Managing businesses during industry and economic downturns

By Hemal Dias, Market Analyst Food Products

Continued from last week

During times of economic downturn which affected all leading economies all over the world, the business leaders and managers have to take many steps to counter it so that their businesses survive and thrive. They need to cut costs, conserve cash, retain market share, keep employee morale high, position the business to emerge from the recession, or a milder economic downturn, with aggressiveness.

Good cash management is vital during a downturn since finding their businesses cash poor in the middle is not an enviable position for managers. The manager must be careful not to take short term steps that provide an immediate solution but will threaten their survival after the downturn.

For example, if the company cuts down on the training and R&D expenditure, then the company might lose its technological edge over its competitors and find itself inept to face competition after the downturn. One of the first things that a company and its managers must do is focus on the core competencies of the company.

During a recession, executives should narrow their company’s focus and further build its presence in its strongest areas or into areas having the maximum opportunity for the company. This is because, if the company continues to pump resources into non core competency areas, then a failure in this threatens the very existence of the firm.

Next the decision makers should plan for the possibility of the slowdown continuing for the next year or two.

The manager and the decision maker should always communicate effectively with the subordinates and be as forthright as possible about the assessment of the business and where the opportunities are. This builds credibility. The various rationales for cost cutting should be communicated to the employees, as this will remove any distrust that comes from being kept in the dark.

People are realistic about understanding the happenings and will excuse the marketplace, but how they are treated determines their trust and commitment to the company. Perhaps this is the area that, most of the entrepreneurs are lacking in this country and on many occasions we have been experiencing that, undue pressure on the fellow subordinates and creating a very unpleasant situation in the working environment in a situation like this.

Above all, customers should not be forgotten, reducing the overheads expenses is important, but not if it restrains the ability of the company to effectively serve the very people who keep it in business and not at the expense of the future of the Company.

Concluded