Businesses are facing unprecedented challenges in light of today’s pandemic induced global downturn and some hard questions on strategic shifts and what’s next for businesses at large need to be asked and answered. Our current environment is challenging to say the least but we have faced economic downturns before.
According to the National Bureau of Economic Research and resources from Wikipedia, since 1785 there have been 47 recessions in the United States. The average duration of the 11 recessions between 1945 and 2001 was 10 months, compared to 18 months for recessions between 1919 and 1945, and 22 months for recessions from 1854 to 1919. From 1919 to 1945, there were six complete business cycles; recessions lasted for an average 18 months and expansions extended for an average of 35 months. From 1945 to 2001 there were 10 business cycles where recessions lasted an average 10 months and expansions an average of 57 months. The Great Recession of 2008 officially lasted 1 year and 6 months.
Even more revealing is examining the economic expansion time between recessions. Economic expansion duration between economic slowdowns average about 3 years, the depression of 1929 is the one notable exception to that rule. The 14 subsequent recessions post 1929 average roughly 4.7 years between each successive downturn of the economy.
We have data which clearly reveals that economic downturns occur with textbook regularity but the ongoing challenge is businesses don’t take each subsequent expansionary period as an opportunity to make structural shifts in their strategy which would mitigate the effects of the next downturn. In short far too many organizations don’t adequately plan for contingencies and adverse future events.
During expansionary times, businesses have a tendency to abandon forward thinking strategic planning and default to the dangerous strategy of “if it ain’t broke, don’t fix it.” Companies are lulled into a false sense of comfort that the good times will continue on for extended periods of time. Risk planning and risk management strategies take a back seat to expansion planning. That proves to be a dangerous and potentially fatal strategy.
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What this latest and unprecedented crisis should reveal is that savvy companies who are in business for the long haul cannot afford to continue along this same tenuous path. Companies are going to need to be more forward thinking. On the other side of this unprecedented business disruption businesses can no longer afford to continue with business as usual. Workforce counts will likely be reduced for the foreseeable future and the savviest of companies will deploy big data, artificial intelligence and other cutting edge technologies to measure employee productivity in real time. No longer will end of the day after action reports be sufficient enough. C-level executives are going to need instant and real time feedback on how each employee is performing at any given time throughout the course of a day. Those real time measurements need to deliver tangible results on measurable productivity and not just effort expended. The metrics also need to be bi directional, looking both inside out towards the customer and outside in from the customer perspective looking inward. Successful outcomes from these metrics will directly and positively impact an organization’s bottom line.
Savvy companies will indeed see the long term strategic value in making the necessary structural shifts during this unprecedented downturn and no longer succumb to the death spiral of business as usual. Increased employee productivity and efficiency in the coming new normal will be critical as organizations are going to be forced to do more with less. Organizations who face these tough questions and strategically plan for the next economic downturn now will enjoy both longevity and a clear competitive advantage.
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