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Laying the Foundation for Your Recession Action Plan
April 10, 2020
The COVID-19 pandemic has the U.S. and global economies staring into the teeth of a significant recession. How will it affect your architecture and engineering (A/E) firm? That'll be determined by how you respond to this challenge.
One of the best ways to develop and implement a strategy for surviving a recession is to look back at the last serious economic downturn and review what worked and what didn’t for firms that were in business at the time. And it underscores the importance of this exercise that many of them are no longer in business today.
With that in mind, we interviewed a number of firms that, from our perspective, came out of 2008-2009 in relatively good shape. We did this before the pandemic, and what we discovered is that there were some important common denominators in their survival strategies that are more important than ever today.
Start with Self-Assessment
When the last recession hit, many A/E firms weren’t prepared and simply went into “survival mode.” The sad irony of that term is that most who adopted this strategy didn’t survive. Their operations became completely reactive and they made decisions based on emotion rather than reason—decisions that ultimately put them into a financial hole they couldn’t climb out of.
In contrast, firms that survived the recession knew very quickly where they were and where they wanted to be when the economy rebounded, and they developed a plan for getting from A to B. That involved acknowledging that certain factors were outside their control, that the status quo wasn’t going to work, and that a survival strategy had to consider both the firm’s goals and what the weak market would sustain.
For firms that weren’t in the best shape when the recession hit, the self-assessment included asking questions about why that was the case. Did they have too many of their eggs in one specialty or geographic basket? Did they have too many unproductive people on their payroll? Was their overhead too high?
In many cases, a firm's suboptimal functioning was due in large part to the fact that they hadn’t developed a high-performance culture prior to the downturn. And while you can’t turn back the clock now that we are facing another recession, you should nevertheless ask yourself these four questions about your culture to see where you stand and whether this is an area you need to address now:
- Every two weeks at payroll time, does management look at this as an expense or an investment? It’s a subtle difference, but the latter creates a much more positive firm culture.
- Do you invest in low-quality “assets?” Firms like to say, “Our people are our biggest asset.” However, what we often see is that firms will allow a low-performer to stick around because it’s easier than continually releasing people who aren’t delivering and replacing them with those who are clearly self-motivated and eager to help themselves and the firm succeed.
- Are performance standards set high and clearly communicated? The answer to this question impacts the one above. Many people labeled as low-performers would do much better if they had a better sense of what’s expected of them, and the upside and downside of meeting or not meeting performance standards.
- What happens if poor performance occurs? Do you have an intervention system? Is there a clearly defined procedure for handling situations where work is not meeting the quality standard? Often, people who are let go by A/E firms for performance reasons are genuinely surprised that they’ve been considered a low-performer for some time before they’re fired.
Hopefully you have a high-performance culture, in which case the response from your staff to a recession will be a positive one. As work slows, high-performing team members ask, “What can I do now that I’ve completed my current task?” while employees in a low-performance culture will try to stretch the current task and stay under the radar.
The former attitude enables you to use people’s talents effectively—maybe in helping to find new work, for example. The latter can make you think you’re busier than you are, which only masks the economic challenges you’re facing. What firms tell us can prevent this is ensuring that team members know how long a particular type of task is expected to take, and that scope creep is unacceptable. And it’s also important to have a feedback loop that lets employees know how they’re doing against this standard.
"Implement a strategy for surviving the recession by looking back at the last serious economic downturn."
Understand Your Niche and Your Clients
Another key to preparing your recession action plan is taking a closer look at your clients and their industries. Which ones are being hit hardest by the downturn? Are some less seriously affected or even experiencing a surge in response to the pandemic? Knowing how their workload changes will be affecting yours is critical.
Needless to say, your business development (BD) team needs to begin reaching out to your clients and prospects immediately. Maintaining deep relationships with your contacts is important even when the economy is good. In a recession, it’s critical.
And rather than just talking about the work that’s coming next month—an understandable concern, given the current situation—your team also should be thinking long-term and asking about what’s coming next year and two years down the road. This can be reassuring to clients who want to know that you’re confident that you’re in this for the long haul. In fact, these conversations may be the start of a stronger relationship in which you and your clients find ways that you can help one another now and in the future.
Also, if you learn of a sector that’s being overwhelmed by work, now’s the time to offer your expertise to companies in that space. Even if you don’t have extensive experience in that industry, what you’ve done for other clients may be transferable and you could find yourself with new business opportunities both during and after the recession. To position your firm to capitalize on those opportunities, use any extra downtime to cross-train your staff, with experts in one field sharing their knowledge with those in another.
Next Up: Crafting and Implementing Your Recession Action Plan
Read our next post, How to Craft and Implement Your Recession Action Plan, to learn how to “choose your rabbit,” create your plan, and take the decisive action needed to survive an economic downturn.
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