The financial crisis and subsequent economic recession provides CEO’s and directors with a vast number of lessons learned. According to international consulting firm PA Consulting Group, the most important learning is that firms need to plan and act upon future recession threats in a completely different manner. Research among over 200 top managers from all over the world reveals that firms that have come out of the recession period most successful have followed three common strategies.
In a research PA asked managers what they would have done during the financial crisis and what management strategies appeared to be most effective. From an analysis of over 200 respondents it became clear that indeed there were significant patterns discovered in chosen strategies and financial performance of the firm.
Successful management strategies
The highest-performing companies shared three common strategies:
1. They identified the threats quicker and responded faster than their competitors.
2. A ‘scientific’ approach to cost reduction, focused on reducing inefficiencies.
3. They viewed the crisis as an opportunity rather than a threat.
Based on a detailed analysis of the crisis and survey results, the PA consultants defined a framework that provides business leaders concrete steps to take in order to prepare for a future crisis.
Poor management of recession
In the survey PA Consulting also investigated attributes of the worst-performing firms. It turns out that they too have three common principles. Firstly, they were too slow to respond to the financial crisis: it took them one year to understand the fundamental effect on their business and a further six months to act. Secondly, they were also too cost focused. Although cost is a key issue, it is a mistake to apply cuts indiscriminately across the business. Many companies have taken remarkable steps to survive yet for most part, the cost cutting had a detrimental impact on the long term. Thirdly, these companies have been too passive in their response to the financial crisis. They were unable to reinvent and transform their organization and in addition too late in spotting new opportunities.