What to Do in a Double-Dip Recession? Grow!
It's official: we're in for a double-dip recession. What does that mean for business leaders? In the first dip, you've probably already done the obvious: cut out excess costs, frozen hiring, reduced inventories, perhaps even instigated some pay cuts or layoffs. So now you're wondering: what else is there?
Well now is the time to focus on growth. In the recession of 2001-2004 (the one everyone's conveniently forgotten about), that's what many of the out-performers, like the manufacturer Timken, did. "It you take a snapshot today," said Ward Timken, then a vice president, in 2001, "there's no question that we're in a recession in the manufacturing sector. It's more of a depression." But you shouldn't, he said, make long-range strategic decisions based on momentary events. So in October 2002, the company, which makes bearings and alloy steels, doubled its capacity by making the largest acquisition in its history, Torrington Bearings. Only a depressed market made the acquisition feasible, as Timken knew.
"We invest when times are tough," Ward's uncle, W.R. Timken, chairman at the time, told the Wall Street Journal in 2002. "So we can capitalize on those investments in the good times." That the Timken family controlled 19 percent of the company's stock, with employees owning another 17 percent, gave management more freedom in its business decisions.
The acquisition gained the company a larger presence in Europe, Asia and Latin America, gave it a wider range of products, and vaulted it to the top tier of ball-bearing manufacturers. Moving when it did, Timken believed that the company would be better positioned to "catch the wave" as world economies recovered.
The acquisition also increased focus on efficiency. Between 2002 and 2004, the company created a network of smaller, focused factories, each making just a few products at which it could excel. "If you drive through the countryside of heartland America," said Timken, "you'll see smaller new plants going up. They're crucial to new businesses birthing and succeeding."
Today Ward Timken is chairman, and no one should be surprised that the company is cranking out a record number of products aimed at the wind-energy industry or that it is announcing yet more joint ventures with China. It is the lack of fearfulness that most characterizes Timken's decision-making. He firmly believed that tough times were tests -- and that the rewards went to the boldest.
So what's your fearless plan for growth?
