Recession proofing your business – Going beyond Cost cutting : Feature Article; V2 Issue3

There is a dip in profits. Budgets are getting smaller. Company stock prices have plummeted. Recruitments are slowing down. Demand for goods and services are falling. Are we or are we not in a recession? While the debate is still on, business managers cannot afford to simply wait doing nothing. It’s prudent to start taking appropriate measures to recession proof your business at the earliest. Use this time to become a leaner, more cost-effective and more efficient operation.

Recession proofing your business must start with remaining a cost effective enterprise through the current downturn.  I am sure your company must be already on to cost management measures like conserving cash, minimizing inventories, monitoring cash flow, making purchases wisely etc. While it is important to manage your costs it is equally important to manage other areas of your business to outsmart your competitors in times like this. Let’s look at what you as a manager can do.

Beyond managing costs
Needless to say you must do all you can to effectively implement in the department, unit or team you are managing, the cost management plans developed by your finance team. But look beyond that to manage recession.

  • Adapt quickly: This is an obvious one. When conditions change you can survive only if you adapt to them. Review the area of business you are managing and see how you need to adapt it to it, not only to combat problems but also seize opportunities. You may have to modify your selling strategy or change your employee engagement plans or take a re-look at your sourcing channels.

  • Stick to your long-term vision: Your long term vision tells you the reason for your business’ or department’s existence. Reconnecting to that vision will help you stick to your long-term approach and keep you going even though you are tempted to adopt short term measures.

  • Sharpen focus on business plan: Your team will look to you for company, department or team priorities. A clear business plan, an appropriate team structure, streamlined processes, the right performance measures, accountability system and rewards are extremely important in times of uncertainty. Make adjustments to how you recognize people during these times. You need everyone to be focused on revenues and costs.

  • Get aggressive in the marketplace: Continue actively selling and marketing your product or service. Consider adding a salesperson or even an additional service to give you an edge over competition. Being in front of customers or vendors builds confidence that you are a long term player. You can gain market share from competitors unable to adjust to shifting market conditions. Similarly don’t stop recruiting altogether. Ensure company presence in the recruitment market by continuing recruiting. You would want to retain recall of your company among your prospective employees.

  • Provide quality service/products: The buying power or willingness to spend is lessened during tough economic times. So to build your customer base and induce current customers to raise revenues, it is importance to provide good service/product. Don’t compromise on service or product quality especially by being understaffed. Instead of hiring full time employees, explore other options like freelancers, consultants and part-time employees. This holds true for not only external customers, but also internal ones.

  • Keep your people engaged: Your most valuable assets are your team members and to get the best of them, you need to keep them engaged. Anxiety levels among them can be high in tough times. So make sure they understand that you are building a lasting and successful enterprise and that some of the cost cutting measures, including layoffs, are necessary for the health of the company. Make your people part of the solution by involving them in initiatives related to cost cutting etc. Avoid widespread cost cutting and layoffs that can undermine employee morale. Disengaged employees can weaken competitive position, endanger future profits and increase turnover inducing star performers to leave. And this is definitely a time when you need your stars to help you figure out things.

  • Train your team members: While you may think it is wise to cut down training expenses, experts say this is a good time to invest in training especially on-the-job and cross training. This will also engage employees and help you get ready to take on the market when conditions improve.

  • Improve productivity: Monitor and improve productivity levels. Get more out of your team by helping them focus on the right deliverables. Use technologies that enable you to eliminate inefficiencies and reduce costs.

  • Maintain strong relationships: While maintaining good relationships is important at all times, during a slowdown one may forget to do so. Don’t!

    • Customers –Did you know the costs of acquiring new customers are up to five times those of maintaining and selling to existing customers? Hence allocate resources to strengthen relationships with your best customers. Being close to them will also alert you incase competition is trying to acquire them as their customers.

    • Suppliers – Even though you may shop for cheaper sources of raw material etc, do not cut off all relationships with existing suppliers. Let them still fulfill part of your need. You do not want to antagonize them since you never know who you may need in future.

    • Banks – Banks are looking for business to boost their income, but are also trying to minimize risk. They are careful about what kind of loans they give. Assure them of your financial position so that they give you an ‘over draft’ facility when required etc. However, seeking additional credit during a recession is not advisable.

  • Be prepared for economic recovery: During the 1990 -1991 recession, Dell perfected its demand-pull production system, and Intel launched its “Intel Inside” branding campaign. Both companies emerged as stronger competitors and grabbed the largest share of profits in their industries over the following years. If you have viable business idea, invest in it, maybe conservatively, but do invest. This is the time to look out for talent, physical assets that were not available to you earlier. A friend of mine working in a financial company tells me every second day he gets a CV of a talented financial professional. This was unheard of in the past.
  • Think long term:  In every aspect of the business think long term. For instance though every rupee saved is a rupee earned, you should be careful while cost cutting. Very often we tend to focus on immediate, piece-meal remedies and ignore the long-term implications. But wise cost management is not only about reducing short-term costs but also achieving lasting competitive advantage. Your business must incur costs to remain competitive - costs of attracting and retaining talent, costs of research and development, costs of building your company’s brand and maintaining company infrastructure.

Doing things differently, some examples….
If you thought cost cutting, reducing reliance on financial sectors or US markets and layoffs are the only measures being undertaken by companies, you are wrong. This is a time to think afresh and get creative on running a business. Check out what some companies are doing or have done differently to manage recession.


Of course what may work for other companies may not work for your company. Figure out what does. What is important is that you take a holistic approach and manage all aspects of business effectively. That way your company will be better positioned to do well when the economic conditions improve or you may just find for example that when business picks up you have client orders, but no talented employees left to execute them. Also remember the lessons learnt during recession. They can be valuable to you even in good times. All the best!



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