How to survive a recession

9. Get in shape early

Many companies that responded best to the downturn acted early to change their business model – and continued to tweak it. Barkhouse says that Syngenta’s steady performance has resulted from the harsh environment for agriculture over decades.

“We’ve regularly had the sort of recessions people are having now,” he says. “A lot of our activity in the past 15 years to get fit for purpose stood us in good stead when a real disaster happened.” It benefited from shifting its cost base from support functions to front-end commercial activity.

Fiat also benefited from early preparation. It began shifting its UK business from a production to a customer focus two-and-a-half years ago – an overhaul that redefined its brand, reconnected with customers and stopped selling cars to rental fleets at discounted prices, as it reduced the residual value of all the cars they sold.

Humberstone says these changes pre-dated the downturn by ten months. “We were well prepared. We weren’t hit as hard as others because we didn’t have high levels of used vehicles or stock, and we had a clean, lean business model in place,” he says.

Reacting fast is often a matter of having the right information. “The grocery industry has remained resilient with stable volumes,” says IGD’s Walton. This is partly because of the non-discretionary nature of the sector, but also because food retailers have superb industry data. “They have a comprehensive understanding of shoppers’ behaviour that enables them to adapt quickly to trends. Alertness and agility are key skills,” he says.

10. Cut costs – but not staff

Virtually every company has attacked its cost base and slashed spending in this downturn. But which cuts are most effective? Businesses have shown real determination to avoid redundancies when reducing staffing costs, and have asked employees to take cuts in pay or hours rather than lose their jobs.

For Ricardo to “rightsize” parts of the business suffering from lower orders while keeping highly skilled staff, it tried voluntary sabbaticals, redeployments and short-time working. “Not only did this help share the pain; it also ensured that as a company we were better placed to gear up once the orders started to return,” Shemmans says.

Benoy’s wage bill is its biggest liability. Lamb says it applied company-wide salary reductions on a sliding scale in 2009. “Those at the bottom of the salary scale didn’t have any reduction, but it rose to a 25 per cent cut in my case,” he says. “All the directors took 20 per cent cuts and most staff took cuts of between ten and 15 per cent.”

Ultimately, the companies that were most willing and able to adapt to the new conditions have had the best results. “The problems that companies have in recessions are often legacy issues: they’re overleveraged, overstaffed or have difficulty downsizing,” Luger says. “Einstein said that insanity was doing the same thing over and over again and expecting different results – companies must stop doing the things that got them into trouble in the first place and focus on downsizing, adjusting the wage bill or changing the product mix.”

Alison Lock is associate editor of Business Voice.

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