- Justin Webb
Recession Realignment and Near-Term Planning
Determining how your organization will survive (or thrive) over the next 18 months
What are we seeing in the markets?
Heading into Q4 2022, directional indicators continue across industries like real estate and utilities within the stock market. We’re already seeing reductions in force within larger companies as they appear to balance challenges of reduced budgets, remote workforces and overall worker productivity. While the experts have yet to officially declare this a true recession, we continue to see further evidence of reduced spending and hesitant postures for both businesses and consumers.
July 2022 Article: IT Readiness for the Storms Ahead
Our own clients and networks are beginning to trim spending and obligatory spend. Most have taken a far more conservative approach to expansion as we progress toward 2023, with expansion and acquisition targets reduced. Overall diligence within private equity and lending networks has diminished, while individual diligence efforts have grown more complex, as lenders and prospective buyers scrutinize target companies and transactions. Talent for key positions continue to be in-demand, with a preference leaning toward longevity and stability of role and company.
"Latest GDP reading confirms the US economy shrank for two straight quarters, supporting one definition of a recession" – CNN Business
What can you be doing?
Be open and honest with yourselves and your employees. There are impacts ahead – so proactively communicate what action you plan to take, how it may impact your organization, and how your people can play a role in preparations.
Finalize and Communicate Your New Strategy
Companies need to be proactively communicating updates to their internal teams, their stakeholders and their key suppliers and service providers. Delaying your messaging or maintaining a veil across your planned actions will only frustrate your employees, your shareholders, your service partners and your customers.
If you still haven’t altered your overall strategy – now is the time to be forecasting how a continued recession may impact your organization over the next 18 – 24 months. Contingency planning is essential unless you are in a position to take advantage of downturns via acquisition or other market share capture. If you are…what are you budgeting and what are those thresholds you are monitoring to trigger action?
Focus on Retention of Key Performers and Hiring Essential Talent
To combat the worry, fear and uncertainty that exists within the marketplace, now is the time to focus on retention of your key performers, as well as to focus on filling the gaps that exist for essential talent within your organization. We have seen too many organizations “roll the dice” with regard to not filling essential roles over the past 18 months – perhaps obfuscated by decent company performance or simple blind luck that they haven’t run into major issues due to these gaps.
It isn’t all about the money – the current job market shows that job seekers are looking for stability and safe harbor from the storm. Offering attractive, solid opportunities within a supportive and communicative working environment may be the differentiator in candidates accepting your role over the competitors…even if the compensation is the same or slightly below what others are offering.
However, now isn’t the time to short-sell key positions…including your existing workforce. Evaluate your current staff and determine how to ensure that your key performers know you are interested in keeping them content. For organizations that have suffered extreme turnover or are overly reliant upon a few personnel – now may be the time to look at retention strategies to ensure you have the proper staffing baseline to continue operations when revenues are reduced.
Identify Low-Hanging Fruit for Expense Reduction
Identify opportunities where you can obtain similar services, coverage or goods via alternate sources in order to reduce your overall spend. Can you obtain similar managed services via another provider, or tailor your coverage based on a reduced footprint? Are there less expensive supply chain options that still allow you to meet your quality goals? Would outsourcing specific functions be a better overall use of budgetary dollars?
If you haven’t aggressively examined your budget, this is the season to review and plan for reduction. You can always spend more in the event your revenues remain similar to past years (or are improved)…it’s more difficult to backpedal on commitments or reduce contractual obligations after you are locked in.
When reviewing your organization – unless you have been subject to significant talent loss already, you are certain to have minimal contributors or poor-performing employees weighing down your payroll in some manner. Now is an optimal time to review overall performance of your staff and determine if a reduction in force is appropriate. Even a single role can make a major impact, as a majority of most companies’ budgets are HR related. Freeze or eliminate non-essential hires at the moment, including interns and low-cost roles that rarely affect your operations but can distract and take valuable time from your full-time staff.
How Can X1 Help?
When you’ve determined it is time to make a change, we’re experts in helping you plan and execute those improvements. Reach out to us and we can discuss your specific situation and how we might assist, including:
Optimizing your organizational structure and defining, recruiting and on boarding key resources to carry you through your next phase of evolution – we have numerous resources in-network and can quickly organize to provide the key talent you need
Helping to define and execute your 18-24 month IT strategy to ensure stability and continuity of services
Identifying budgetary savings strategies and renegotiating your base contracts to reduce your overall spending
Providing dedicated IT leadership for key company projects to ensure you have the dedicated bandwidth to execute successfully
Managing completion for integration of prior acquisitions and ensuring alignment
Conducting a risk assessment of your current environment and establishing a plan of action to mitigate major risks identified
Private Equity May be Heading For a Fall – The Economist
Private Equity Investors Worried About Valuations – PE Insights
Economists Are Divided on the Risk of a US Recession - CNBC