Strategies for Emerging from the Downturn Stronger Than Ever
- Keywords:
- talent
Every economic downturn presents opportunities. For company leaders, it’s a chance to make strategic decisions that can help their businesses not just weather the storm but come out of it stronger than before. But what’s the best way to capitalize on the opportunities that are unique to a challenging economic environment?
Although the economy appears to be headed into a recession, fueled by rising interest rates and high inflation, strong companies have always been able to capitalize on this type of environment to make themselves even stronger. This cycle, however, includes an anomaly that represents a potential obstacle to capitalizing on those opportunities: a labor shortage.
In traditional economic cycles, companies often win by hiring more. Right now, though, we expect labor markets to remain tight, which means businesses will need to find other ways to build strength. One way is to make strategic acquisitions at more favorable valuations. They’ll also be able to attract new talent that’s aligned with their strategic goals—not because they’re outbidding the competition, but through being perceived as a formidable and resilient employer. And as this economic cycle continues, and as in previous downturns, companies with strong leadership teams that act on new opportunities surfacing because of the downturn will get stronger.
Exploring strategic opportunities
During an economic downturn, some businesses will look to maximize efficiencies by cutting costs and streamlining operations as a way to weather the storm. Others will consider strategic acquisitions to gain market share, perhaps by purchasing a struggling competitor, or acquiring a company with the stable talent that an organization desperately needs. Also, a vertical acquisition can be a way to solve supply chain issues by integrating a shipping company or other supplier.
Exploring such opportunities requires a management team that’s well-versed in how to integrate an acquisition. It also means having a team that’s resilient. While you have no control over external factors that can impact your business, such as rising interest rates, having a strong and resilient management team that is able to make the right decisions at the right time in the areas where you do have control are the ones that come out of the cycle stronger. If something isn’t working, your leaders should know when to back out. And when there’s an opportunity to make an investment, they should understand how best to take that leap.
Finding leaders who have been there before
In our experience, how leaders approach a downturn depends on whether they've had to negotiate through an economic cycle before. If you haven't, this will be a new challenge for you, and you may not be as inclined to make strategic leaps of faith.
Ideally, the people responsible for key decisions will have some experience in navigating market cycles. Leaders who experienced previous downturns, such as the 2008 recession, recognize the patterns they follow and understand that this is not a permanent situation.
For CEOs who haven’t experienced a downturn, it could be a good time to hire senior leaders who have been through these cycles and can help guide you through troubled waters. The current retirement cycle among Baby Boomers means that many seasoned C-suite-level executives have either recently retired or are nearing retirement. That may create opportunities to bring them in as consultants or as part of an informal board of advisers.
A healthy level of friction
We’ve also seen that the companies that emerge stronger from a downturn are the ones with a C-suite team that introduces a healthy element of friction in terms of strategic development. If there's too little friction, that usually means your leadership team is full of yes-people who go along with whatever the CEO proposes. Conversely, you don't want an executive team that’s constantly at odds with each other about the direction of the firm. The ideal balance is a team that will challenge assumptions and petition for change. In the end, that's what enables companies to grow.
This can be a difficult element to introduce. As the owner or CEO, you guide the company’s vision and overall strategy, so it’s natural that you may be accustomed to making the key decisions without anyone challenging you. But you shouldn’t be the only voice that gets heard. Particularly in a downturn, it’s important to have a level of oversight to give you a fresh perspective.
Top-down talent management
There are studies that show that money isn’t the main reason people leave a job. More often, it's related to culture,1 management2 and engagement.3 As long as you have the fundamentals in place—that is, you're paying fair wages and your business is competitive—having a top-flight leadership team will help you retain talent from the top down.
Essentially, if you focus on the talent at the top, the benefits will trickle down through the rest of the workforce. A good COO can attract good plant managers, and a good plant manager can attract good floor workers. It’s natural to want to invest in getting as many workers as possible. But that starts with investing in the leaders who can help you attract those workers.
Keep in mind that when it comes to leadership talent, more isn't necessarily better. Sometimes one exceptional VP of finance or COO can fulfill several leadership gaps.
Are you positioned for success?
Everybody looks like a genius in a bull market. But a downturn is a good time to take a hard look at your executive team and strategic decision makers. As we navigate this challenging period, ask yourselves a few key questions:
- When was the last time you made a decision that was challenged by other members of your executive team?
- Does everyone in the executive team have the same background, or is there a diversity of backgrounds, viewpoints and professional experiences?
- Do you have members of the executive team who have experienced economic cycles?
- Are your compensation structures aligned with the company’s strategic goals?
Emerging stronger from a downturn requires vision and leadership from the top. When you have that in place, you’ll be able to make the strategic decisions that can help your business grow as well as attract and retain the right people who can help your organization meet its goals. From there, it creates its own feedback loop where you can continue to grow, pursue more acquisitions or investments, and attract more talent.
Paulina Kursa, Andre Orbe and Heath Scheid contributed to this article.
3 Gallup
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Steven Jensen
Head, Diversified Industries, Canada
Steven Jensen is Head, Diversified Industries, Canada and oversees managing various lines of business within the Diversified Industries Group. Steven leads a team o…(..)
View Full Profile >Every economic downturn presents opportunities. For company leaders, it’s a chance to make strategic decisions that can help their businesses not just weather the storm but come out of it stronger than before. But what’s the best way to capitalize on the opportunities that are unique to a challenging economic environment?
Although the economy appears to be headed into a recession, fueled by rising interest rates and high inflation, strong companies have always been able to capitalize on this type of environment to make themselves even stronger. This cycle, however, includes an anomaly that represents a potential obstacle to capitalizing on those opportunities: a labor shortage.
In traditional economic cycles, companies often win by hiring more. Right now, though, we expect labor markets to remain tight, which means businesses will need to find other ways to build strength. One way is to make strategic acquisitions at more favorable valuations. They’ll also be able to attract new talent that’s aligned with their strategic goals—not because they’re outbidding the competition, but through being perceived as a formidable and resilient employer. And as this economic cycle continues, and as in previous downturns, companies with strong leadership teams that act on new opportunities surfacing because of the downturn will get stronger.
Exploring strategic opportunities
During an economic downturn, some businesses will look to maximize efficiencies by cutting costs and streamlining operations as a way to weather the storm. Others will consider strategic acquisitions to gain market share, perhaps by purchasing a struggling competitor, or acquiring a company with the stable talent that an organization desperately needs. Also, a vertical acquisition can be a way to solve supply chain issues by integrating a shipping company or other supplier.
Exploring such opportunities requires a management team that’s well-versed in how to integrate an acquisition. It also means having a team that’s resilient. While you have no control over external factors that can impact your business, such as rising interest rates, having a strong and resilient management team that is able to make the right decisions at the right time in the areas where you do have control are the ones that come out of the cycle stronger. If something isn’t working, your leaders should know when to back out. And when there’s an opportunity to make an investment, they should understand how best to take that leap.
Finding leaders who have been there before
In our experience, how leaders approach a downturn depends on whether they've had to negotiate through an economic cycle before. If you haven't, this will be a new challenge for you, and you may not be as inclined to make strategic leaps of faith.
Ideally, the people responsible for key decisions will have some experience in navigating market cycles. Leaders who experienced previous downturns, such as the 2008 recession, recognize the patterns they follow and understand that this is not a permanent situation.
For CEOs who haven’t experienced a downturn, it could be a good time to hire senior leaders who have been through these cycles and can help guide you through troubled waters. The current retirement cycle among Baby Boomers means that many seasoned C-suite-level executives have either recently retired or are nearing retirement. That may create opportunities to bring them in as consultants or as part of an informal board of advisers.
A healthy level of friction
We’ve also seen that the companies that emerge stronger from a downturn are the ones with a C-suite team that introduces a healthy element of friction in terms of strategic development. If there's too little friction, that usually means your leadership team is full of yes-people who go along with whatever the CEO proposes. Conversely, you don't want an executive team that’s constantly at odds with each other about the direction of the firm. The ideal balance is a team that will challenge assumptions and petition for change. In the end, that's what enables companies to grow.
This can be a difficult element to introduce. As the owner or CEO, you guide the company’s vision and overall strategy, so it’s natural that you may be accustomed to making the key decisions without anyone challenging you. But you shouldn’t be the only voice that gets heard. Particularly in a downturn, it’s important to have a level of oversight to give you a fresh perspective.
Top-down talent management
There are studies that show that money isn’t the main reason people leave a job. More often, it's related to culture,1 management2 and engagement.3 As long as you have the fundamentals in place—that is, you're paying fair wages and your business is competitive—having a top-flight leadership team will help you retain talent from the top down.
Essentially, if you focus on the talent at the top, the benefits will trickle down through the rest of the workforce. A good COO can attract good plant managers, and a good plant manager can attract good floor workers. It’s natural to want to invest in getting as many workers as possible. But that starts with investing in the leaders who can help you attract those workers.
Keep in mind that when it comes to leadership talent, more isn't necessarily better. Sometimes one exceptional VP of finance or COO can fulfill several leadership gaps.
Are you positioned for success?
Everybody looks like a genius in a bull market. But a downturn is a good time to take a hard look at your executive team and strategic decision makers. As we navigate this challenging period, ask yourselves a few key questions:
- When was the last time you made a decision that was challenged by other members of your executive team?
- Does everyone in the executive team have the same background, or is there a diversity of backgrounds, viewpoints and professional experiences?
- Do you have members of the executive team who have experienced economic cycles?
- Are your compensation structures aligned with the company’s strategic goals?
Emerging stronger from a downturn requires vision and leadership from the top. When you have that in place, you’ll be able to make the strategic decisions that can help your business grow as well as attract and retain the right people who can help your organization meet its goals. From there, it creates its own feedback loop where you can continue to grow, pursue more acquisitions or investments, and attract more talent.
Paulina Kursa, Andre Orbe and Heath Scheid contributed to this article.
3 Gallup
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