Lectures

A Recession is a Golden Opportunity for Growth

Recessions are opportunities for growth. Companies succeed by reinforcing their strengths during recessions and preparing for the next period of prosperity. The more severe the recession, the more closely all employees must work together with positive attitudes and creative efforts so they can overcome these difficult situations.

Every time employees join together to survive during a recession, a new "node," or opportunity, is created in the growth of the company, much like the nodes on a bamboo stalk.

The company can grow unimpeded, in a straight line, during good economic conditions, but during a recession, when all employees join forces together to survive, they create a node of opportunity from which the next growth spurt will begin. The more nodes in a company's stalk, the stronger the company becomes.

Related Information: Always Remain Cheerful

Preventive measure to prepare for recession

High Profitability is the Best Defense Against the Effects of Recession

The most important strategy for surviving a recession is to firmly establish a highly profitable business structure during normal economic conditions.

Having high profitability means that you have the resilience to remain profitable even if sales drop due to a recession. I always tell management that they are not truly managing if they cannot post profitability of at least 10 percent. Creating a sound financial structure with high profitability is the best safeguard against a recession.

Highly profitable companies are also able to accumulate greater cash reserves to weather a long recession with lower profit levels. They can also afford to take advantage of prices that are radically discounted during a recession and invest in equipment by using their extra funds.

Successful business management means doing your utmost to raise profits at all times, not just trying harder to survive during a recession.

Countermeasures in time of recession

1. Every Employee Must be a Salesperson

I am sure that all employees, regardless of which department they work in, have plenty of ideas. A recession is the perfect time to take these ideas to customers and drum up demand for our products. All employees should take part in this.

If all employees -- not only those from sales, manufacturing or R&D, but also the indirect support functions -- work together, promote products to customers, and win orders for our products, they will not only make our customers happy but will also gain an understanding of how the whole operation works.

Employees should not simply support sales, but must also consider how to turn ideas of their own into attractive products that will increase sales. I'm not talking about employees running around just to support sales; rather each employee should think about how to take their everyday ideas and create a product and then sell that product.

2. Put All Your Energy into Developing New Products

During a recession, you must put all your energy into developing new products. This is the time to devotedly work on developing products you were too busy to work on before, or to improve products which did not completely meet customer needs during better economic times. This takes the cooperation of the entire company, not only engineering and development groups, but also sales, production and marketing.

During a recession customers also have more time on their hands, and will be seeking new products. We must proactively visit customers and listen to their ideas or suggestions for new products, as well as their complaints and requests regarding existing products. We should take this information back to the company and find ways to use it when developing new products or even whole new markets.

3. Minimize Production Costs

In a recession, competition intensifies and both the market price and sales volume fall drastically. In such a business environment it's more critical for a company to lower its manufacturing costs than it is to lower its selling price in order to remain profitable. It's tempting to think that this is a difficult task, but this is the very moment you must resolve to make it happen by radically changing the way you do business.

You must question how everything was done in the past to find ways of reducing costs further and making drastic changes. You must review and revise the manufacturing methods that were taken for granted in the past; streamline the organization by merging job functions to increase efficiency; and reduce production costs.

By building resiliency in this way during a recession, you will be able to see immediate profits when the economy improves. During a recession, if a company reduces its production costs and improves the organization to successfully post profits while selling at lower prices, then once the economy recovers, it will immediately have significant profits.

Related Information: Maximize Revenues, Minimize Expenses (Count What Comes in, and Control What Goes Out)

4. Maintain High Productivity

When orders drop during a recession and the same number of employees are kept in production to manufacture a smaller number of products, productivity suffers; employees become underutilized and less diligent; and the workplace loses its sense of urgency.

Under such circumstances, move personnel who are not needed for production to another area. For example, have them work on plant maintenance or attend training sessions so that the plant will be better prepared once the economy recovers.

The production floor should maintain the minimum number of employees to retain the same sense of urgency as when production was at its busiest, so that employees will remain diligent and alert. It is important to maintain the same high level of productivity that was achieved at great effort in earlier times.

5. Establish Mutual Trust

A company's true quality and strength are tested when it faces a crisis such as a recession. You will find out if you have formed employee relations that are truly built on the ability to cooperate through hardship and prosperity. You will experience firsthand if you have created a corporate culture that prizes such relationships, and if the work environment is such that hardships and burdens can be shared with others.

A recession provides the perfect opportunity to evaluate and improve the corporate culture and interpersonal relationships in the company. It is vital that the company take advantage of this opportunity to improve the corporate culture even further.

It's important to remember that this type of relationship is not easy to establish. Employee frustration tends to be much worse at the very time that cooperation with management is essential. If this happens, I believe it is important not to be discouraged, but take the opportunity to humbly reflect on your management style which created these weak bonds in the first place. Work to establish better relations for the future.

From the Seiwajyuku Chubu Tokai Region Joint Meeting (May 13, 2008)