By next June, our economy will be 72 months into the current economic expansion. That’s a long time. And the expansion has been heavily stimulated by a lot of government intervention in the forms of hard cash to bail out major financial institutions, low-interest rates and record government spending. We’re not predicting an imminent recession. But we are prepared to tell our clients that the possibility of a downturn has got to be a meaningful consideration in their strategic planning. What are the implications of this? Here’s a short list of things to keep in mind:
- Make the tough leadership decisions that you’ve been delaying or hoping won’t have to be made. — If you’ve got business segments that are under-performing your competitors because the right leaders are not in place, make the needed changes now. Good times make it easy to coast along, having record years even with some parts of the business showing unjustified weakness. But there is a cost: missing the opportunity to put even more money in partners’ pockets or making investments now to avoid unnecessary drops in market share when the economy falters without the right leaders in place.
- Invest in market segments that are recession resistant. — These include services like regulatory compliance, products and services geared to wealthy clients whose liquidity is not deeply affected by a weak economy, litigation support and outsourcing services to name a few broad categories.
- Put your partners — and staff — where the opportunities are. — If a business segment is weak, move talent to stronger business segments, rightsizing all segments to the relative strengths of the respective segments. Don’t be a victim of your historical staffing. Recruiting and developing great people takes time. It’s a far better move to take a top person from one area and put him where the action is than to look outside in the current war for talent. We’ve heard every reason in the world why this is hard to do. Yes, it is, but do it anyway. Some top performers will get fresh opportunities that energize them, and the weaker performing segments will also be energized by having sufficient work to support those remaining. The alternative is to wait until the economy weakens and ask perfectly good people to leave because you’ve already staffed your recession-resistant business segments externally. Don’t fall into this trap.
- Accept the fact that your people, particularly partners, are working very, very hard. — And don’t turn down work because of it. Now, 78 months into an economic recovery is not the time to add lots of lateral people unless they bring something special to the table. There’s nothing worse for morale than going into a recession meaningfully overstaffed and needing to downsize. If people leave for lifestyle reasons, accept it. These are not the long term players in this business.
Who knows when the next recession will actually happen. It’s a fragile world where consumer confidence can evaporate overnight.