Saturday, December 6, 2008

Tough times call for tough actions - not panic!

Tough times call for tough actions!

It is no secret that we are already in recession in US, Canada and elsewhere in the world. And I have heard pundits criticize our governments, insurance companies and banks who were irresponsible in lending us what we couldn't pay back!

I agree, in most part. But what next? How should we respond in these times? What should businesses do in these tough times?

Well! that's a $64,000 question. Most companies have responded by cutting costs (a.k.a laying off people!). Truth be told- that is an EASY decision for management to do! Remember, "Tough times call for tough decisions" and not panic. To lay off people across the board and put a hiring freeze, cut sales and marketing budgets, spend less on IT and infrastructure- these are "easy", "self-defeating" and panic-struck decisions. By cutting cost this way, companies would lock their fate as a "losers"- management guru have called this phenomenon as "downward spiral" when companies lay-off their valuable assets in bad times only to make things from "bad" to "worse".

Need explanation? Understand how each business unit or function works. Sales and marketing is responsible for the top-line (revenues). Operations is responsible for lowering costs and ultimately accountable for a healthy bottom-line (profits). So when companies cut into their marketing and sales budget, they ensure revenues will not be the same as before - and the top-line takes a downward trend. With decreased revenues, operations team face need for cutting cost to maintain the bottom-line. They do so by laying off operational staff and infrastructure and that helps in keeping the company out of red (losses) in short term. But overtime, operation team faces drop in productivity. Asset turnover decreases and bottom-line is soaked in deep-red (losses)!

So what should we do? Respond in toughness. Do what other people are afraid to do. "Grow" and not shrink in these tough times. In other words, companies should learn how to BOOM IN RECESSION! HOW? Read my blog : "BOOMING IN RECESSION"

RECOMMENDED READING: For further reading, refer to following books

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