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Learn From Past Storms … Even if They Were Less Severe

Recently, Harvard Business Review made available to subscribers a reprint of a June 2001 article entitled “Moving Upward in a Downturn” by Darrell Rigby. The fundamental premise of the article is that, “During industry downturns, smart executives don’t panic. Instead, they coolly place counter intuitive bets to outperform slumping competitors.”

The article addresses three phases of downturns: storm clouds on the horizon; battling the elements; and here comes the sun. We think it’s safe to say we’re battling some very strong elements today! That said, Mr. Rigby’s fundamental advice for action during all the phases is sound, even if you have to play catch up now.

First, do not act as if the storm will blow over. It is essential for leaders to prepare for the worst. Keep one eye on how you want to emerge from the storm, but also make sure to have contingency plans in place for any near-term issues.

At the same time, panicked diversification is not the answer. Targeted and focused bargain hunting should be encouraged, but now is not the time to move into a new arena.

As always, avoid “quick fix” actions. While it might be necessary to cut costs during the storm, it’s important to also make decisions that support the long-term success of your company. Rigby mentions Solectron, an electronic components manufacturer, which cut costs in addition to ramping up its customer satisfaction focus during the recession of the early 1990s. These planned and purposeful actions led to a Baldridge Quality Award, a 50% increase in revenue and market leadership.

Finally, when the storm starts to clear, take a measured and planned approach to moving your business to the next level. Too many leaders will be shell-shocked by the storm and will wait too long to accelerate into the recovery. No one advocates spending like a drunken sailor, but you should expect to increase your investment in staffing and other assets during the critical “here comes the sun” phase. During this phase, rather than just celebrating survival, Rigby advises you to take the opportunity to assess your business for the better times ahead. That is, shed what doesn’t fit and strengthen the core.

So what does all of this mean for you?

Make contingency plans that aren’t simply staff cuts, but also include providing critical support to the people who remain. And make sure these plans include “what ifs” for when and if any of your key staff decide they can’t or are unwilling to ride out the storm with you.

At the same time, don’t just batten down the hatches. Plan for what your organization should look like when the storm finally passes. Develop plans and position your business for when the time for positive, forward-looking action is right.

“Be prepared” should not just be the Boy Scout Motto … it should be yours as well.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.