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Director, The Center for Information-Development Management
http://www.infomanagementcenter.com
I've been calling information-development (ID)
managers to find out how they are coping with the
economic downturn. Many have had budgets frozen or
slashed, which means they have difficulty
supporting staff training needs or travel to visit
staff members at outlying locations. Others have
faced layoffs in their groups.
If you haven't already done so, complete the
latest CIDM survey,
Coping with the Slowdown.
We are trying to accumulate a picture of the current
climate, and the survey will assist in data
gathering.
The June 2001 issue of the Harvard Business Review
includes an analysis of typical responses to a
downturn and compares them to best practices
employed by companies that have weathered
downturns and come out on top. Darrell Rigby, Bain &
Company summarizes the result of a two-decades long
survey of 377 Fortune 500 companies and more than 200
senior executives. He first charts the
Conventional Approach to a downturn. This approach
will seem frighteningly familiar to many ID
managers.
First Phase = Denial
Executives deny that the downturn will affect your
company. Consequently, they make no early moves to
strengthen the company's position while revenues
and profits are still respectable. In fact, many
of them keep spending money wildly on acquisitions
and mergers, many with companies having only
peripheral connections to the core business. They
feel that any contingency planning will only make
the troops and the stockholders nervous.
Unfortunately, after investing in marginal new
businesses and spending on outlandish perks, they
are primed to find the company with redundant
staff pulling in multiple unrelated directions.
Second Phase = Panic
When the downturn finally hits, the reaction is
total panic. Managers are told to cut everything
in sight. Quick fixes result in slashed budgets
everywhere but especially in anything that might
resemble a perk. Employee morale is crushed when
all opportunities for learning and growth are
eliminated. No training, no travel, no
professional development investments get approved.
The problem is not with cautious spending but
rather with acting differently in a crisis than in
good times. Profligate spending results in
devastating cutbacks. And cuts that are dumbed
down and implemented across the board mean that
everyone suffers.
Rigby points out that layoffs rarely make sense.
The average US company has 15% to 20% attrition
each year. The typical downturn lasts about 11
months and results in sales lowered by less than
10%. The scramble to fire--and then rehire and
retrain--Rigby notes, is not a sound business
strategy.
Third Phase = High-spending frenzy
Downturns do not last forever, although it may
seem so to the young high fliers of the dot.com
economy. Some of us have already lived through
half a dozen downturns in our careers. The
Conventional Approach teaches that a company has
to spend its way out of bad times. Because the
panicked actions have destroyed employee morale
and disgusted customers, the only response is to
buy back loyalty.
I'm eagerly awaiting the frenzy. It will probably
be good for the CIDM and the research and
consulting environment.
Rigby goes on to explain that successful companies
take a different path. Because they weren't
profligate spenders in the good times, they have
the ability to weather the downturn without panic.
They are careful to invest wisely during the
downturn, using it as an opportunity to overcome
competitors and gain market position. When the
turnaround arrives, they're stronger than ever
before. But they don't sink into a spending frenzy
either.
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