Leadership Solutions from Read Solutions Group: Planning for the Downturn

Thursday, November 15, 2007

Planning for the Downturn

An economic downturn is looming ... the only questions about the extent and timing. HBR asked some of its bloggers to give their perspective. What about yours?

Tom Davenport in Recession: The Next Big Thing comments:
I’m hoping this time for a more enlightened approach to recession-oriented management. Gone, I hope, will be the managerial conservatism, the mindless cutbacks, the early retirement offers to everyone with a pulse, the fire-sale pricing. We can do better, so let’s try.
He suggests that people have shown willingness to tighten their belts together. So rather than cut 10% of the workforce, can we find ways to reduce executive compensation, reduce work hours, and cut compensation costs for the short term? Notice what I started with - executive compensation. It's got to start at the top with a stronger and deeper commitment than is being asked for from the employees, and not automatically made up for in the next bonus round.

If you can retain and even engage employees through bold management moves during a downturn, it may be just the right time for innovation and change, according to Bill Taylor in Innovate for Success in a Downturn.
It all goes back to changing the game. The companies and products that make it big don’t succeed because their champions “time the market” well. They make it big because their champions believe so deeply in what they are doing that they plunge ahead, regardless of macroeconomic conditions—often in face of the worst possible macroeconomic conditions.
Global strategist Pankaj Ghemawar asks whether companies engage in counter-cylical activity and look at a downturn as a potential opportunity for investment in Global Strategies for Uncertain Times.
The truth is, many companies could do better by treating downturns as times to lay the foundations of future growth—including additional globalization—rather than as times to turn off the investment spigot. Such a shift to a more countercyclical investment pattern is aided by the fact that many companies—although there are obviously exceptions in sectors particularly exposed to the property and credit crisis—are still sitting on large piles of cash.
Business and economic cycles, whether macroeconomic or industry specific, are a reality of today's market place. The successful companies will be the ones who find a way to change their game and plan for ways to succeed when others flounder.


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