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Many of the foreboding economic indicators are snapping into place. US GDP shrank during the first quarter of 2022. The stock market has been on a downward slide for weeks and recently entered bear market territory for the first time since the start of the pandemic in spring 2020. The federal reserve is raising interest rates in an aggressive bid to combat the historically high inflation rates ravaging the country.
All signs are pointing to an economic recession — the first we’d be facing since The Great Recession of 2007-09 (depending on how you view the economic volatility in the early days of the pandemic).
While these are troubling signs for all Americans, they can be especially unnerving for businesses and their leadership. Recessions can set off such significant decreases in economic activity that companies across a wide swath of industries can become existentially threatened. There are, however, ways to mitigate the damage.
Here are five strategies companies can avail themselves of if they want to not just survive this sharp economic downturn but thrive through it.
Related: How Entrepreneurs Can Survive the Next Recession
1. Carefully-considered consolidation
When customer bases are shrinking, profits are falling short of expectations and companies are tumbling headlong into the red, it can be extremely tempting to start carrying out mass layoffs. After all, recessions understandably trigger a flight-or-fight response in many companies, and executives often feel that rapid cost-cutting is one of the most proven paths to survival.
I would argue that consolidation, retrenchment, or whatever other euphemistic term you want to use for laying off employees is something that should be regarded with seriousness and a great deal of caution and discernment.
If leadership is committed to letting go of some of its workforce to reduce overhead and stop at least part of the bleeding, it should be extremely discriminating regarding where those layoffs come from. Carefully parse your organizational structure for things like redundancies and superfluous responsibilities. See where cuts can be made in a way that won’t substantially alter day-to-day operations. And perhaps most importantly, don’t initiate layoffs in a rash, impulsive manner or from a place of panic and desperation.
2. Advertising and marketing spending
It’s unquestionably a cliche, but there’s longstanding merit to the notion that major adversities present individuals, businesses and other entities with unique opportunities for growth.
During a period of economic downturn verging on a recession, many businesses will feel compelled to pull back on their marketing and advertising campaigns. This can create a void in certain industries that the savviest, most ambitious companies will quickly recognize and endeavor to fill.
With all the marketing noise from the competition dying down to little more than a whisper, businesses that go in the opposite — and admittedly counterintuitive — direction of increasing their marketing spend will fill that void and reach a wider audience than ever before. And while such a bold gambit may not pay off immediately, it can reap cumulative rewards as individuals start spending more in the months and post-recession years to come.
Related: How to Help a Business Thrive During an Economic Recession
3. Enhancing the customer experience
The last thing executives should want during a tumultuous period is for internal turmoil to start bleeding out to their customers and clients. Companies must be determined to go in the opposite direction, providing a robust, even flawless customer experience that does not betray any of the seams of what might be happening internally.
This should always start with customer service. Make sure you’re communicating regularly with clients and customers, and their needs are being not only heard but rapidly responded to. If you simply aren’t sure about how your clients and customers are feeling about your business, try implementing a customer satisfaction survey. You want to know where they stand, and exactly what you can do as a company to retain their business through the recession and for many years afterward.
4. Streaming products and services
An economic recession can be a good time for companies to carry out reassessments of past decisions. It’s possible that certain products and services no longer perform as well as they have in the past, but executives held onto them out of either a calcified habit or the dubious expectation that they would eventually rebound.
In a period of such substantial and often irrevocable change as a recession, it might be high time to finally eliminate those goods and services that are sapping your resources but no longer generating proportionate profits.
Cutting fat and focusing on the primary engines of your revenue can help lead to a subtle but important transformation among your workforce: no longer spread as thin over a plethora of unevenly performing projects, employees and leadership are able to free up the necessary cognitive bandwidth to brainstorm ways to improve their best products and introduce promising new ones.
Related: How Entrepreneurs Can Win During A Recession
5. Identifying new potential leaders
I was going to title this “keep morale high,” but I wanted to reach for something more specific and less often discussed. While awareness and enhancement of the morale of your employees are always critical — not least of all during an imminent recession that could be negatively affecting them in innumerable ways — a less commonly heralded action is identifying new potential leaders within your organization. Seek out the kinds of employees who are confident, outspoken and consistently self-possessed, and whom others rely on for their imperturbability when frustrations are running high and uncertain abounds.
Once you’ve zeroed in on these individuals, start developing relationships with them. Cultivating leadership internally can be a huge asset for a variety of reasons. When employees are empowered to express their leadership abilities, it helps keep the aforementioned morale high, strengthens communication throughout the organizational hierarchies and between departments, and reduces turnover. With a few rare exceptions, the more leaders a company has, the better served it will be to flourish for years into the future.