As the global economy heads back into crisis, business leaders are refocusing on what they need to do to succeed in uncertain times. The challenge they face is that many of the old rules no longer apply. This makes it even more difficult to know how to react to a fresh economic downturn.
PA’s Managing Uncertainty survey provides some of the answers. The survey, conducted this summer, asked more than 200 senior business leaders from across the world how they had responded to the financial crisis and what management strategies had proved most effective. Our analysis establishes which actions added value and which did not.
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The most common response to the financial crisis – cautiously battening down the hatches – is not a formula for success. Our survey shows that the highest-performing companies were those that responded faster than their competitors, removed inefficiency and planned to come out of the crisis stronger.
Respond faster than your competitors
Most companies took 18 months to understand the nature and severity of the global financial crisis that began in February 2007 and then to act in response. This was, in part, because many business leaders were neither observing what was happening nor orientating themselves to the new environment.
Yet the findings of the Managing Uncertainty survey are clear: there is a direct correlation between speed and success in decision making. Companies that responded faster were far happier with their decisions, despite having had less time to make them.
Remove inefficiency but protect competitive advantage
Of our respondents, 82% cut costs in response to the economic downturn. However, the survey shows that it was a mistake to cut indiscriminately across the business. The highest-performing companies cut out inefficiency but protected competitive advantage. They took a carefully judged approach to cost reduction, aiming to preserve staff and avoiding fire sales and cuts that would affect products and service.
Plan to come out of the crisis stronger
Two-thirds of respondents saw the financial crisis as a threat and sought solely to ride it out. However, the survey evidence shows that, in doing so, they missed an opportunity. Companies that reacted positively – planned flexibly, strengthened governance and acquired new businesses – emerged from the financial crisis with a sustainably higher market share.
The recent financial crisis and ensuing economic downturn underline the need for successful businesses to become better at managing uncertainty. They need to plan management strategies for a range of scenarios and adopt a more flexible approach in order to respond quickly and seize the opportunities of crisis, as well as manage its challenges.
To be talked through the Managing Uncertainty survey by a PA expert and discover lessons for your organisation, contact us now.
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