Cuts, yes, but growth and greater success are possible with the right pragmatic actions. Downturns are tough on employers and their employees. The good news is that if history is any indication, economic slumps are rarely insurmountable. Based on past recessions, here are five pragmatic actions that winning companies take.
Many businesses understandably cut their advertising budgets during hard times. But history shows this reduces their exposure, mindshare, and ultimately, demand. For example, after Post, the leading cereal maker going into the Great Depression reduced its advertising budget during the Depression, second-place Kellogs increased its ads budget by 30% and quickly overtook Post as the leader. The lesson: When a recession comes, don’t stop marketing.
Include Discount Pricing
In addition to maintaining their marketing, businesses that offer short-term discounts weather recessions better than those that hold firm on pricing. Although this reduces margins, studies show that temporary discounts are highly sought-after when money is tight.
Make Budget Cuts
As revenue decrease, so too must budgets. Although some cost-cutting is encouraged, research shows that those who make precise cuts fare better than those with wide-ranging cuts. For example, reducing employees’ hours, introducing furloughs, and providing performance pay all grant continued access to your existing talent with permanent layoffs. This affords you the necessary manpower to try new things instead of doing more on your own (which doesn’t work).
Develop A Growth Mindset
Another problem with extreme cost-cutting is that it fosters a siege mentality, argues Harvard Business Reviews. This leads organizations to aim low, succumb to pessimism, and focus on survival instead of growth. Ask yourself, “What new opportunities can I take advantage of now?” and “How can I grow?”
The recession often forces businesses to reinvent themselves. But retraining or “upskilling” employees must always accompany that change, according to the Harvard Business Review. For example, ask your employees to come up with their own personal development plan, then help them fulfill it by allocating time during the workday to do so. You could also pay for online training, credentialing courses, or “microlearning” classes to help them build technical skills.