Experienced people are an essential part of a corporate recession survival plan.
Early
in January, I had the opportunity to travel through Asia. Whenever I
travel overseas, one of the things I enjoy is reading the local
newspapers to get the world view from a different perspective. This
time, my travel took place during the recent turbulence in the world
stock markets, and the first caucus and primary in this year’s U.S.
Presidential election.
While each country has their
own very distinctive way of interpreting events, one common thread
seemed to be that, regardless of story or subject, each paper presented
what can best be described as a definitive result. This approach made
sense for political stories because, in fact, there were definitive
winners in each race, but the stories became more interesting on more
subjective topics.
The articles that I began to
focus on related to the severe fluctuations that the world’s equities
markets were experiencing at that time. Regardless of whether on any
given day the market was up or down, the cause of the fluctuation –
printed in clarion headlines in every newspaper regardless of country
was that the United States was in the midst – not on the verge – of an
economic recession!
Reading the content of the
stories, I was having difficulty understanding how each paper was
reaching the same conclusion. It was clear, however, that none of these
articles were concerned with the impact the reported recession might be
having on the people of the United States. The only concern seemed to
be the impact the recession would have on the local economy covered by
the newspaper.
While most would agree that the
global economy is very interdependent, and the U.S. economy is going
through a rough period, most economists have not yet called it a
recession. However, during the fifteen-hour return flight a few
thoughts did come to mind: What if the economy deteriorates to a point
where we are indeed in a recession? If no one really cares about the
economy outside their own localized market, what would the impact be on
my relatively small company? And are there any lessons from the 2000 to
2001 industry implosion that ought to be called upon now?
The
first and last questions are really one in the same. In 2000 and 2001
the “perfect storm” hit our industry. The demise of the dot-com bubble
combined with the 9/11 terrorist attacks put a damper on the overall
economy and devastated the electronics industry in particular. Combined
with the dramatic shift to lower cost Asian manufacturing, we all
experienced what seemed more like a depression than recession.
Therefore, we in business today have experienced perhaps a worst-case
scenario. So if we slide into a recession, it should not be worse than
what we experienced in 2000 to 2001. That leaves the real question,
what hard learned lessons should we be taking to heart?
Possibly
the biggest lesson to learn is that we need to be aware that recessions
do occur, and therefore we need to be focused on reality rather than
wishful thinking. In our business, the reality is that your next order
depends on your customer – not the latest economic forecasts. Reality
is that cash is king and that it is imperative to pick your
opportunities – and customers – well! Stay focused on what’s important
– getting new orders, delivering customer satisfaction and creating
financial stability, especially during difficult economic times.
The
more I thought about the what-if’s and reflected on hard lessons
learned just a few years ago, the more I realized the importance that
people play in how I might survive and prosper – or fail – in a good or
bad economy. Possibly, management job number one is ensuring that
everything possible is done to retain the best employees. What will
help companies survive, regardless of location or technology, is having
a competent, flexible and motivated work force.
Sounds
simple, but again that gets back to the lessons learned a few years
ago. For many companies, when the economy softened, the first cost
cutting was payroll. These cuts were usually made because of short-term
pressures. Possibly the most costly approach taken by our industry
involved laying off higher paid and more experienced people, and
replacing them with new, less qualified and inexperienced employees. In
any technology-driven industry, loosing your most experienced people is
tantamount to a company like Intel cutting its R&D budget!
A
subtler but equally devastating approach involved employee benefits,
which were cut or made prohibitively expensive by many companies,
forcing good employees to look elsewhere – usually out of the industry
– to equal or further their careers. Cutting experienced staff and
reducing pay and benefits resulted in a drain on desperately needed
expertise, and significantly aided the rapid exodus of customers to
less costly overseas suppliers during the last economic down turn. If
we learned nothing else from the past, we should realize that it’s the
combined talent of the people in each individual company that
determines its success or hastens its failure.
So,
based on my travels and looking at my backlog, I really have no idea
whether this year will be boom or bust. What I do know is that there
are clouds on the horizon that look ominously like bad weather
approaching, and I know that now is the time to stay focused and make
sure I have a strong team assembled to help us ride out the potential
storm. PCD&F
Peter Bigelow is president and CEO of IMI (imipcb.com); This email address is being protected from spambots. You need JavaScript enabled to view it..
