Recession are we, or aren’t we? While the economists and pundits are arguing about whether or not the US is in a recession, my opinion is that we are. The classic definition of a recession is a decline in GDP for two consecutive quarters. However, it is important to keep in mind that economic data and statistics are reported on a historical basis, and by the time the economic data is released to confirm that the economy has fallen into a recession, the recession has already taken hold. In today’s post I’ll share my thoughts on how to successfully lead your business through an economic downturn.
As I mentioned in the opening paragraph, lagging economic data is not the information you should use to make strategic business decisions. Don’t wait until there is a formal acknowledgement of a recession to start planning how you’ll navigate tough times. Rather, use the many present warning signs of the slowing economy (slowing job growth, declining Dollar, constricting availability of capital and credit, slowing retail sales, lack of consumer confidence, stepped-up Fed intervention, correcting stock market, growing inflationary trends, etc.) to adjust your strategy and tactics while maneuvering is still a bit easier.
The lack of astute, decisive, and proactive thinking by your executive team in a slowing economy can make it much more difficult to survive the large challenges that likely lay ahead. I can’t even begin to tell you how often I’ve heard statements like: “I’m concerned about the stability of the market, and want to wait and see how everything shakes out over the next few months before I make any decisions”, or “I’m cutting back on marketing expenditures until I see how bad the economy is really going to get”. This type of thinking is akin to driving your car toward a brick wall and watching the brick wall get closer and closer, yet doing nothing to alter your course. My advice is simply not to hesitate change course now while there is still time to avert disaster.
Let me state that I realize that many CEOs and entrepreneurs have only seen growing, robust, and even frothy markets and that for many chief executives this is the first time they’ve had to face the test of a strong economic correction. That being said, there is good news The simple truth of the matter is that more tangible, enduring wealth and market dominant positions are created in declining markets than in advancing markets. Significant rewards exist for those smart enough to move forward and strategically leverage their business model to exploit opportunities while their competition pulls back and braces for tough times. The following business principles will help your business thrive regardless of the state of the economy:
Velocity to market is critical in the success of any business. In a down economy the stakes are higher, the money and resources are tighter, and the decision-making ability of your management team will be the difference between success and failure. If your management team can streamline operations, facilitate solid strategic planning, conduct flawless tactical execution of business initiatives, and recruit, motivate and retain best in class human capital, your business will gain ground while your competition is “down-sizing” or “right-sizing”.
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