Tis the season for self-congratulation

It seems everyone I run into these days works at a firm that just posted a record year. (Its true at IW, too, for the second year in a row.) To which I always give the same two-part answer:

1. Thats great, but . . .

2. What are you doing to get your company ready for the big downturn in the economy?

I know, I know. Nobody likes a party pooper, especially in the middle (we hope) of a long economic boom. After all, profits are still up, interest rates are still down, and the U.S. bull market seems to only catch a cold while other bourses come down with the flu, or worse. And, no, my crystal ball doesnt indicate anything particularly ominous on the horizon. Its just that all of us know theres another recession in the offing, whether its two years, three years, or even (we hope) 10 years down the road. Forward-thinking leaders will skip the self-congratulation and instead plan for a slumping future that (we hope) will never arrive by focusing on three areas:

Anchoring a recession-resistant debt structure -- Only an idiot would ignore the opportunity offered by low interest rates to invest for the future on somebody elses dime. And only a complete idiot would turn that opportunity into risk by investing in capital expansion that assumes no recession will occur.

Safeguarding customers, employees, and vendors -- Pain in a recession is universal. What can you do today to make sure that valued partners suffer as little as possible? If orders dry up, for instance, will you use downtime for employee training and plant maintenance, or will you cut hours? When customers need to stretch payments, will you accommodate them with alternative financing or cut off their supply? Will your vendors feel pressure to slash costs, or will you invite them in to jointly plan a survival strategy?

Maintaining investment for the future -- When todays record profits start to weaken, will you cut your R&D budget? Will you pull back from sales and marketing efforts to develop new customers? Will you delay the new customer-service system until things improve? Or will you plan now to make sure those expenses are evaluated over several years, rather than in the harsh light of a single bad quarter?

Executives who succeed at these three tasks well call survivors.

The ones who dont well call unemployed.

* * *

Last month an old friend of IW was slighted when Bernie Nagle was inadvertently omitted from the list of those responsible for the success of IWs Census of Manufacturers. Formerly with Census research partner Price Waterhouse and now director of global business process engineering at Berg Electronics Group Inc., Nagle played a vital role in the early planning of the Census.

Send e-mail messages to John Brandt at [email protected]

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