my pairings for many reasons and will not dwell further on them here but I am always available to debate them should you wish. The truth is that they are all the functions of one business your business. It may also be worth calling me to account for leaving out altogether another of my pairings the legal and financial functions of the organisation or admin and CSR. Further to these and dependant on what you do no doubt there are other functions which should be in the list but I re-iterate it is how fit the business itself is and in turn its departments are to deal with the recovery .

Let me paint a picture for you - the survivors. You have - cut cost in learning programmes, let personnel go to save salaries, reduced advertising after all your customers know you and finding new ones will be costly and difficult. You will have decided you will stick to what you do as R&D is expensive and we will keep away from controversy in the market and our products so we can minimize on customer service and PR all are good sound measures to survival.

Problems maybe how well you managed the redundancies and the departures. The enterprising and the go getters are the very people you need in a competitive market and are very often the first to have gone in a down turn they could now be with your competitors or setting up their own business.

While looking after old customers and not advertising saves you money as recovery starts who will be your new customers will they know you and what about those old customers are they being courted by your competition and worse still those bright people with great ideas you let go and have now set up a competitive business. Are they already eyeing up some of those clients - the non-competitive clause from their contracts will soon have passed their expiry dates.

You’ve cut the learning programme so are the staff you’ve retained been kept up to speed with current sector thinking do they posses the 'up to the minute' skills sets they need and have they been stretched in team working, leadership, business development or other skills so they can take on the new competition from the emerging markets and win. To late to start when the battle for the recovery is underway

Only you can tell me if you are better placed than you think you are. I would suggest in this recession right now is a good time to review your situation to take a little time out talk to your consultant – whoever but it is essential you talk to people outside your business who can take an objective look and advise you accordingly and honestly how you stand. Take a look with you at the potential of your business because if you have survived the recession it would be a shame to fail in the recovery but sorry to say history tells me that many businesses who think they can will not survive the recovery. The time is right to analyse what you can achieve.

Today it is time to plan the opportunities for tomorrow.