By Michael Gunther
If you have been in business over the last decade, you have seen good times and bad times. What did you learn about your business model and leadership capabilities from the past economic upturns and downturns?
Businesses and the economy are dynamically impacted by local, national and global trends. Issues in Asia and Europe impact us as much as local employers closing their doors. The trends and indicators of an economic downturn continue to rise and fall inconsistently. As a business leader, you must pay attention to the economy, as it will affect your day-to-day organization.
Over the last few months, there have been numerous indicators pointing to an impending economic correction. The economies of China and Europe struggle to maintain a healthy growth rate that will allow for sustainable employment and consumer spending. On CNN Money this week, the International Monetary Fund said that the “prospects for the world economy this year are getting gloomier.” In the U.S., two-thirds of economists in a recent study suggested that we should anticipate a correction within the next 12 to 24 months. The banking industry reportedly is starting “the worst year since the financial crisis in 2007-2008” after assessing first quarter results, according to Reuters. Remember, most economic downturns do not start with a housing crisis like the Great Recession. Most downturns start with the financial and economic indicators as mentioned above.
I don’t intend to induce a fear response, but rather provide a cautionary note to all the business leaders who missed the trends of the last recession. I am not suggesting the economic correction will be as severe as the last market correction, but it will hamper growth and provide a challenging time for businesses to thrive if they are not properly prepared for the inevitable.
You may be feeling positive since surviving the last recession – revenue and profits growing again, employees more engaged, etc. I would just implore you to take a step back and ask yourself some key questions. If things did slow down: Are you prepared to adjust your business and strategies to maintain a sustainable growth rate? Have you planned for a worst-case scenario in your budget and financial plans? How have you incorporated economic trend analysis into your management meetings? Have you reflected on the strategies you would implement in a downturn based on the lessons learned from the earlier recession?
I am certainly not suggesting that you slow down your investment into growing your business, but I am recommending that you take into account all the trends and indicators of economy into your decision making process. I am also suggesting that you bring back that ‘pessimistically-optimistic’ attitude and perspective into your business. I see many leaders who are naturally optimistic about the future, which I think is a healthy trait, but one that needs to be balanced today with a pessimistic perspective in order to generate a more balanced approach to long-term success.
Businesses thrive in both good and bad economies. The leaders who can weather the rise and fall of the economic ocean most effectively are the ones who are assessing the economic landscape and choosing to make methodical decisions. Which type of leader are you choosing to be?