Be prepared, be very prepared: Useful guides on how to get ready for the economic recovery

Some day this war’s going to end ­ and when it does
businesses will have to convert their recession-fighting swords into recovery
ploughshares. To succeed, they’ll have to start now. Fortunately, there has been
a steady flow of publications aimed at helping organisations thrive in the
downturn and embrace the (eventual) upturn.

Pit stop
The Economist Intelligence Unit (EIU) recently issued a report arguing that
recessions favour the bold: such organisations “have taken decisive action to be
ahead of the pack when the gloom finally lifts,” it says. It suggests a
five-point plan:
• Rethink the business model A recent EIU survey found that a
quarter of businesses had already changed their business model in the current
environment and the same proportion intended to.
• Investing in the future “You can’t save your way out of a
recession,” as Intel co-founder Gordon Moore once said, so you have to be
prepared to go against the flow, invest in enabling technology, keep research
and development going.
• Investing effort, not money The paper suggests key areas of
investment in terms of time and effort should be innovation, collaboration and
sustainability. Forget about “incubation rooms”; instead, think about offering
employees rewards for creative thinking. As for collaboration, the paper quotes
Sun Microsystems co-founder Bill Joy who said, “No matter who you are, most of
the smartest people work for someone else.”
• Finding new markets Emerging markets haven’t been immune from
the downturn, but they are still the best prospect. Remember that when western
economies recover, they will still be ‘mature’.
• Communicating with stakeholders In a world of social
networking websites, blogs and YouTube, “bad news spreads at the speed of
light”, the report says. “It has never been more important to maintain a good
corporate reputation.”
Taking advantage of the pit stop: How to prosper in a recession
https://tinyurl.com/eiu-pitstop

Upside
Fortune magazine’s senior editor-at-large Geoff Colvin has written a
book that offers ten management strategies to prevail in the recession and
thrive after it’s over. Based on interviews with business leaders, he refutes
the view that slashing costs and sacking staff is what matters most. Instead,
recession means restructure, reinvent and reimagine. The downturn is “rich with
possibilities”, he says.

Colvin’s list of action points includes suggestions such as: reset
priorities; protect your most valuable asset (that’s your people, in case you
needed to be reminded. Colvin says that while General Motors, Ford and Chrysler
were laying off 140,000 people between them, Toyota sacked no one, preferring to
send employees on extra training courses and teaching them how to improve
productivity); engage the outside world; re-examine your strategy and business
model; and more.

But Colvin’s book is perhaps even more interesting and enlightening in the
early chapters when he sets out exactly why it is that this recession is such
good news:
• “This downturn is worldwide, so your canvass of opportunity is huge.”
• The depth of the downturn means that fundamental elements of economic
behaviour are being affected in ways that may last for years.
• “This downturn is long, which means many companies won’t survive it.” Fine, as
long as yours is one of the ones that does.
• “This downturn is novel, so most managers have never experienced anything like
it and no one has an advantage in knowing how to manage for it.”

What all this adds up to, Colvin argues, is that even when recovery comes,
things will not return to normal: there will be a “new normal”, in which the
world is less US-centric, governments will play a larger role, and economies
will be less consumer-orientated.

He ends with the thought that this current crisis is “a unique opportunity
for self-development”.
The Upside of the Downturn (Nicholas Brealey, £16.99)
www.geoffcolvin.com

Finance
The ICAEW Faculty of Finance and Management’s recent monthly magazine carries an
article by Morgan Witzel of the University of Exeter Business School. He reviews
some of the recent literature in this area, but starts by quoting Scottish poet
Robbie Burns: “The best laid plans of mice and men gang aft agley.”

Witzel finds authority for the notion that sudden crises force a “cognitive
shift” ­ which is to say that people reappraise their actions and plans, seeing
their priorities in a new light. “Activities which might have seemed to be
really important now seem less so, and can be cut without harming the company
itself.”

He makes the point that cutbacks pose a threat by signalling that the company
is in trouble. While it’s rarely a good idea to pretend that everything is fine
when it’s not, Witzel adds that the best people may leave, in search of safer
jobs elsewhere. The ones left behind soon become demotivated.

Time for a sporting metaphor: “Boxers sometimes say that in a match, the
first punch they receive is the hardest and hurts the most. If they can get over
the shock of that blow quickly, they themselves become more alert and
aggressive.”
Strategy in an upturn, Finance & Management
www.icaew.com/fmfac