Careful planning can help your organization not just survive, but thrive
The next economic recession isn’t a matter of “if.” It’s a matter of “when.” Multiple indicators support many economists’ predictions that a 2023 recession is nearly certain:
- Inflation is running at 40-year highs.
- Although the third quarter of 2022 is estimated to show a modest GDP increase of 2.9%, the previous two quarters had negative GDP growth.
- For the past 10 years, the Federal Reserve’s interest rate has been near zero—while $7 trillion of currency was printed.
Even without these indicators, recession preparation should be part of your business plan. The following best practices can help your organization prepare for the next economic downturn, successfully navigate it, and even emerge from it in a more competitive position.
Build a War Chest
Your organization should have two or three months of operating capital in the bank, plus access to another two or three months of funding through lines of credit or other financing options. Even in a recession, opportunities will arise; to take advantage of them, fast access to cash is critical. Capital reserves also help your organization stick to its long-term strategy instead of deviating from it to respond to crises.
Plan for Problems
A 30% drop in revenue, losing your largest customer, seeing half your open orders go on hold—all these scenarios are real possibilities. Brainstorm problems like these, then develop detailed, written plans to respond.
- Every response plan should identify task owners.
- If a plan includes staff reductions, include your HR department in its development.
- Include execution tracking in every plan.
- Review each plan every quarter and update as needed.
Create Forward-Looking KPIs
These indicators will let you know when to put certain response plans into action. KPIs vary by business; examples include the number of associates on assignment per desk, the number of open orders per recruiter, your sales pipeline, revenue, net operating income, percentages of cancelled/on-hold orders, etc.
Look for Waste
Review your organization’s processes and identify situations that limit productivity or create bottlenecks. Include organization charts in your review; look for duplicative roles and issues with span of control. In this exercise, the help of a Lean Six Sigma Black Belt is invaluable.
Determine Your Investments
Economic slowdowns are tremendous opportunities for well-prepared organizations to focus internally and invest in people, processes, and technology.
- Acquisitions – A recession is your chance to acquire market share from competitors that are less prepared or not as forward thinking as your organization. And in every downturn, there are valuable assets you can acquire at discounted prices.
- Technology – New staffing technology can increase productivity for recruiters, sourcing specialists, salespeople, and middle-office/back-office support staff. An economic slowdown is an excellent time to invest in new tech, as the slower business pace gives your team more time to focus on the upgrade. You can increase your company’s value while competitors are just trying to survive.
Most technology investments will be considered capital expenditures and not affect your EBITDA. When the recession passes, you’ll have better technology and processes, plus a staff aligned on the future: a real competitive advantage.
Prepare to Prosper
Every challenge is also an opportunity. You can’t prevent recessions, but you can plan for them—doing so is preparing to prosper.
As Newbury’s President, Chris Scowden brings 25 years of recruitment leadership experience and application of leading-edge technology to the Staffing Industry. Before joining Newbury Partners, he led business transformation and division turnarounds at AMN Healthcare and TrueBlue. Prior to leading some of the largest process and technology transformations in the Staffing Industry, Chris was the Global Delivery Leader for IBM/Kenexa RPO. He has worked closely with Bullhorn and several of Bullhorn’s acquired companies as an enterprise customer over the years. We invite you to learn more about Chris.
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