Moving Up in a Downturn

Someone recently sent me a really good article from Harvard Business Review titled, “Moving up in Downturn”. Usually, HBR articles are pretty disconnected from the real business world. It’s as if they’re written for the sole purpose of helping management consultants sell more services to confused middle managers in the F500. This particular article however, I felt was actually helpful. The thrust of the article was about how companies can tune their strategy to get ahead in an economic downturn. In its 11 pages, the article talks about the three phases of a downturn and lays out some simple Do’s and Don’ts for businesses.

Here’s my take at the crib notes:

Storm Clouds Gathering When it’s clear that problems lie ahead, e.g., the summer of 2008, executives have to face reality quickly. Acting as if the storm will blow over will leave your firm flat-footed when your business gets hit. Contingency planning is of critical importance – “what will we do if orders drop by 10% next year? What about 30%?” Executives and managers need to resist the urge to tell employees that the downturn won’t affect them or that it won’t be bad. Contingency planning is not a sign of weakness. It’s good business.

The Hurricane Hits When things get ugly, e.g., November 2008 – February 2009, the firms that had their heads in the sand typically over react with aggressive cuts. Cutting deep after things are bad seldom solves near-term cash problems and ends up causing damage to the business that lasts beyond the downturn. Companies that have their contingency plans ready put them to work and are positioned to make strategic moves. Firms can focus on quality and customer service, or finding acquisitions at a bargain. Competitors who have to cut deep late in the game will do so at the expense of the quality of their service.

Skies Clear Just as you shouldn’t slam the breaks suddenly when things look bad, dropping the accelerator to the floor when outlook improves doesn’t make sense either. The companies that cut too deep will probably over spend to try to repair the damage they caused by cutting into bone. Overspending can cripple a business even further by creating inefficiencies and destroying profit margins. Companies need to temper their growth strategy against their businesses’ ability to scale.

Applying the Principles in 2010 It seems like 2010 will be a year of recovery. And while no one knows how fast employment will come back, it’s likely it will be a better year than 2009 (let’s all hope). If the last recession is a guide, you can usually pull off 2 or 3 big strategic plays in a recovery before your team gets busy with the business of managing success. We’ve spent the last few months here at Bullhorn mapping out our big plays for 2010 and weighing our options. It should be a very strong year for Bullhorn, even if the economy doesn’t come roaring back.

PS, since people always post questions about the iPhone despite the blog topic, here’s an update: We’re making really good progress on the iPhone sync solution and a large percentage of Bullhorn employees using it every day. Although we ran into some snags rolling it out into beta this month, we should have the beta out to customers in December. And, no, iPhone is not part of our recovery strategy. It’s just good business.

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