Recession Realities

 

 

Many pundits are forecasting that we are heading into a recession.  Without commenting on the veracity of their claims, let me share a few facts.

1.    Since 1950, North America has experienced 11 recessions as defined by successive quarters of negative GDP. Therefore we experience one about every 6.5 years.  With that level of frequency you would think that business leaders ought to have some idea about how to respond.

2.    The average recession lasts about 11 months, but the median is closer to 8 months. Why then do these same leaders react like ‘chicken little’ and believe that the sky is falling in?

3.    If it does happen, this recession will be unique in that it will occur during a period in which both employment and interest rates are at or near historical lows.  Granted, inflation is higher than it has been in years but these same economists state that this is a short term blip and not a systemic situation.

Against this background, how should leaders prepare and respond?

1.    Do not…let me repeat; DO NOT…start laying off personnel.  In a market where staff shortages seem to be the norm rather than the exception, why would your first response be one of eliminating your most important asset?  You have invested heavily to recruit or retain, train and equip these assets and they should be the last, not the first casualty.

2.    Seriously examine your ability to sustain your business for 2-3 quarters of declining revenues of 5%.  If your bottom line is so fragile that this puts your company in a perilous situation, I suggest that your problems are much bigger than facing a recession.  Revenue-and profit-declines are not new to the business cycle and your plans should always have some room to respond without it being a crisis of survival.

3.    COVID taught us some important and painful lessons, not the least of which is how to be creative in times of uncertainty.  With COVID we had no idea of the timeline or the severity of the impact on our businesses.  But recessions are actually more predictable as the timelines noted above have proven.  For most businesses the impact on your bottom line will hurt but it will not be fatal.  Ride it out, tell stakeholders to be patient, and come out the other end grateful and ready to seize the opportunities that always follow.

Start now to examine your business.  It should be structured to withstand tough times and to prosper in the good.  A knee jerk reaction to changes only means that you are structurally inept and that is never sustainable.

The Lesson I learned from John Kutumbo

 

Some years ago I was privileged to accompany a group headed to Nairobi where they were teaching a number of Kenyan pastors studying towards their Master’s degree in Theology.  As is customary, on the first day each person was asked to introduce themselves.  Several attendees started off by identifying the particular church in which they served.  But when it was his turn John stated ‘…my name is John Kutumbo and the Lord Jesus Christ is my saviour…’

What John had reminded me is that what I do is not who I am.  John is a pastor. That is his profession.  But John is a Christian and that is who he is, that is his identity.  If John ever ceases to be a pastor, that will only change what he does.  It will not change who he is.

I cite this example because I believe that my boomer generation lost sight of the differences and has, by example and by word, failed to lead subsequent generations effectively.  Too often identities have been associated by what one does and what one has accumulated.  It gave rise to the phrase attributed to Malcolm Forbes, an American entrepreneur who stated “…he who dies with the most toys wins…”

At this point I need to also reference a line from the Wizard of Oz.  When Dorothy’s dog Toto pulls back the curtain to expose the so-called wizard, Dorothy scolds his by stating ‘…you are a bad, bad man…’ to which the gentleman replies ‘…no little girl, I’m not a bad, bad man; but I am a bad wizard…’ I include this reminder because boomers and others did not intend to be bad examples; they just didn’t try hard enough to be good examples.

Regardless of what you do or what you have, you should never confuse that with who you are.  The importance of this is relevant especially for those in leadership because your teams are always looking past that which is temporal – position or things – and they are seeking to be led by your character, by who you are. 

You do the same thing even when you aren’t conscious of it.  If your leader has pinned his or her credibility on their title or possessions, then they lack the substance to be a sustainable leader.  You know that; either intrinsically or experientially.  And you will not invest fully because you know that they lack the character to persevere when times are not going well.

The question then is a simple one.  Who are You?