During every economic downturn, two types of companies emerge. The first focuses on aggressively cost-cutting, while the latter deploys a high-spend strategy to acquire new technologies and undervalued talent.
Rather than committing to one of these, companies should target an optimal balance of each, with their core business and post-recession goals leading the way. In the 2000 recession, Staples did not sway extremely to either side. They reevaluated their business model and, despite closing underperforming locations, grew their workforce by 10%, primarily to support core services. Post-recession, they outperformed their main competitor by 30%. During the financial crisis, Costco opened stores but focused their merchandise mix and limited product variations, allowing for increased discounts and a more streamlined supply chain. These measures allowed revenues and earnings to steadily grow, even post-recession.
Two steps to take during COVID-19
1. Take a holistic approach.
Businesses should selectively focus their capital to ensure they have the right tools and talent to support their core business. In addition to streamlining one’s own business strategy and supply chain, COVID-19 has introduced several new priorities.
- With a large percentage of the workforce working remotely, privacy, cybersecurity and data storage are pressing issues. These will continue after the lockdowns are lifted, so ensure you have a strong IT strategy and the talent to manage and adapt with it.
- Complex accounting and financial regulations have arisen due to the CARES Act. Ensure you are actively managing financial reporting.
2. Know your limits.
Only commit to accessible projects.
- Ensure the right tools are in place for a remote workforce and virtual clientele.
- For talent needs, consider hiring consultants and contract employees.
- Divest nonessential assets.
- Prioritize project backlog to ensure timely project completion once the economy rebounds.
Companies that follow these principles will not only succeed but will emerge from COVID-19 more resilient.
Learn more about Joyce here.