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Bounceback -strategies in an economic downturn

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Survival Strategies in an economic downturn
Western Europe research by Executives Online.

This report is drawn from an online survey conducted among
senior executives and experienced interim managers based in
Western Europe at the end of 2008. Our survey sample of over 300 included 45% employed executives, one fifth interim managers on assignment, a small percentage employed in a
non-managerial capacity, and one third either interim managers not currently on assignment or not in the labour market.

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Bounceback -strategies in an economic downturn

  1. 1. Bounceback Survival Strategies in an Economic Downturn “Success is how high you bounce when you hit the bottom” George Patton Western Europe Survey Report
  2. 2. Contents 2 Introduction 3 Method and Survey Sample 4 The Challenges of an Economic Downtown 5 Leadership and Uncertainty 6 Business Impact 7 Impact on Recruitment Policy 8 The Experience Factor 9 Looking Ahead 10 Greatest Challenges 11 Potential for Opportunity 12 Lessons to Remember 1
  3. 3. Introduction Executives Online offers a unique, fast-track approach to Finally, we asked more forward-thinking questions, to learn executive resourcing and thus maintains strong relationships what respondents saw as the biggest challenges and with leading companies as well as with executive talent in opportunities – and what lessons they would offer for the marketplace. managing through a recession. We undertook a survey of the many key players in the Western We were excited by the positive thinking that we found in Europe business arena to gain some perspective on the impact the marketplace despite the less-than-favorable economic that the current trading downturn is having on organisations, conditions, and impressed by the strategic insights and savvy and to glean insights, lessons, and learnings that can help any tactics offered. We are happy to share these findings with company to weather - and perhaps even benefit from - the you and hope you find them inspiring as well. current economic climate. First we gained a broad assessment of the current marketplace situation, understanding what activities and attitudes were shaping response to the crisis. Then we focused specifically on Anne Beitel recruiting and staffing issues, probing how companies were Managing Director adjusting their recruiting policies in light of the downturn. Executives Online Current situation Impact on recruitment Looking ahead G Challenges in a downturn G Actions underway G Challenge and opportunity G Leadership and uncertainty G Experience factor G Lessons to remember G Business impact 2
  4. 4. Method and Survey Sample This report is drawn from an online survey conducted among To provide perspective, we asked about their employment senior executives and experienced interim managers based in status during the last recession in the early 1990s. At that Western Europe at the end of 2008. Our survey sample of over time, more than half were employed as executives or 300 included 45% employed executives, one fifth interim managers, a fifth were employed but in a non-executive or managers on assignment, a small percentage employed in a non-managerial capacity, 5% were working as interim non-managerial capacity, and one third either interim managers managers or other independent executive professionals, not currently on assignment or not in the labour market. and 19% were not in the labour market. Status of Respondent Respondents by Country 2 Austria 1 % 5% 8% Belgium 59 Denmark 3 19% Finland 3 Status of France 12 22% Current respondent status 45% during last Germany 20 56% recession Greece 10 20% Italy 54 Norway 3 23% The Netherlands 73 Portugal 18 Spain 31 Employed in executive/managerial Employed in executive/managerial Sweden 19 capacity –45% capacity –56% Switzerland 9 Interim manager not on assignment –23% Employed in a non-managerial capacity–20% Unspecified 8 Interim manager on assignment –22% Not in the labour market then –19% Not in the labour market right now –8% Working as an interim manager or other Total Respondents 323 Employed in a non-managerial capacity –2% independent executive professional –5% 3
  5. 5. The Challenges of an Economic Downturn The greatest challenges facing clients or employers right now were varied yet inextricably linked, and remaining optimistic and committed was cited as critical. When asked what were the greatest challenges facing clients or employers in the current economic climate, some consistent themes emerged: G A downturn in demand, decreased sales G Cash flow problems G Reduced access to capital and credit G Budget cuts and freezes, especially for more strategic initiatives G Declining confidence G Resistance to change G Lack of skilled people G Attracting the right talent Not surprisingly, these elements are inextricably linked – lower demand leads to fewer sales which leads to slashed budgets and less access to capital – and thus in this downward spiral, the ability to attract quality talent becomes compromised as well. Other "softer" themes emerged which affect this spiral, such as lack of confidence and the persistent uncertainty that can cloud even the most straightforward business decisions. Remaining optimistic and committing to strategic initiatives with an eye toward the long-term health of the business was something mentioned repeatedly. " The greatest challenge in this economic climate is to prioritise and reduce activities to enable the company to meet profit objectives – but still remain in a position to maximise opportunities in the upturn. " 4
  6. 6. Leadership and Uncertainty Conservative behaviours and fear How has uncertainly affected client leadership? become more evident in economic downturns. 160 Uncertainty can affect a company’s leadership in 140 a variety of ways. In this recession, almost half of 45% survey respondents are seeing those effects to 120 number of responses include more conservative behaviours. Nearly a 100 third noted more fear, but almost a quarter did indicate that company management had been 80 27% making great efforts to reassure the team. 60 22% 40 20 5% 0 Has become Is fearful, and Has made great Has become more it shows efforts to reassure more conservative the team risk-taking Beyond attitude, however, uncertainty has impacted companies' short, medium, and long-term projects and additional changes are expected over the next 12 months. 5
  7. 7. Business Impact A "stick to your knitting" attitude and short-term cycles. A priority right now is to establish stability in the thinking can result as companies focus narrowly short-term, with the hope that growth-oriented initiatives – on surviving the downturn. including hiring – can be resumed in the medium to long term. While some respondents noted “no change” in behaviour, for the majority of companies, there is less appetite for long-term returns and a renewed focus on: " New ideas are put on the shelf when money is involved and only G The "short term" the most needed expenses are G G Retention of existing clients/business Core activities included in the budget. " In some cases, new avenues of opportunity are being pursued. Risk-averse thinking, excessive caution and delay, and slow There is some increased emphasis on new product development, decision-making have also been witnessed, particularly around as companies look for opportunities in “next-generation making new investments. Companies are adopting a “wait and see” attitude before committing to any expenses. Initiatives of technologies and growth engines.” Companies are also looking any sort are examined in great detail and require numerous beyond their borders for new markets, and new brands and approvals and sign offs before they can move forward. In some lower price points are being rolled out to broaden current cases, projects are being reduced in scope or broken up into market reach. smaller, more measurable chunks to make the investment more palatable and the payoff more attractive. Spending and budget cuts, and restrictions on travel are also a reality. " We believe that it’s time to create new opportunities and to invest in Recruitment has been impacted in the same way; staff has new marketing strategies to keep been cut in many places and there are hiring freezes or holds on external recruitment and relocations in some firms. In other competitive and to keep the cases, recruitment is just stalled and involves lengthier hiring business on a positive trend. " Of key company activities, Recruitment has If client has taken actions, which areas are been affected the most by the economic most affected? downtown. Among companies who have taken action in response to R&D the economic climate, Recruitment has been affected the 8% most, followed by Operations/Manufacturing. Sales and Training Marketing have been impacted as well, although many 10% Recruitment respondents noted the importance of keeping up sales and 28% marketing initiatives to help maintain company momentum Marketing especially as the economy begins to recover and new 13% opportunities emerge. Sales Operations/ 18% Manufacturing 23% 6
  8. 8. Impact on Recruitment Policy What changes has your client or employer made to its recruitment policy in response to the economic situation? Frozen recruitment 37% Delayed recruitment 33% Reduced use of consultants 31% Reduced use of interim managers or other contractors 20% Used less expensive recruitment services 14% Hired more junior (less expensive) people than planned 13% Increased use of interim managers or other contractors 9% Created new roles to deal with the expected difficulty 8% Used more senior (more capable) people than planned 8% Increased use of consultants 8% Used recruitment services with lower/no up-front fees 7% No change 6% Companies are cutting back somewhat on permanent Companies are taking a range of actions to address these recruitment, but some are increasing their use of concerns, with varying degrees of success. In terms of interim managers and other contract employees as a permanent recruitment, measures include: means of staffing amidst uncertainty. G Requiring a robust business case be put forward before pursuing any recruitment Specifically around recruitment policies, employers are making G More cautious recruitment with longer timeframes and changes in response to the economic situation, with almost more thoughtful decisions 40% opting for delayed recruitment and one third freezing G Alternate (lower cost) recruitment strategies recruitment outright. By comparison, contract employers have G Leveraging interim managers or consultants to solve been affected somewhat less, with a third noting a reduced specific issues use of consultants and almost a fifth citing reduced use of interim managers or other contractors. Balancing that out, 9% There is a growing emphasis on hiring temporary or interim of employers have increased their use of interim managers or staff rather than going straight to permanent personnel. other contractors and 8% have increased their use of Contract resources, which can be hired on short-term or consultants. Another change is a shift toward the use of less medium-term contracts, can ease the recruiting burden expensive recruitment services. amidst economic uncertainty. Citing faster results, more companies are using interim workers which allow them to Saving on recruitment costs is certainly important at any address staffing gaps quickly and with less risk than that time, but it becomes even more pressing during an economic involved with permanent recruitment. downturn. Survey respondents raised a variety of concerns facing them around recruitment, with top themes including retention of strong performers, identifying strong performers, and keeping recruiting expenses down. With uncertainty about the future, businesses are reluctant to commit to the long- " When shareholders do not expect great returns, that is when a company can term fixed costs of permanent recruitment. make investments in people and then seize market share from competitors " 7
  9. 9. The Experience Factor Management experience during a previous Is experience of a recession/downturn an economic downturn was seen as critical by important criterion for businesses in the the majority of respondents. recruitment of their senior staff during a financial downturn? When asked whether experience of a recession was an important criterion for businesses in the recruitment of senior staff during a financial downturn, three-quarters of respondents said “yes.” While many cautioned against assuming that lessons from previous recessions would apply No, it’s not directly in this one, the majority still conceded that having very important worked through similar business conditions in the past would 25% lend helpful knowledge and experience for the present. Some of the rationale in this was around experienced managers being less likely to “panic” or be driven by fear. A willingness to make the necessary changes to weather an economic downturn is certainly important, and as “mistakes Yes, it is important can be costly,” previous experience is helpful. 75% " A senior executive with recession experience will have the good ideas and natural leadership to manage the Previous experience was seen to bring: team in this difficult period . . . G “the knowledge of which plans and strategies can work in because downturns require better a recession” G managers, and better experience. " The more powerful message was that experienced executives G G “the ability to manage the risks” “a more mature and less emotional response to the crisis” “the vision to see beyond the immediate situation” would realise the importance of strengthening the business during the downturn, knowing “how to cut in the right areas Perhaps just as importantly in terms of organisational stability, to protect the future.” A realisation that “things always turn experienced leaders were seen as being able to convey this around” would help to avoid the “knee-jerk reactions” that confidence amidst crisis to more junior staff members. would fundamentally damage the long-term health of the Recruitment was an area that many felt should not be ignored business in the name of short-term expediency. An exclusive during an economic downturn. Taking advantage of the focus on cost cutting would likely damage the business and increased labour pool, many saw the economic uncertainty as a leave companies poorly positioned to take advantage of new great time to seek top talent to enrich the company’s workforce. opportunities that would arise both during the recession, and certainly at the time of the inevitable economic upturn. Interestingly, senior executives who had been through a " Experienced managers will understand that this is an inevitable part of the previous recession in a management capacity were more likely business cycle and will have some idea to note the importance of longer-term, strategic thinking than were their more junior, less experienced colleagues. of what to do in order to minimise the recession's impact on the organisation's long-term viability. " 8
  10. 10. Looking Ahead Opinions varied as to when there would be an improvement in trading conditions, with some feeling hopeful as soon as June 2009 and others believing it would be more like December 2009 or June of 2010. When do you believe we will start to see an improvement in trading conditions? 32% 25% 24% 8% 8% 2% By June 2009 By Dec 2009 By June 2010 By Dec 2010 Later than We haven’t seen Dec 2010 a negative effect 9
  11. 11. Greatest Challenges Of the many challenges facing client or employer businesses, respondents were split over which might prove the greatest. Almost 40% cited the need to time investment right in order to capitalise on the post-recession upturn. Over a third worried that too many cuts right now would impact readiness for future growth. Just less than a third felt that remembering how to think optimistically again would be a challenge. What will be the greatest challenge to your client’s or employer’s business coming out of recession? Timing investment right to 39% capitalise on coming out of recession If we cut too much now, we 36% won’t be ready for growth again Remembering how to 29% think optimistically again 0 50 100 150 number of responses 10
  12. 12. Potential for Opportunity Almost a third of respondents saw greater need for their services as interim managers. Despite the obvious issues and problems that would arise in an economic downturn, many noted that there could be opportunities too. Focusing on “what’s really important” and “achieving a leaner, more cost-effective organisation” were seen as strong opportunities for just under half of those surveyed. Almost a third saw greater need for their services as interim managers. What opportunities do you see in these types of trading conditions? Focus on what’s really 49% important, and cut the rest Achieve a leaner, more 44% cost-effective organisation Companies need my services as an 27% interim manager more in a downturn Develop “counter-cyclical” 18% products and services Employees are more loyal 15% in such an environment Marshall organisation and resources to 15% position for when there’s growth again 0 50 100 150 200 number of responses 11
  13. 13. Lessons to Remember Learning from the past is perhaps the best way to Keep your focus on what makes a difference approach the present; while the current downturn G Get back to the basics may be different from those in the past, the same G Drop anything that is not contributing added value forward-thinking attitudes and strategic actions G Don’t delay investment decisions; now is the time to still apply. develop new initiatives and move ahead of the competition Survey respondents felt that many lessons could be gleaned from the last economic recession and applied to this one. Manage costs aggressively, but strategically The overall tone of response was one of balance, restraint, G Maintain a low cost base and positive attitude. A variety of lessons emerged across all G If necessary, cut back quickly and deeply so you’ll only key business areas, including staffing, cost management, need to do it once marketing, and customer relationships. G Limit cost and staffing cuts to areas that will not impair future recovery An intelligent, balanced response is key G Restructure without compromising valuable resources G Avoid knee-jerk reactions G Cut all non-essential costs and then build gently for the G Don’t overreact to market conditions upturn G Be cautious, but don’t panic G Reduce debt and maximise cash for the opportunities that G Make calm, logical and appropriate decisions based on will come fact rather than fear G Do not avoid investment just because the outlook is G Ensure that strategies and resources are in place uncertain sufficiently to take advantage of the market when it G Plan for the long term starts moving again 12
  14. 14. Make staffing a priority G Provide support in areas where existing clients are experiencing difficulties G Listen to staff fears and concerns G Build stronger customer relationships through adversity G Be honest with staff and brief them effectively and regularly to avoid rumours G Offer staff assurance of their contributions Continue marketing with an eye toward the G upturn Ensure that the best people aren’t unnecessarily lost G G Preserve valuable, experienced staff by talking to them Do not cut marketing spend: continuing to communicate about future opportunities with customers is critical G G Use downtime to train staff as that is more difficult Leverage innovative sales and marketing techniques to during busy times solidify customer relationships G G Leverage flexible working contracts and the use of Keep investing in strategically important areas interim or fixed-term appointments G Maintain your share of voice in the market G Return to a simpler and cleaner organisation structure G Be bold in approach G Invest in innovative products and services Stay close to your customers G Remain positive and identify opportunities wherever they arise G Talk to your customers every day G Focus on maintaining service to clients at constant prices G Don’t compromise on quality and keep your clients happy G Understand what new requirements your customers have now About Executives Online We offer a unique, full-service process which is a balanced blend of technology and personal service. Executives Online delivers fast-track headhunting – interim management, project management, and permanent recruitment – leveraging our 60,000-strong Talent Bank of senior executives. We source talent globally, via the Talent Bank which is built and drawn upon by each of our growing network of offices around the world. Our approach attracts both the best candidates and the most challenging opportunities, and enables us to rapidly and effectively match them together in successful placements. 13
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