"Smart Companies" - Get Ready for The Recovery!

The current economic turndown (2009) has delivered an almost unprecedented level of unemployment in the US, arguably the highest since the 'Great Depression'. Individuals and companies are being hammered by huge reductions in their income. Many companies have been unable to stay afloat, corporate bankruptcy filings soared by 64% in the first quarter 2009 versus same period 2008 (Admin Office of US Courts). Domestic housing prices have decreased by 17% in the last 12 months (Halifax House Price Index).

However, nothing is forever and there will be a turnaround; economic stability will return. The big unknown is 'when' it will return. Smart companies realize this, and are already taking steps to take advantage of the recovery, when it does come. There are a number of precedent-ial models of strategies that have worked very well for some companies; one most notable being that which Intel implemented during the recession of 1981-83.

The 125% Solution

Intel called its strategy "The 125% Solution"; its idea was to have all exempt employees work two  hours longer per day, and at the same time, take a reduction in pay; no layoffs. The objective being to get new product (and support) launches ready for implementation when it was clear that the US economy was in a recovery phase. The expected outcome for Intel was to 'scoop' the market share pool, 'crush' its competition (at that time Motorola) with exciting new products, and attack new markets.

The strategy worked brilliantly for Intel, whose annual revenues more than doubled between 1981 and 1984. Intel also changed the microprocessor performance paradigm by introducing its 80286 microprocessor. Intel's strategy probably set the stage for the acceptance of the Personal Computer (PC) by 'big-business'. Intel might well have established the beginnings of a completely new industry; maybe the most important in history, since the invention of the 'Spinning Jenny' and the industrial revolution.

It would be very difficult for businesses to implement the 125% solution today, but it is a clear example of how companies can benefit by planning, structuring, and getting ready for the economic recovery, when it comes. Most businesses today have trimmed their employee pool significantly; they've probably slowed up developing new products, cut marketing, and have maybe even cut their sales force.

What Smart Companies Do

When demand returns, revenues will start to increase; profits will get significantly better, as a % of revenues (due to higher operating efficiencies; fewer employees and lowered expenses). The not-so-smart companies will think that raising efficiencies even further is a great strategy. Sorry! Higher efficiency does not translate to a differential advantage, especially when some competitors are introducing new and improved products and entering new markets, and experiencing improved efficiencies.

The 'smart' companies will have upped their efforts in developing new products and targeting new markets. At the same time, these 'smart' companies need to get the most out of their existing employee base, and select and hire the best candidates from the pools of unemployed workers that are eagerly looking for new employment. How will these companies do this with depleted HR staffs, and with many previously trusted recruiting companies out of business?

Good to Great

Jim Collins (Stanford University; his book Good to Great) studied over 1400 companies trying to discover what it was that made some of them go from being average-to-good performers to becoming great performers. He used stock price as his measure of performance. What he discovered was that it was the employees of these companies that made the difference, the people, and of course an enlightened management.

Collins coined a neat metaphorical description of the process; 'get the right people on the bus, get the wrong people off the bus, get the right people in the right seats, and get the bus moving'. The bus in this case is the metaphor for a company. During this upcoming recovery phase of the economy, companies should not be thinking of going from good to great. Nor even thinking of changing a paradigm (as Intel did), they should have expectations for the coaxial growth and introduction of new products, increased market share, along with higher revenues and earnings. And of course the success of these fine plans, is totally dependent on the 'right people' to execute them.

The Right Way

Smart companies will be doing some or all of this at this time (mid 2009). A few of them will do it the right way, and some of them, the not so right way. The right way is to do the following:

1.  Set post-recovery Objectives (revenues, share, etc)
2.  Develop strategies for achieving these Objectives
3.  Develop a Human (and economic) Capital plan that will enable the results
4.  Recruit and 'hire' the best people for the jobs highlighted in the plan
5.  Organize the workforce to best align it with the strategies to be implemented
6.  Execute on these strategies

Many companies have fine plans, and fine ideas, but can't execute on them; it is a very common problem. In that case, they should look at who is on the bus, because for sure they have the wrong people on the bus. It might be the managers, it might be the wrong people in the right jobs, but for sure, it is a people thing.

At this time companies need to continuously audit and evaluate their current Human Capital resources. Making sure the right people are in the right jobs. And that key employees are available for the implementation of the strategies that will allow them to benefit from the recovery. Retention of Human Capital is critical at this time, and serious steps must be taken to assure the best possible productivity from that resource.