Original publication: Forbes Magazine By Gary Fowler, Forbes Business Development Council
The global economy is in a constant shift — like a tide, it rises and falls, ebbs and flows.
Amid its incessant fluctuations, this volatility doesn’t leave a single business untouched.
Some survive. Some struggle. Some cease to exist, while others flourish and excel.
It’s hard to predict the direction of fluctuations or their onset overall. These times of economic crises — recessions — can happen for a number of reasons, from economic shocks to financial panics or even global emergencies. There is no doubt about the adverse effects recessions and crises have on businesses, but there are still ways that businesses can minimize the damage.
A 2010 HBR study (paywall) of 4,700 public companies during the economic downturns of 1980, 1990 and 2000 found that 85% of market leaders get dislodged during a recession. But in the midst of such failures there were a few surprising bright spots; an impressive 9% of the companies went further than just recovering after a recession — they burgeoned and outpaced their competitors by more than 10% in sales and profitability growth.
So what are some specific actions companies can start taking regularly to ensure the best outcome possible during dire times? Based on the recommendations of a 2019 HBR article (paywall) on the subject and my personal experience navigating difficult times, here are a few things to consider integrating in your daily business operations that can help your company triumph in times of crisis.
Introduce decentralization to your hierarchy.
A lot of companies are used to a trickle-down system of decision-making and action-planning: Important decisions are made on an executive level, and the further down the hierarchy spreads, the less autonomy distribution there is.
As the HBR article explains, since recessions inadvertently bring an increased level of uncertainty, you should cultivate the ability to delegate decision making across the company without centralizing it at the top. This can allow your company to adapt to sudden changes in economic conditions faster and more efficiently.
Increased levels of uncertainty demand extra agility on the company’s side. Such circumstances force them to adapt and embrace these changes through experimentation and openness to innovation. As HBR suggests, companies should create a relatively more even distribution of power across the company by gathering input and contributions from employees at multiple levels.
This isn’t only true in regard to preparing the company for extenuating circumstances; I’ve found that this is true for any company that strives to increase market share and get ahead of competitors, even in stable times. Since the rise of the startup culture globally, empowering employees at various levels in my work has allowed me to increase engagement levels and valuable contributions from people with diverse backgrounds and perspectives. The way established businesses should think today is to adopt a startup-like zeal and democratic internal structure — and with the relative financial stability that sets them apart from rising companies, this combination of financial capacity, legacy and additional decentralization can become the ultimate formula in times of hardship and success.
Invest in IT and innovation.
In times of crisis and economic downturn, it seems intuitive to halt investments and maximize savings to weather the storm. But in reality, companies that come out of the water dry may be the ones that reach high levels of digitization, and you can achieve this by making gradual and increasing investments in technology.
There are a few key changes that technology introduces to any company that decides to go digital.
For one, as HBR explains, technology can introduce more efficiency and transparency to any business. Specifically, any type of digitization you take on should create unique, actionable insights and uncover areas of improvement and inefficiencies. Compile vast amounts of data to allow executives and employees alike to understand the business better, and help them better analyze the effect the recession may have on the company and how this impact can be mitigated through operational improvements.
One of the biggest trends that I have witnessed rise is AI that revolutionizes how businesses operate day-to-day. Through machine learning and neural networks, companies can create AI algorithms that are quick and efficient at learning to detect patterns and analyze data — and the more digitized the company is, the more data there is to analyze and the more insight such technology can generate.
Any modern-day AI tech should allow employees to focus on high-involvement tasks in their specific areas of expertise by taking over any low-involvement, administrative and mundane tasks. You can also look for AI solutions that analyze business operations within companies and streamline processes after identifying inefficiencies that otherwise went unnoticed.
You can also look for technology that allows for more productive remote work by connecting employees in virtual rooms, thus allowing the workers to put their knowledge and expertise to good use despite spatial and temporal impediments.
Keep employee morale high.
Very often, companies turn to large-scale layoffs in an attempt to cut costs.
And while sometimes layoffs can seem absolutely necessary to these companies, they forget one thing: There is no company without its employees.
As HBR explained, a company that doesn’t care for its employees will never earn the loyalty or devotion of their employees — and without their enthusiasm, the productivity levels in the company will remain low. This is a high risk for the period of time right after a crisis, when employee morale is one of the pillars the company can rely on to rebuild and reestablish itself. Without it, there will be no pulse.
Build better teams.
While motivating valuable employees is one way of taking care of the company vicariously, recessions are also good times to build great teams. The constraints that recessions bring are also opportunities for change, improvement and expansion — and they’re a unique opportunity to understand what kinds of people the company truly needs to build the best team. The possibilities here are endless: From going global and hiring across borders or exploring talent abroad through remote work to looking inside the company to get referrals from other trusted employees, recessions could signify a time when companies can build core teams that will lead the company to a swift and successful rise after the difficulties are overcome.