During periods of market slow down, the management of a company can make choices about how they will react to the future, and the position where they would like to be once the economic hard times ease and the market begins to bounce back to what it was before.
By changing their perspective and strategy planning to have a long term perspective instead of seeing only the production of a short term positive improvement to the books, it is possible to grow a business even during tough economic times. A precondition to success in this area, however is that the people in charge are experienced leaders and are willing to look beyond the short term responses and work toward positive change for the future. It goes without saying that if the company is in a strong position before the recession begins, combined with good management during the period of recession, that business has a better chance of rising to the challenges with not only more efficient processes, but with a greater market share, due mainly to it stepping into the space left by companies who fail in the meantime.
The predisposition toward a long term business growth strategy needs to be already present in managerial viewpoint during times of plenty as well as times of hardship and needs to cause the implementation of changes which will be beneficial over a period of a number of years and not only from the short-term stance. The ability to manage recession in this way is the mark of true leadership qualities and the trademark of success.
The use of redundancy is an obvious example of immediate reaction to signals in a declining market. While it’s immediate effect is to release funding into the company which may be sorely needed, the long term consequence is that once the recession diminishes, the company then needs to re-grow the knowledge and experience base that it has just discarded. Across-the-board axing of worker positions may seem like the obvious thing to do, however it will be short-sighted in the long term vision.
For one thing, the wider social implications of major redundancies such as those that we are seeing in the international economy at present, actually makes a bear market last longer, as it affects the entire status of a country’s economic infrastructure.
It is far more beneficial to reduce your cash flow by optimising processes than getting rid of people, particularly if you want to grow during or immediately after a recession. This way you maintain the human capital necessary to quickly and effectively respond to an upturn in the market.
The methodology used by consultants can usually help you identify quick wins in this area, and the money thus released can be used to fund growth related activities such as buying your competitors stock or developing new services.
The old adage of buying when the market is depressed is most applicable in this situation, and businesses should be preparing for this situation when the going is good.
