Adapting to the Recession
by Andy Winterburgh
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2009 marks the 30th Birthday of Witan Jardine. Unfortunately the current business environment is not one which provides much reason for celebration of that event. As Witan Jardine was born in the 1979 recession, lived through the 1989 recession, thrived in the downturn in 2002 (the 1999 downturn arrived a bit late!) it isn’t a huge surprise to be facing another one in 2009. I have no doubt that we’ll come through this one as we have all those that came before, so perhaps we’ll have reason to celebrate after all?
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"A very tough year"
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That said, you don’t have to look very far to find a headline which suggests that 2009 is going to be a very tough year. What started as a crisis in the financial services sector is continuing to infect the wider economy. Unemployment is rising sharply, with nearly 2 million people now out of work, the housing market is depressed and high street sales are weak. It’s difficult to see why things will improve anytime soon.
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In fact you’ve only got to look at the reaction to Baroness Vedera’s comments about maybe having seen “a few green shoots” to understand that the collective thinking is such that to think anything more positive will probably cause offence. Given the uncertainty of the business environment, such remarks are clearly ill judged and/or mistimed. Nonetheless I believe that it remains possible to take an alternate view of the current depressing reality without being accused of being a heretic.
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"Ensure the business survives"
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Where there can be little debate is that the immediate focus has to be on doing what is necessary to ensure the business survives. There are five key steps necessary to achieve that:
- Preserve cash and be brutal on costs. That means changing the mind set of people within the organisation about what expenditure really makes a positive difference to the bottom line and stripping out any unnecessary costs.
- Make tough decisions and implement change. In tough times employees are more open to change because they understand that things can not carry on as they have before. Good managers will use this opportunity to implement the things that need to be done, both now and for the future.
- Hold on to the company values. Business “guru” Jim Collins said, in a recent interview with Fortune Magazine, that what differentiates the companies that do well in turbulent times from those that don’t are their values. He said, “The more challenged you are the more you have to have your values.”
- Deliver quality. With so much choice and so little demand customers are in the driving seat. If managers want to stop their customers going elsewhere without simply having to slash margins, they need to ensure they are delivering a great product or service.
- Identify the people capable of dealing with the challenges this market will present. Jim Collins goes on to say, that it’s the people you have with you more than any plan which will make the difference when the storm is raging. These are times which require persistence, determination and a willingness to embrace change.
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"A more positive future"
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With such limited visibility of what lies ahead, managers clearly need to stay focused on the short term. The question is whether it is still too early to be thinking about the plans for a more positive future? For those who have not yet made the changes to their business model necessary to survive or don't have adequate funding it may well be. But history shows that one only gets to see the unique opportunities created by a recession about once every ten years, so good managers will find ways to use the downturn to create long term value. |
"History shows that one
only gets to see the unique opportunities created when coming out of a recession
about once every ten years. "
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| "Hearts and minds as well as bodies" |
One of the ways they can do that is to ensure that the people they retain through the tough times stay with them when the good times return. These are the people who will bring with them the history and the legends that define and create a strong corporate culture. This creates a dichotomy, as these same people may currently find themselves being stretched more thinly, as they cover the work that a team previously undertook on their own. They may have seen their career progression put on hold, or even taken a step back to the 'shop floor' becoming more operational than they have been in the recent past. This makes retaining them vital, but it’s their hearts and minds as well as their bodies that need to be retained.
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It’s possible to confuse low staff turnover, with high levels of engagement. There is a perception that it’s easier to retain talent in a downturn as people perceive that they have fewer options and that changing jobs is risky. The reality is that if firms don’t ensure that their people feel valued and supported in the tough times, they are likely to see their talent walk out of the door, either while things are still tough, or as soon as the market picks up.
| Whether they are leading a team, a department, or a business, in order to ensure that when those green shoots do eventually appear managers are ready to take advantage of the unique opportunities that coming out of a downturn provides, now may well be the time to review their practices around motivation, engagement and retention.
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| "A world with significantly lower bonuses" |
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| One of the challenges for businesses is how they motivate their people in a world with significantly lower bonuses. No doubt many people will be satisfied simply by being able to hold on to their job. Certainly one can anticipate expectations of bonuses being lower. But there is a distinct difference between doing what is required to “keep a job” and what is required to be a high performer and thus bonus earner. If ever there was a time when organisations needed their people to be really driven, that time is now. |
"If ever there was a time when organisations
needed their people to be really driven, that
time is now." |
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As a result some companies may feel it’s worth looking at whether the mechanisms they have in place to encourage that behaviour, still achieve their aim. If not, firms may find it more beneficial to implement an alternative which rewards the results that will help the organisation through the worst of the recession. While this will have the associated costs, if it is set up to reward the behaviours that matter, it is possible to create more value than through the saving of costs through the non payment of bonus, which may simply encourage employees to adopt a work ethic reflective of that.
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 At the Executive level, most will take a pragmatic view about short term remuneration, especially if they can see longer term rewards.
The declines in world’s stock markets and any “old world” performance criteria may mean that in the “new world” many share/option schemes designed to retain and motivate are no longer doing either. So now is the time to be reviewing them to ensure they achieve their purpose.
The bonus is obviously only one of the mechanisms to make employees feel valued. Companies can still do many things to ensure that while things are tough outside the office, life inside office is still fun and rewarding with training and development firmly at the top of the list. If people can see that while they might not be enjoying tremendous rewards now, their loyalty and commitment in the tough times will be rewarded with opportunities in the future they are more likely to drive hard to help create that future.
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| "People need strong leadership in challenging times" |
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The vast majority of managers will not have experienced leadership in a recession. They now are learning "on the job". One thing they must be conscious of, even as they do this, is that people need strong leadership in challenging times. While traditionally training budgets are one of the first things to go in a recession, anecdotally at least, many companies are investing in their management teams to give them the skills to motivate their people and lead them to the light at the end of the tunnel. Some companies are turning to Executive Coaches to ensure their leaders do not have to work through the challenges in isolation.
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"There are always essential hires to be made"
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Since the start of January we have seen slightly increased recruitment activity over that of December. That’s not much to shout about, given that the December Forum of Professional Recruiters Index (comprising results from 30 of the UK’s best known professional recruiters including WJ) showed permanent recruitment activity running at its lowest level since the index started in July 2003.
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"There are always essential hires to be made and some
companies will use the downturn to pick up talent which at other times might be unable to find" | |
Given both the seasonal effects of the holiday period and an apparent almost total aversion to decision making in all of Q4, it would be hard to imagine that recruitment activity could get much worse. But it’s still too soon as yet to rule that possibility out.
But the tap never entirely turns off, there are always essential hires to be made and some companies will use the downturn to pick up talent which at other times might be unable to find – certainly that’s our plan.
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"Investing in training and development"
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Like many other companies we took the actions necessary to reduce our cost base at the end of last year. As a result we’re now as well positioned to deal with the coming year as we possibly can be. We’re in the process of reviewing our short and long term management incentive schemes in order to ensure that they drive the behaviours required to come out of this recession well placed and ready for action.
We’re investing in training and development to ensure our people have up to date skills to perform in the current market. We’re using the Executive Coaching firm, Performance Consultants, to support our Senior Managers. We’re in the process of developing our Talent Strategy. We’re developing working practices and communications to support a culture which is reflective of the business environment. And (I had better whisper this) we’re even considering having that 30th birthday party at some point.
If you’d like any more information about what’s going on in the recruitment market or have any questions or comments, please send an email to: guy.day@ambition.co.uk
Guy Day is Managing Director of Witan Jardine, an Ambition Group Company.
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