HOW TO SURVIVE ECONOMIC CRISIS

It seems the financial downturn is hitting virtually every industry sector in one way or another. Opinions are rife but information and strategy is hard to come by. Key questions on the minds of business managers are typically along the lines of: y y y y y y How long will the crisis last? How bad will it get? Which industries will get hit the hardest? What are other companies doing? What should I be doing to reduce my exposure? How will we survive?

The strategy to adopt in times such as these is going to be unique to each company; however there are a few approaches that can be adopted across all business sectors. Cleaning out the Closet Now is not the time to be carrying poor performing business units and product lines. CEOs and product managers need to be dynamic in streamlining operations and divesting parts of the business which are outside core competencies. Divestment of businesses reduces market exposure and frees up liquid cash to help cashflow. Cashflow will be important in the next few years to keep the business operating and paying off called in debts. Of course in a credit starved financial climate, simple divestment to a private equity fund may not be so easy. Strategic partnerships and mergers with business units of other companies must thus be sought. Focus on Efficiency Closing down the oldest and least efficient production lines is key to maintaining margins. Sales opportunities are likely to be few and far between and are thus likely to degenerate into a price war between suppliers. Margins will only be met with efficient production processes. Indeed overcapacity for chemicals production in Europe is now a big concern. Just two years ago the reverse was true with supply bottlenecks common in chemical intermediates. Consolidation is inevitable, but large prizes await the survivors during the market recovery in terms of market share gains and growth opportunities. Focus on Core Competences Now is not the time to be expanding into completely new areas of business. While it remains true that acquisitions can be made at a bargain price, one would recommend that investments are related to key competence areas. Expanding the product portfolio and acquiring market share in core business areas however is a good strategy during times of recession when companies can be bought cheaply. Use Joint Ventures and Other Strategic Alliances Joint ventures can be used to create asset light operations. This is a strategy employed by a few top chemical companies to help secure profit margins and feedstock supply. Joint ventures also have the advantage of shared risk exposure and the ability to leverage the expertise of the partner company. Focus on the "Safer" Industries

It is clear that some industries are going to get hit harder than others. Large purchases such as a new car or house are likely to be postponed in many households and thus the automotive and construction industries are ones to avoid. Conversely, personal care and healthcare remain top priorities and are likely to continue to grow, albeit at a lower level. Government health budgets are also a key source of revenue in the healthcare sector. Secure Feedstock Supply While the focus of many CEOs may be directed to the mayhem in the downstream markets, thoughts also need to be directed to suppliers to the business. What happens if a key supplier goes bankrupt? Now is the time to be executing strategic sourcing projects and strategies to prevent being let down. This is particularly relevant in times of trouble when de-stocking to reduce warehousing costs is likely to be in progress. Searching for the "New China" Ten years ago, large cost savings could be made by moving production units to China. With the growth of the Chinese economy and the subsequent slowing down in the last year, cost savings in China are a thing of the past. Companies looking to move production must investigate new low cost production centres. Eastern Europe looks particularly attractive with its close proximity to the growing Russian market and access the core Western European market. The Middle East is also area for good growth that needs to be considered. Conclusions Taking a proactive approach rather than a reactive approach gives a competitive advantage in the market. Taking the risk out of decisions by tracking the markets, looking for avenues of improvement and areas of recovery will ensure a speedy recovery. Simply doing nothing and riding out the storm, as history has shown, is a recipe for disaster. Moreover, truly fantastic opportunities exist for companies with healthy cashflows and an aggressive appetite for growth. The market is unlikely to return to normal as the landscape will have changed too much by the time the dust settles. The automotive industry in particular will look nothing like it did pre-2008. Now is the time to start researching winners and losers in the market and build an action plan to increase the odds of survival.

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Few industries are immune to the effects of the global recession and few anticipated the breadth and depth of the economic crisis. Unprepared, many companies in trouble reacted from the gut, cutting high-paid employees first and realizing too late that their competitive advantagetheir top talenthad walked out the door. Circuit City learned the hard way that knee-jerk reactions about cutting staff can be fatal. When online competitors swarmed into the electronics market and revenue began to fall, Circuit City laid off experienced salespeople. That produced a one-time savings but eliminated the companys distinctive valuesalespeople who knew the products well. In November 2008, Circuit City filed for bankruptcy. This is just one example of a company that reacted in old ways to new dangers. But it highlights a significant fact about corporate survival in this recession: companies must safeguard and develop their critical talent if they want to weather the crisis and prosper in the turnaround. Old ways of thinking about employees as expendable expenses must go.

Companies that have been shaken but not brought down by the economic crisis are those that already understood the value of their human capital. A forthcoming study by the ASTD and the Institute for Corporate Productivity (I4cp) Learning in a Down Economy shows that 38 percent of companies surveyed are placing more emphasis on learning during this economic downturn. When the time came for belt tightening, they already knew what capabilities they needed to be more competitive, innovative, and customer-focused. And they had processes in place to find, hire, assign, and keep the talent they needed most. These companies responded quickly and leveraged technology to design, deliver, and account for employee learning and development. They didnt hesitate to move training out of the classroom and to pare training content down to the essentials to achieve more efficiency and effectiveness. They ensured that every training and development program, however small, supported a business goal in some way -- or it didnt survive. One of the toughest challenges of the current economic crisis is that companies must act even when they dont know what is coming next or how long recovery will take. But one fact is certain: old ways of doing things are not coming back. Following are some actions recommended by ASTD to help organizations remain competitive during the economic crisis and position themselves for growth in the turnaround. Theyre based on the practices of learning professionals in companies that are centered on talent and know how to leverage human capital to full advantage.

1. Scarce resourcesHow can you accomplish more with less? In this knowledge-based economy, the differentiator for organizations is no longer systems and processes. Senior executives agree that people are THE differential advantage for organizations. With scarce resourcesincluding tighter budgets and reduced staffworkplace learning and performance (WLP) professionals must concentrate on developing employees, not delivering training. Recommended action: Old ways of thinking are outdated. Demonstrate learnings effect on developing talent in your organization by ensuring there are processes in place to find, hire, and keep key talent.

2. Leaders who dont understand the value of training and development in a knowledge economy cut budgets for programs that contribute to overall performance. The ASTD-I4cp study showed that companies that put a stronger emphasis on learning during the economic crisis had better market performance. Learning departments that can show that learning directly impacts corporate performance will survive the economic downturn. Speak the language of business when communicating the value of learning to executives in the organization

by identifying ways in which the learning function can support the organizations strategic vision. Recommended actions: Make sure that every learning program supports a goal and has metrics to measure value and performance.

3. Strategic planningHow can you plan when no one know what will happen next? Many organizations are in the process of reassessing their strategic plans and putting major, costheavy initiatives on hold. The harsh economic climate may help refocus a strategic plan on what is important. Although no one can predict what will happen in the next week, let alone the next month, organizations should be focusing on new initiatives and the competencies that will prepare them for when economic conditions improve. Where is your organization and industry headed in the next year, three years, and five years? What are your organizations key strategies, goals, and objectives? WLP professionals can be a major player in helping organizations plan for the future by understanding the organizations key strategies and performance metrics. Recommended Action: Understand your organizations strategies, goals, and the learning needs of your workforce, and determine how you can meet those needs with the content, tools, and systems already in place.

4. Competitive advantageHow do you develop employees to have the skills to maximize your core business strengths? Are you familiar with your companys key competitors and their strengths? What is your companys competitive advantagedo employees have the skills and competencies to successfully support that business strategy? Listen carefully to key clients, and focus on delivering superior service and products to your customers. Recommended Action: Be clear about the organizations source of competition and concentrate on ways to leverage your companys key strategic drivers.

ASTD Economic Survival Guide

How to Survive and Thrive in Challenging Times

Few industries are immune to the effects of the global recession and few anticipated the breadth and depth of the economic crisis. Unprepared, many companies in trouble reacted from the gut, cutting high-paid employees first and realizing too late that their competitive advantagetheir top talenthad walked out the door. Circuit City learned the hard way that knee-jerk reactions about cutting staff can be fatal. When online competitors swarmed into the electronics market and revenue began to fall, Circuit City laid off experienced salespeople. That produced a one-time savings but eliminated the companys distinctive valuesalespeople who knew the products well. In November 2008, Circuit City filed for bankruptcy. This is just one example of a company that reacted in old ways to new dangers. But it highlights a significant fact about corporate survival in this recession: companies must safeguard and develop their critical talent if they want to weather the crisis and prosper in the turnaround. Old ways of thinking about employees as expendable expenses must go. Companies that have been shaken but not brought down by the economic crisis are those that already understood the value of their human capital. A forthcoming study by the ASTD and the Institute for Corporate Productivity (I4cp) Learning in a Down Economy shows that 38 percent of companies surveyed are placing more emphasis on learning during this economic downturn. When the time came for belt tightening, they already knew what capabilities they needed to be more competitive, innovative, and customer-focused. And they had processes in place to find, hire, assign, and keep the talent they needed most. These companies responded quickly and leveraged technology to design, deliver, and account for employee learning and development. They didnt hesitate to move training out of the classroom and to pare training content down to the essentials to achieve more efficiency and effectiveness. They ensured that every training and development program, however small, supported a business goal in some way -- or it didnt survive. One of the toughest challenges of the current economic crisis is that companies must act even when they dont know what is coming next or how long recovery will take. But one fact is certain: old ways of doing things are not coming back. Following are some actions recommended by ASTD to help organizations remain competitive during the economic crisis and position themselves for growth in the turnaround. Theyre based on the practices of learning professionals in companies that are centered on talent and know how to leverage human capital to full advantage.

1. Scarce resourcesHow can you accomplish more with less?

In this knowledge-based economy, the differentiator for organizations is no longer systems and processes. Senior executives agree that people are THE differential advantage for organizations. With scarce resourcesincluding tighter budgets and reduced staffworkplace learning and performance (WLP) professionals must concentrate on developing employees, not delivering training. Recommended action: Old ways of thinking are outdated. Demonstrate learnings effect on developing talent in your organization by ensuring there are processes in place to find, hire, and keep key talent.

2. Leaders who dont understand the value of training and development in a knowledge economy cut budgets for programs that contribute to overall performance. The ASTD-I4cp study showed that companies that put a stronger emphasis on learning during the economic crisis had better market performance. Learning departments that can show that learning directly impacts corporate performance will survive the economic downturn. Speak the language of business when communicating the value of learning to executives in the organization by identifying ways in which the learning function can support the organizations strategic vision. Recommended actions: Make sure that every learning program supports a goal and has metrics to measure value and performance.

3. Strategic planningHow can you plan when no one know what will happen next? Many organizations are in the process of reassessing their strategic plans and putting major, costheavy initiatives on hold. The harsh economic climate may help refocus a strategic plan on what is important. Although no one can predict what will happen in the next week, let alone the next month, organizations should be focusing on new initiatives and the competencies that will prepare them for when economic conditions improve. Where is your organization and industry headed in the next year, three years, and five years? What are your organizations key strategies, goals, and objectives? WLP professionals can be a major player in helping organizations plan for the future by understanding the organizations key strategies and performance metrics. Recommended Action: Understand your organizations strategies, goals, and the learning needs of your workforce, and determine how you can meet those needs with the content, tools, and systems already in place.

4. Competitive advantageHow do you develop employees to have the skills to maximize your core business strengths? Are you familiar with your companys key competitors and their strengths? What is your companys competitive advantagedo employees have the skills and competencies to successfully support that business strategy? Listen carefully to key clients, and focus on delivering superior service and products to your customers. Recommended Action: Be clear about the organizations source of competition and concentrate on ways to leverage your companys key strategic drivers.

5. RisksThe world becomes more risk-averse every dayhow do you create a culture that encourages innovation? Edwards LifeSciences, a heart valve supplier, changed its culture from a blame culture that created risk-aversion to an ownership cultureone that puts company stock in the hands of the employees. We tell employees to treat the company like they own it, not like they work there, says CEO and Chairman Michael Mussallem. If we want to be innovative, we need to study what makes a company innovative. We felt that if we were going to have a learning culture, we needed to create an environment for really new and fresh minds. Innovation flourishes in learning cultures, where there is alignment with business strategies, Clevel involvement in learning, efficiency, effectiveness, and a strong learning investment. The culture at Edwards LifeSciences recognizes and celebrates innovative ideas as they happen, and does not punish employees for trying and failing. Recommended Action: Give people time and permission for innovation. Create a culture that allows for failure and applies the innovative ideas back into the business.

6. Efficient learningHow do you train the greatest number of people in the fastest and most efficient way? During the 2001 recession, e-learning took off. It has continued to grow at a steady pace because it accommodates the three distinct learning styles of auditory learners, visual learners, and kinesthetic learners; is a more efficient form of training for globally dispersed audiences; and enables continual access and reuse of content. Recommended Action: Leverage more technology-based learning applications webinars, simulations, and virtual worldsto reach the more employees and increase learning hours per employee.