Laying the Foundation for Your Recession Action Plan

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:

1. 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.
2. 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.
3. 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.
4. 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.