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  • Business Challenges After the Recession

Business Strategy

23 Apr 2009

Business Challenges After the Recession

  • By Bill Conerly
  • In Business Strategy

When
the recession is over, business challenges will be different, not gone.  Companies wrestling with the downturn need to
consider what new problems they’ll face in the recovery.

 

You
may have cut back on your staffing level to survive the recession.  When sales recover, you’ll start hiring—but
whom?  Many of the folks you laid off
will not be available.  Some of the
people you hire may not have worked in your industry before.  You will have a training challenge greater
than you had before the recession. 

 

The
employees who stayed with you through the recession will be different.  They may have felt guilty when they survived
layoffs.  Then they worked hard without
bonuses, pay raises or much chance of promotion (because the company was not
expanding, and few higher-ups were quitting or retiring).  After working hard through the recession,
their attitudes will be different than had been a few years earlier.

 

Consumers
are cutting back on their spending, but the day will come when they buy cars
and furniture again.  How will the
recession change their attitudes?  Will
they buy the same products, the same styles, at the same price points as they
did in 2005?  Probably not.  What mix of products will fill the consumer’s
need to celebrate the return to normalcy, without falling into the same old bad
habits?

 

When
it’s time to ramp up production, will your vendors be ready?  If you had to cut back your orders during the
recession, your vendors will be hurting. 
They may have laid off key personnel, and they may not have the
financing in place to buy raw materials to provide you with products.  Their problems will become your problems if
you rely on them for critical supplies.

 

Speaking
of finance, what about your own situation? 
The financial crisis has changed the world of credit in ways that won’t
quickly be reversed.  Securitization will
continue, but at a much slower pace, with far simpler deals.  This is a problem even for companies that
never floated complex deals on Wall Street. 
Virtually all forms of business credit have been securitized:  bank loans, lease receivables, commercial
mortgages, credit card debt.  Many
business borrowers didn’t even know that the money for their loans came through
these channels.  The closure of secondary
markets, though, makes business credit harder to obtain.

 

Business
recoveries are stressful to balance sheets. 
Chief financial officers who have felt stressed by declining sales
volumes will feel a different kind of stress next year.  Increasing orders will require spending on
inventories and personnel, much of which has to take place before payments are
received from customers.  This need for
working capital will increase before credit markets fully adjust to the
financial crisis.

 

How
does a business leader prepare for these new challenges?  The first step is to keep the company going,
which means dealing with today’s challenges. 
At the same time, take a few hours and sketch out the challenges you
expect when the recovery comes.  Bring in
a few colleagues and brainstorm.  Then
look at the issues that need current action. 
Some problems can wait until they arise, but others can be nipped in the
bud with a little forethought.  The
companies that thrive in the recovery will be those that not only survived the
recession, but also planned for better times.

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