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Prepare for Disaster

February 2014
Steve Blue

Steve Blue

The CEO’s Field Guide to Surviving the Next Recession

The recession of 2007-2009 caught many CEOs off guard. They weren’t prepared for it, and they didn’t know how to manage through it. Many CEOs never even saw the recession coming despite the fact that the warning signs were there and they weren’t subtle. When it was over, CEOs breathed a collective sigh of relief and many of them went on to use the expansion business management model. When we experienced the government shutdown, CEOs should have been asking, “When is the next recession, and how will I survive it?”

There is a process and a methodology that CEOs can follow to predict when the next recession will occur, prepare their businesses to survive it, and make their business stronger. This article describes a 6-point plan for surviving and thriving during the next recession.

A 6-Point Plan for Surviving and Thriving During the Next Recession

1. You Need an Early Detection System
Recessions don’t simply arrive unannounced. A shortage of an early warning system is not the problem; it is actually the shortage of a reliable and accurate early warning system. Your early detection system should consist of three parts. A reliable economic forecasting organization can forecast turning points in economic growth and inflation with unerring accuracy. While they can’t tell you exactly when the recession will occur, they are unerringly accurate in knowing it is on the horizon and will arrive soon. The second part of your early detection system is when your backlog starts dropping. While this should always be a cause for concern, this is the time to dig deep and find out why it dropped. The third part is to examine what is happening with your customer’s backlog. When a recession is looming, you will find softening backlogs all along the chain.

2. Develop Your Profit and Cash Preservation Contingency Plan
Get your senior leadership team together offsite and spend one or two days developing the plan. It should basically be a “if this happens, we will do this” plan with trigger points along the way. Build trigger points around backlog, orders, sales, profit and cash. At each trigger point, plan specific actions, including deciding what parts of the business were critical to maintain at each trigger point and what parts could be done away with. Because we took crisp, decisive and definitive actions as the recession worsened, we were able to preserve profit and cash.

3. Develop a Plan to Strengthen Your Employee Culture during the Crisis
You can be sure your employees are plenty scared during a recession. You can use the crisis of a recession to strengthen the bond between your employees and the company (again assuming you have one … if you don’t you have other problems). Be honest about the crisis you are in. Tell them the truth before they make their own ‘truth.’ Keep the honest communication consistent, constant and high touch. Celebrate every little success you can find. Solicit their suggestions on how to improve the business. Make them a partner in navigating the crisis. This will increase the trust and the bond with the company.

4. Anticipate the Recession’s Impact on Your Competitors and Position Your Company to Take Share
Think deeply about how your competitors will react to the recession and what the likely impact will be on them. Often, during a recession, customer service is the first thing to go. This could be an opportunity to get closer to your customers and edge the competition out. The recession may also significantly weaken your competition’s cash flow. If you have done a good job of preserving your cash, you should be able to take some of their market – from stocking inventory that your competitors can’t carry to rolling out aggressive marketing campaigns.

5. Use the Crisis to Sharpen Operational Control
This is the time to refine all of your systems and procedures that may have lost their efficiency over the years, including anything from order entry systems to financial reporting procedures. Sharpening that control will make your company stronger during and after the recession.

6. Conduct a Recession Post Mortem
It is important to conduct a post mortem. What did we learn from the recession? What can we improve upon for the next recession? How did our competitors behave during the recession and how can we use that to our advantage the next time? How did our customers behave during the recession and how can we use that? How did our employees behave during the recession and what can we learn from that? Ask these questions while the heat of the battle is still fresh. Document the insights and place them in your recession battle plan file for the next go around.

With more than three decades of management, executive, consulting and speaking experience in markets all over the world, Miller Ingenuity CEO Steve Blue is a globally regarded business growth authority and “turnaround specialist” who has transformed companies into industry giants and enthralled audiences with his dynamic keynotes. He may be reached at www.StevenLBlue.com

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