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How to manage during a downturn

Updated on September 30, 2012

How does one manage the company/business/dept/section during a recession?

Business cycles go up and down and during the down cycle, there will be a slowdown of trade, activity, and business. Customers are cutting back because their customers are cutting back. One end of the chain is consumer spending - if people don't spend, business cannot sell. It then affects the entire supply chain.

We've also heard that governments is always aiming to maintain a balance between inflation and deflation. If price goes up too fast, then spending power is reduced - people will spend less as a result and economic activity will suffer. Deflation can happen when there is financial crisis like what happened during 2008-2009 - economic activity goes down because banks are not lending to businesses. Banks are not lending because there is no confidence that they will be paid back. It's actually a confidence issue. When we hear credit freeze, it means banks are not lending, i.e. credit is not flowing. Governments like the US is trying to restore confidence in the banking system but is facing many challenges. Deflation as I understand, even if price is low and is lowered, consumer spending does not increase because consumers are not confident of spending when the economy is not in a good shape.

Anyway, I digress into the economics of the slowdown...

I read something useful on how one can look at managing the downturn - the source comes from market research firm Frost and Sullivan. SMEs are mentioned as a specific target on how to manage during the downturn but I think it's relevant to MNCs or any big local companies as well.

If you are an organisational leader, what do you do in this environment? If you are a department head or section head, what do you do? If you are a small business owner what do you do?

Here's a useful model to look at how to manage during a downturn.

1. Short term (~1 year)
Maintain your key people (keep their talent in place)
Look at how to manage cash and keep costs down

2. Medium term (perhaps 1 year+ onwards)
Focus on improving efficiency (improve productivity)
Develop better processes so that you can still deliver to the end user

3. Long term (2/3 years onwards)
Have a view of the future - keep on investing for the upturn when it comes.
Identify key areas to invest in to position oneself for the upturn

For the leader, manager or anyone who leads a team - provide strong leadership, positivity and the right mindset for the crisis.
Do not cut down on everything - keep investing in critical investments because they will take you to the next level when the recession ends.

Further reflections on the short-term strategy
It's important to keep the talent. If you are the employee, recognise this - prove to the company, your leader that you are a valuable talent to the company. Take the initiative to come up with ideas or suggestions on how to improve the business, reduce costs (e.g. cutting down on bureaucractic processes), attract more customers, sell more to existing customers, etc.

Thoughts? Comments? I'd love to hear from you


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