The bad news just keeps coming.
While there is still a lot of uncertainty about the near future, and the economy is shedding jobs at a rate of half a million per month, it’s hard to remember that recessions are survivable.
For those of us not eligible for a federal bail out, it’s survival of the fittest. Companies and the people running them have to make very tough decisions. Those who survive will do so by being disciplined about managing cash and creative in their business development efforts.
What will the competitive landscape look like when there is a rebound? Your guess is as good as mine. Every time there’s a recession though, someone brings up the story about the two men hiking in the woods. So please forgive me if you’ve heard this one before, but it’s worth repeating…
The two men hiking in the woods
There are two men hiking in the woods who see a bear not too far ahead running straight at them. One man turns to run away while the other man quickly puts down his pack, pulls out a pair of sneakers, sits on the ground, removes his hiking boots, and starts putting the sneakers on his feet.
The first man cannot believe his eyes and says, “Those sneakers aren’t going to help you outrun a bear.” The second man replies, “I don’t have to outrun the bear. I just have to outrun you.”
The bear is the economy. You are the guy with the sneakers. The other guy is your competition. All we need to do is make sure that we help you outrun the other guy.
What are you doing to manage the downturn?
Every two months, our firm hosts the Senior HR Thought Leaders Forum at the Union Club in down town Cleveland, Ohio. At the January forum, we asked the question: “What are you doing to manage the downturn?” What ensued was a lively discussion with many ideas for you to consider. Here are several of those ideas.
Managing cash flows and conserving cash
Conserving cash does not mean spending as little as possible. What it does mean is that every single penny is spent as effectively as possible, with the smallest level of risk to return. Managing cash flow requires minimizing debt and doing everything possible to keep the cash flow positive.
It seems most companies have stopped their 401k matching programs, frozen salaries, laid off workers, and cut salaries. They’re doing everything they can to conserve cash. Others are investing in their future leaders by nurturing the talent they have. While merit increases may be frozen, they are offering their “keepers” new responsibilities and interesting assignments, and giving them challenging opportunities earlier than they might otherwise have done.
Reorganization and restructuring
Public companies have to answer to shareholders, so when there’s a recession like this, leaders must realign their cost structure to weather the downturn and do it with certainty. It’s not personal. It’s just business. One of our Forum participants told how his CEO could see the downturn coming, and wanted to take radical steps to restructure and re-organize. The Human Resource leader recommended that a significantly large number of employees be laid off, and that others be offered early retirement. The Chief HR Officer’s objective was to restructure one time and only one time. In this way he hoped to mitigate the long, morale destroying death march he had observed at other companies in the past.
Executive leadership and visibility
Strong executive leadership is needed now more than ever. Leaders should be highly visible and actively communicating about the business environment. They should regularly articulate the plans the company has for managing the downturn. Leaders should constantly remind employees that it is everyone’s job to figure out where to reduce expenses— on everything from copy paper to corporate travel and lodging to raw materials. Especially even factory workers should be asked what could be done to drive down costs. They know where the savings are. They’re just waiting to be asked.
Turning a crisis into an opportunity
The main thing is that you can’t take this downturn lying down. How are you going to turn this crisis into an opportunity?
Hard times means there are lot of talented people out there. And right now their skills are going to waste. It’s a great time to look for smart people who can get things done. Are you spending time looking for the star performers that will help you through? You’d better be doing something about this or your competitor might.
As Wendy Edgar, Area Human Resources Director, America’s People Team at Ernst & Young said at the conclusion of our meeting, which summed everything up and brought our time together to a close: “a financial crisis is a horrible opportunity to waste.”
Remember the story of the two men hiking in the woods? What are you doing to “outrun” your competition? What are you doing to turn the crisis into an opportunity?