I need your help
This is a serious post and I would love some of the heavy hitters out there like Jon Ingham, Scott MacArthur, Bay Jordan and Jon Husband to critique it. Others please join in!
I am a work psychologist. That means I am as much concerned about work as I am about psychology. I do a lot of background reading about management, organizations, new work like nanotechnology, etc.
McKinsey’s advice on management & organization in a recession
McKinsey have just circulated an old report 2002 report on risk and resilience in recessions.
They argue that firms that come out of a recession in the upper quartile, differ significantly from other firms. The winning group, lets call them “recession-lovers”, either hung on to their upper quartile position, or came up from below.
The McKinsey report has a few sentences I find ambiguous. They are also talking about firms that make the UQ. They aren’t talking about firms who climb from LQ to Median say, so we should be careful not to over-extrapolate.
3 winning characteristics in a recession
I have found THREE characteristics of the ‘recession lovers’.
1. ‘Recession-lovers’ surge ahead because they were always clearly focused on what they are doing. Prior to the recession, recession-lovers are involved in less acquisition activity than their rivals. Recession-lovers maintain their acquisition activity during a recession, while others drop acquisition activity to the steady level of the recession-lovers.
Can we conclude that firms who are less successful during a recession were involved in shakier business prior to the recession?
2. Recession-lovers make 33% more sales per employee than their rivals. During the recession, they maintain this ratio by spending MORE money on sales and general costs. To do this, they absorb lower margins (TESCO’s just announced this I think).
Can we conclude that more successful firms move to protect and maintain their central markets?
Can we conclude that less successful firms are willing to jeopardize their market position by taking quicker profits?
3. Recession-lovers spend more money on R&D and double this expenditure during the recession.
Can we conclude that rivals had thought that their markets and products were stable and by cutting back further believe that markets will be essentially unchanged after the recession?
3 thought-provoking questions for HR Managers to ask
If I have summarized this report correctly, then there are hard questions HR Managers should be asking as they consider redundancies, cutbacks, etc.
1. When we hired staff, we assured them of their importance, and the value and importance of the products and services they would deliver. What has changed?
2. Now the market is tougher, surely we should give staff more, not fewer, resources to do their work and to sell our products and services. If we don’t allocate more resources, than why? Was our previous allocation of resources thoughtless, or, is the market is worth protecting, in which case . . . What are the ethical and legal implications of what we are saying?
3. If we are making less provision for R&D, then are we saying that the demand for our products and services will be stable into the future? Is so, why not write long-term contracts for staff on those lines?
What’s your take?
I would like to phrase these questions as constructively as possible and I don’t want to overreach.
How can we improve our understanding of a business so that in the future we can ask the right questions earlier?
Where do young HR managers in UK develop and test their understanding, BTW? Which are universities and firms known for turning out HR Managers with solid business sense?
UPDATE: For an HR Managers perspective on the Recession, I have written a summary on a new post.
I’ll come back with more serious critique in a day or two, but as we move further into a networked world, I have three words for companies wanting to make it into the UQ … culture, culture, culture.
The interesting points for me are 1 and 3 as these seem to imply that organisations need to continue with a long-term perspective, even when times are tough.
I’m less impressed by point 2 – organisations with higher sales / employee are going to be able to live with lower margins. So the key is understanding how they’ve developed this position. Which could again be about 1 and 3?
Thanks Jon Ingham. That’s a good way of looking at it.
Yes, we must always remember that some businesses are inherently more profitable than others. (Some veins of gold are better than others).
I heard a good phrase last night.
Business is the permanent search for temporary monopoly.
By nature HR people look for permanent monopolies, I think. We should factor in time as well?
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