Four Reasons to have an Economic Recession
By: Ed Muzio
I’m as hopeful as anyone that the worst of the recession is over. I’ve felt the pinch myself and seen disastrous results on loved ones. This has not been fun. Still, at the risk of being labeled overly optimistic -- or perhaps overly pessimistic -- I have to say that I’ve also seen some good come out of it.
So, I respectfully and humbly offer four reasons why, for the sake of good business, we needed to have an economic downturn.
1. Recessions Demand Clarification of Purpose
In my book -- figuratively and literally -- clear purpose precedes everything else. While that’s easy to say, it’s remarkably difficult to do. Defining and maintaining an appropriate set of goals for one’s own life is challenge enough; doing so for an entire organization is orders of magnitude more difficult. When times are good and money is flowing, it’s easy to let the mission get a little fuzzy.
One client of mine is, let’s say, one of the world’s premier producers of widgets. Several years ago they decided to expand to their product offering, including user-experience products, component manufacture, environments for widget-using groups, devices using products similar to theirs, platforms in new markets and more. Any one of these might have been a good strategic move; tackling them all at once created the same kind of confusion in the corporation that you felt while reading this paragraph. It didn’t work and everything including the primary product line suffered.
When the recession came around, they got serious, and got focused. Now, they are the world’s premier producer of widgets again, making a small but manageable set of strategic advances.
2. A Recession Prompts Waste Reduction
Wasting resources on too many strategic advances is problem enough, but in many cases waste goes much deeper. From opulent travel policies made famous by high-level executives to misinformed investments made in poorly understood (but compellingly packaged) mortgage instruments, to overkill and overrun on green employee programs, groups of people are notoriously bad at deciding what to do with money. In this area, recession creates focus.
Much of the group work I do, for example, happens at off-site retreats. In 2009, my clients evaluated how much they spend on those events, and what return they get on the investment. After those decisions were made, I found myself still on the invitation list, but to less expensive venues with less elaborate meals and activities. Organizations that have large conference rooms, for example, are now using them more often in lieu of rented space. The recession didn’t stop all capacity development activity, but it did force companies to get clearer on which parts of those activities paid off.
3. The Upside of Downsizing
When you gain weight, you can either go on a diet or you can buy larger pants. The corporate equivalent to this maxim is that when you get busier, you can either get more organized and effective or you can add staff. When everyone is overloaded in an economic boom, the easy answer is to hire. But adding staff adds opportunities to create even more work, creating a dangerous cycle of headcount growth without real bottom-line justification.
While I’d rather see companies creating jobs than eliminating them, I also want those jobs to be viable in the long term. Unnecessary hires lead to waste, layoffs and restructuring; sometimes a diet is the wiser option. As the economy turned down, many of my clients began cancelling open requisitions for new headcount as part of their recession staffing solution strategy. Remaining requisitions had to be carefully justified and tied directly to bottom line need.
As the economy picks up, it’s important to continue to engage in practical recruiting strategies with potential candidates who have the capacity to address ever-increasing demands for specific skills. To be sure, overly draconian requisition requirements can stifle necessary growth. But you have to admit that sensible hiring is a sensible requirement.
4. The Common Cause Effect
Have you ever noticed how quickly a group of people will align against a shared enemy? Nothing breeds solidarity like a common cause. Excessive nationalism, over-competitiveness and myopic focus on the nearest competitor are some of the less desirable organizational manifestations of this very human trait. It can lead to problems, but it can also lead to solutions.
The recession has been a perfect common enemy against which we could all align. My favorite story of this phenomenon comes from a software company whose leaders determined that revenue delays would put them out of business. They didn’t want to get beat and they knew they needed help. So, they gathered their employees to brainstorm solutions, and asked a very simple question: “what do we do to keep the recession from winning?”
Their answer was simple and brilliant: use our existing talents to develop iPhone apps in the interim. Their solution worked, their company is still in business. Their apps are now a profitable sideline to their core offerings.
Why Does It Have to Hurt?
“Interesting points,” you may be thinking, “but I just don’t know.” Be honest. This whole article presents an uncomfortable notion, doesn’t it? Why would an otherwise sane author extol the virtues of economic contraction? Who in his right mind takes a pro-recession stance?
My answer is not mine. It belongs to George Santayana, who said “those who cannot remember the past are condemned to repeat it.” I’m hoping that by paying attention to the benefits of this recession, we can avoid the next one.
Actually, many of the lessons aren’t all that complicated. The four I’ve discussed here -- be clear about your purpose, avoid waste, expand your small business hiring when it makes sense, and finally, make sure your teams have a shared cause -- are common sense, applied. You may be able to think of some other lessons as well.
Take a moment and ask yourself, “What have I learned from the recession?” You’ve already been forced to live through it; you might as well extract some value.
If we’re lucky, we all will have learned to be better business people, and to create stronger futures. That’s why, despite the possibility of appearing to be out of my mind, I’m going to continue being grateful for the lessons the recession has taught us.
And, I’m going to continue hoping that it’s over.
Edward G. Muzio, CEO of Group Harmonics, is the author of the award winning books Make Work Great: Supercharge Your Team, Reinvent the Culture, and Gain Influence One Person at a Time and Four Secrets to Liking Your Work: You May Not Need to Quit to Get the Job You Want. An expert in workplace improvement and its relationship to individual enjoyment, Muzio has been featured on Fox Business Network, CBS, and other national media. For more information visit Make Work Great and follow the author on Facebook.