SURVIVING THE ECONOMIC SLOWDOWN by S N Sapre, Former Chairman, Pune Branch & Distinguished Member.

SURVIVING THE ECONOMIC SLOWDOWN

By  P. N. Sapre
BVS Quality Systems

There is no   sense in denying that India in the grip of  economic slowdown. We are still not in it. The threat of slowdown   yet to come down on us, with it’s severity.  Managing slowdown is not an easy task by any means.   It needs to a strategic   mindset  focussed on  over stretching and changing  of our  goals, for  current and future success of the organisation.

Leaders should accept the fact  slowdown in economy  are part and parcel of  of this Volatile , Uncertain, , Complex ,  Ambiguous (VUCA) world we live in.  Economic prosperity at macro and micro level  may not last forever.  A long -term  view , coupled with constant vigilance is key to riding the economic slowdown. Slashing down costs and laying off the staff may seem like the  only option available , but such short term measures   can cause irreparable damage or harm  to the organization.  

 What is kind or colour of the Slowdown.

There are many concepts and theories to explain  the present 2019 slowdown . But what is important is understanding it. It is important that,  we  should know  what kind  or colour   of slowdown we are likely to face.

  1. Firstly general economic slowdown is triggered by macro issues , such as Trade Wars, Oil Prices hike , Tariff battles, any many more international issues. As an individual organization/ company you can do nothing against such macro issues.   Only thing you can do is you should know how you can protect  your top line  and bottom line  from getting badly effected economic slowdown and hope for an early turnaround  of the economy.
  2. Secondly other theory is that it is a Cyclical Slowdown which varies with the industries . Many industries go through the series of boom and bust. Capacities get built as there is excess demand and limited production or supply.  But, once the once the mega capacities get operational , the opposite happens such as Excess supply than demand .Depending upon where the company  get caught in the capacity  cycles the company faces very intense slowdown effect. So it is cyclical slowdown . Real Estate sector is  facing slowdown is good example cyclical slowdown.       

 

 

  1. Third kind of slowdown is the structural slowdown. There are macro level changes taking place/ happening  in the industry which lead to long term effects.   If it is structural Slowdown.      In structural slowdown it is difficult  to be able to come back to the past glory days.  For examples sales of PC being effected by the attack of  affordable laptops . Camera sales dropped due to  introduction of Camera Phones .    Take the case of automobile sector . In the present  situations , all the various auto sector products  are facing slowdown  which are due many different issues such as  of Ola or Uber in place of buying a vehicle, truck or lorry or trailer load carrying capacities are increased which  reduced the demand for normal lorries/trucks of ten tonnes .
  2. Fourth kind of slowdown is Cyclical Slowdown . This is slowdown is due to business cycles who do happen in any business at not defined period. When  in any kind or type of  business  profits  are high  then there are many new entrants in the business.  This results in over productions or supply overtaking  the demand .  Production is more that the demand resulting in over inventories or stock piling up. Prices start falling and sales are  slowed down  considerably.  This ultimately results in slowdown  of production  or may results in loss of jobs. 

Managing  Slowdowns  :  Firstly we need to accept and understand  the knd and nature of slowdown before applying some techniques. An economic slowdown calls for tightening of the belt .  In case of structural slowdown major strategic re-thinking  to done   on what Organization should do to over come the decrease in the demand or sales. This may even need to introduce a advanced technology. If company is facing a cyclical  slowdown  caused by  economic slowdown then you have remedial actions to implement.  Organizations reduce cost selectively  focusing more  on operational efficiency  than their Rivals  do.   Presently in India real estate sector is facing this slowdown.

Be Ready for Risks : Economic recessions and slowdowns  are inventible  .  When  they arrive it is too late to do anything.   Companies those who fail to prepare for recessions will definitely  suffer when the economy  turns down.  Companies those foresight the and make reasonable  preparations  will find  that they can override the recessions to great extent.   Preparing for recession  or slowdown should be part of every company’s long term strategy.    Economic  slowdown leads to a drop in sales  and profits  and it also results in reducing manufacturing and consumer spending.  Altimetry it results in loss of jobs.   These are the major effects of  economic slowdowns.  To know the seriousness it may be noted that in UK by end of September 2019 job lost were over 4,20,000.

Every organization , regardless of sector  or country will  face the problem of where the cash is not readily available.  During this period it s essential to ensure that retain good talent  and also maintain  effectiveness in performance of  existing workforce,  so that  things do not get worse.  This is the time where organization should not compromise to the commitment of creating greater place of work. Organizations some times fail to take off their eyes on the good and productive  culture .  Culture is sum total of every person within the organization . This includes their attitudes, beliefs, skills  behaviours  and traditions. This will develop a culture of meeting the challenges during slowdowns.    Organization should take  some steps to stay committed to performance by the people in the organization.

  1. They must do something different . They must know that  what they carry  out today will  not carry them through the difficult times of slowdowns.   They must ignore and restructure  optimization of use of resources like Men, Material ,Machines and Energy.  Minimise  and reduce the resources utilisation where there is no or less outputs.  Every Man and Machine should result in tangible outputs      orelse remove them or  prevent them from  ineffective or less efficient use. 
  2. Get every one involved in the effort made by the company for meeting the challenges of slowdowns.  Develop a culture that everyone is  maing adequate and untired efforts to meet  the challenges . Remove the persons who do not produce  profitably and effective outputs relating to business.
  3. It is crucial that those not committed to helping the organization in it’s difficult times  and times of needs  are managed out . They  not only spoil their times but develop a culture of not bothering  which makes  adverse effect on the sincere and e effective people who are mak9ng sincere efforts to face the challenges  of economic slowdowns.  
  4. Prepare now for an economic downturn
  5. Adjust your budget. Avoid depending on extra income like bonuses or overtime hours.
  6. Pay off card debt. If you can’t, consider options to fund your balance while you whittle it down.
  7. Beef up your savings. Make sure you have enough funds for an emergency.

Reduce set expenses  .

  1. Adjust your spending budget now to avoid depending on extra  funds requirements.   Use existing cash  to strengthen   your financial pressures. 
  2. Increase you credits from external providers, suppliers and contractors.
  3. Collect your dues (receivables) from customers and clients. Let them not do business on your money.

Shrink  to   Survive   : With economic slowdown is on the horizon  it time to do contingency planning . Better  be prepared to survive an economic slowdown than be a victim.  Growth has slipped below  the long term of 6.6% for consecutive quarters which implies that India  effectively is in quasi recession  August 2019  .

 10 Thing every organization can do  during economic slowdown.

  1. Develop forecasts based on optimistic  , realistic and revenue  earning  scenarios.
  2. Formulate contingency plans. Make your sure that your top manager act promptly to achieve  planned results. 
  3. Watch out for early warnings signs of economic slowdown.
  4. Be willing to adjust to adverse situations to dictionary spendings
  5. Be ready to keep bankers and investors  informed ed in case slowdowns.
  6. Identify and maintain your strengths  and you best customers.
  7. Be ready to decide what you can stop doing
  8. Manage liquidly as hard s profitability
  9. Collect from customer faster
  10. Monitor your receivable on day to day basis

References  :   Harvard Business Review(HBR) ,  Indian Management AIMA , Economic Times. Financial express.