Managing in a Downturn – On the Road Less Travelled
How are you preparing for tougher times ahead? The conventional management response during a declining economy would be thinking ‘which business units to close and what costs to cut?’
Few people are painting a rosy picture with the current economic climate and some countries are already experiencing a recession although not as severe as the Great Depression in the 1930s. The Economist reported that during the 2001’s American recession, Singapore, Hong Kong and Malaysia’s economies suffered full-blown recession; the meltdown due to a slump in exports and investments. Analysts expressed concern that the American recession in 2008 is deeper and the negative sentiments are that Asian economies are going to be hit harder this time. During the recession in 2001, the growth in Asia region dipped to 4.2%. Then again the macroeconomics fundamentals in Asia are much healthier now than in 2001. It was forecasted that growth in emerging Asia will achieve an average of 6.4% in 2008 and down from 7.8% in 2007.
Every day we read about the turbulences in the economic and financial environments around the world that are affecting our economy because we are more globally integrated now than in 2001. In some Asian economies, organisations are already heading towards a recession. One thing is clear – management should not wait for situations to get nasty as having a clear head and new perspectives are crucial to lead and manage their organisations and people strategically in this challenging time. The time has come to head towards the road less travelled and beyond.
How are you preparing for tougher times ahead? The conventional management response during a declining economy would be thinking ‘which business units to close and what costs to cut?’ Cutting your costs skin and flesh down to the bone may put you at a disadvantage with competitors that are managing strategically in core areas and incapacitate your business when times start to look up.
Most organizations response to an economic downturn by paring operations costs, laying off staff, freezing wage increases, slashing training budgets and curtailing sales and marketing activities. Although budget cuts make the balance sheets look good and soothe jittery nerves, the joys are more often short term. Budget cuts may bring about adverse effects in employee morale, talent retention, customer confidence, opportunities and corporate reputation.
If your organization is going to emerge from the economic slump in a competitive position, there are strategies you can implement with your mid-management level across your organization.
Strategy 1 Communicate!
Be clear when communicating the economic downturn and its challenges to your employees. Be mindful that your management is not sending a distress signal to the employees and communicating the message that the economy is to be blamed for the difficult times you and your employees are facing now and in the times ahead. You may well be showing the employees the organization has no control over what is going to happen to the business and that the situation is out of hand and left to the fate of the economic conditions. Increasing anxiety in the workplace will distract the employees’ focus and dampen their motivation when they should be united and driven to help you turnaround the business. Top down clear and honest communications about the challenges and how the organization plans to move forward will help the employees understand how their roles connect to the big picture and prevent your talented employees from walking out the door when you need them most.
Strategy 2 Rewards and Recognition
Some organizations are thinking in these bad times, their employees should be grateful to have jobs at all. The fact remains that layoffs, salary freeze and budget cuts are catalysts for well-trained, talented employees to look for better opportunities elsewhere. In difficult times, organizations need to work harder on retaining talents and rewarding good performers as it is the people who will deliver the sustainable advantage. Give good employees a reason to stay on by making room for them to keep advancing their careers and to gain in experience, responsibility, remuneration and in other tangible and intangible ways. Even when you are forced to freeze base pay, you could introduce variable rewards linked to overall business performance and personal achievements. You could move employees laterally across the formal structure and let them take on new challenges in other units or sections.
Strategy 3 Increase Learning & Development
Learning and development budgets are often the first to be slashed during a downturn however managers who manage downturns well often increase these budgets during hard times. The return the organizations will get from investing in their people far outweighs the training costs. When organizations create the right environments in their departments and increases training opportunities, they will see their employees giving more voluntary effort and commitment to their work. The logic is simple: employees who are engaged by the right kind of leadership, which is clear and motivating, will feel recognised for their efforts and will give more beyond that which their job demands. The effort spreads across all levels and flows through to the bottom line.
Strategy 4 Focus on what matters
While cost cutting is necessary, it can make everyone think twice before pursuing new initiatives and opportunities for investment. On the other hand, downturns are ideal opportunities to push through radical changes, re-focus your business and re-shape how you should operate your core business units. Core strategies may have lagged behind the operational aspects when businesses were doing well in favourable economic conditions. Downturns are the times when you could re-align your core business strategies with your operational model and get some legwork done so when times turned for the better you are ready for a sprint.
Strategy 5 Fix to be Lean
Get rid of duplication and waste and streamline your processes for a ‘leaner’ organizational structure in an uncertain economic climate. These approaches are crucial tools to manage tougher times and challenges without compromising quality and standards. Seek objective, external help to review work processes and service delivery systems and take immediate actions to fix work flow or sections that could be eliminated or streamlined for a leaner operation. When re-engineering your work processes create the right organizational climate to nurture the right culture and employee behaviours to increase the buying in and ensure employees are fully engaged.
I wish you all the best on your journey on the road less travelled.
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