During a time of recession, companies are faced with making tough decisions, including where and how to cut costs. But, as we discussed in last week’s blog, investing in growth-related activities during this time is important both during and after the recession, which we referred to as “forward-thinking.” This week we want to talk about being a “progressive company” and what that means for your business during and after a down economy.
WORK ON OPERATIONAL EFFICIENCY, DON’T CUT EMPLOYEES
One of the first reactions a business leader may think of when cutting costs is to reduce the number of employees. While it is true this will help lower expenses, it can actually hurt business operations in the long run. While progressive companies do experience layoffs, it’s at a much lower rate than companies that take a more defensive approach. Instead, progressive companies work on operational efficiency, which allows them to improve the output they provide with the input needed to run the business. There are many ways to improve operational efficiency, but here are some top actions to take:
- Focus on training and cross-training. Having well-trained staff will lead to more efficient work.
- Review, review, review. Make sure your processes are reviewed regularly. This will allow your business to improve upon them, becoming more efficient.
- Know your customer. Cut back on other tasks and duties and focus on what matters most to them.
Companies that focus on improving operational efficiency see a decrease in costs, not just now but after a recession ends. When demand picks up, you will see faster-growing profits.
IT’S THE PERFECT TIME TO INVEST – DO IT
Companies that were seen as “winners” after the 2008 recession used the down market to invest in different ways including:
- Plants, Property, Equipment
- Creating new markets
- Research and development
- Marketing
Some of these are pretty self-explanatory. Assets such as equipment will be lower during the time of a recession. In the long-run, this will save businesses a moderate amount of money than if they were to buy the same piece of equipment when the market picks up. But what about R&D, or marketing?
One thing that progressive companies keep at the top of their priority list: staying connected to the customer. Taking this time to research what your customers’ needs are, and developing new ways to fulfill them will help dramatically when a recession ends. Furthermore, discovering new customer bases that could benefit from your products and services will improve growth. Again, these investments will pay dividends in the future when the economy inevitably picks up. If you are stuck in the moment, you will lag behind your competitors once demand starts to increase, which will negatively impact your ability to meet the requirements of your customers.
Making calculated investments while reducing costs by improving operational efficiency is a business’s best bet at coming out on top after a recession. Progressive companies that take this approach see much higher growth when all is said and done. Marketing Works uses a proprietary method, the PULSE process, to develop better strategies for our clients. Reach out to me at bill@marketingworks360.com to schedule a session so we can help you think more progressively, or to come up with new ideas for your business.