How is Your Recession Planning Coming?

Last Updated Oct 27, 2007 8:54 AM EDT

The experts disagree on the matter, but increasingly the ugly "R" word is starting to be heard about the current United States economy. But whether we enter a recession or not, it seems quite clear that the business climate ahead is as uncertain as the next minute's oil price.

If you aren't already doing some scenario planning about what a slowing or uncertain economy means to your bottom line, you are behind the game. And don't think just doom and gloom. Hard times can provide terrific opportunities as well--the dot-com bubble burst put a lot of talented people in play, and at affordable salaries.

Some great ideas for handling the oncoming Age of Economic Uncertainty have been put forward at Harvard Business Online, where management mavens were invited to opine on the question, "What should smart leaders and managers be thinking about amidst all this uncertainty?"

Here are some tips on uncertainty management:

  • Forget the good times: Many Generation Yers have not lived through an economic downturn, and thus lack the gray beard's experience in handling uncertainty. Business author and researcher Tammy Erickson advises young managers to be hypersensitive to indicators of trouble and ignore that old feeling that everything will bounce back next month. This time, it might not. She also advises businesses to manage cash closely, favor agility over lower costs in stratgey planning, and develop detailed alternative scenarios -- what happens when sales drop 10 percent?
  • Take advantage of turmoil: Going conservative in a downturn is just wasting a terrific competitive advantage, writes entrepreneur Bill Taylor. "If you start a company when everyone else thinks it's a great time to start a company, how is that an advantage?" A genuinely good idea can receive a favorable tail wind in bad times: "The battle for talent is less ferocious. Potential investors aren't wading through a sea of rival business plans. All sorts of costs, from office spacer to ad space, are lower."
  • Invest in the future: Harvard Business School globalization expert Pankaj Ghemawat sees uncertain times as a wonderful time to invest in foundations of future growth around the globe. The years of good times have left many companies flush with cash, and a downdraft is an opportune time to start spending, he says. After the Asian crisis, for example, global cement companies were able to buy out local capacity in Asia on the cheap.
  • Avoid across-the-board cutbacks: Babson College professor Tom Davenport sees it every downturn. Companies automatically lop off 10 percent of the work force, lash spending budgets, hand out early retirement packages, and offer customers rebates or cheap financing. "I'm hoping this time for a more enlightened approach to recession-oriented management," Davenport writes. That would include offering employees more time off in lieu of income, and giving the most experienced workers part-time gigs instead of buyouts. Why? When times turn good again, you'll want these valuable employees on board.
  • Middle management's action plan. It's time to be proactive with your boss about what your department or team will be doing if the slowdown hits. As management expert Kevin Coyne puts it, "have a conversation with your boss now as to what impact a recession could have, and whether to develop contingency plans -- before the pressure cooker of underperformance clouds both of your perspectives." Be ready with an action plan, but one with alternatives for your boss to consider.
  • Heavy hangs the head that wears the crown. When the going gets rough, anxious eyes turn to management for leadership. Consultant Marshall Goldsmith counsels leaders to not sugar coat the truth, keep decision makers focused on what can be changed and what can't, and to be cognizant of how their own appearance and manner influences others.
If you've been through tough times in the past, what advice would you offer your colleagues today -- especially those still green around the edges?
  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.