SURVIVING THE ECONOMIC SLOWDOWN
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.
- 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.
- 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.
- 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 .
- 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.
- 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.
- 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.
- 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.
- Prepare now for an economic downturn
- Adjust your budget. Avoid depending on extra income like bonuses or overtime hours.
- Pay off card debt. If you can’t, consider options to fund your balance while you whittle it down.
- Beef up your savings. Make sure you have enough funds for an emergency.
Reduce set expenses .
- Adjust your spending budget now to avoid depending on extra funds requirements. Use existing cash to strengthen your financial pressures.
- Increase you credits from external providers, suppliers and contractors.
- 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.
- Develop forecasts based on optimistic , realistic and revenue earning scenarios.
- Formulate contingency plans. Make your sure that your top manager act promptly to achieve planned results.
- Watch out for early warnings signs of economic slowdown.
- Be willing to adjust to adverse situations to dictionary spendings
- Be ready to keep bankers and investors informed ed in case slowdowns.
- Identify and maintain your strengths and you best customers.
- Be ready to decide what you can stop doing
- Manage liquidly as hard s profitability
- Collect from customer faster
- Monitor your receivable on day to day basis
References : Harvard Business Review(HBR) , Indian Management AIMA , Economic Times. Financial express.