Is the U.S. in a recession? As I write this article, the answers, forecasts, and models vary — considerably. While economic output in the U.S. fell for the second consecutive quarter, the job market — typically an indicator of a recession — continued to post strong numbers through June. As Jon Hilsenrath at The Wall Street Journal put it, “If the U.S. is in a recession, it’s a very strange one.”
No matter the answers from economists or Wall Street, the fears of economic uncertainty being felt by businesses are very real. To be prepared for when the next recession comes, companies need to evaluate supply chains and operations, strengthen stakeholder connections, support talent and teams, and invest in the future. We’ve gathered five articles from our library that business leaders can use to navigate the uncertainty and volatility associated with downturns.
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Among the many concerns of a global recession, one that is particularly troublesome is the phenomenon known as the bullwhip effect: When demand contracts, it leads to excess inventory and capacity and, potentially, supplier instability and an economic downturn. In this article, MIT professor Yossi Sheffi reviews the fundamentals of preparing for and responding to disruptive conditions, along with tactics for weathering a downturn.
As Sheffi puts it, “Executives should prepare to seize the opportunity of the downturn to evaluate suppliers and customers along the supply chain and make transformative changes as part of their recovery efforts.”
In today’s world of hybrid work arrangements, leaders are increasingly strangers in the places where their organizations physically reside. With greater mobility and a disconnect from a physical office space, many leaders have identities that are not tied to one location. Yet those who lack a clear “passion for place” and well-established stakeholder connections might be putting their companies at a disadvantage during times of hardship.
Morela Hernandez’s article from MIT SMR’s summer 2019 issue continues to offer sound advice for leaders today as they navigate a looming recession. In research conducted with over 180 companies, Hernandez found that when organizations are tied to stakeholder communities through a common social context, they are better positioned to innovate and collaborate: “Our key finding highlights the importance of having (and leveraging) distinct stakeholder bonds to help the organization survive adversity. In particular, we found that managers can more effectively respond to hardship when they activate a shared emotional connection — what we term a shared passion for place with organizational stakeholders.”
In times of uncertainty, developing a passion for place and involving stakeholders can be a lifeline for executives and their businesses.
In the first year of the pandemic, ADP Research Institute conducted a global study of resilience and engagement levels across 25 countries to help leaders become more engaged and resilient in their own lives and to identify ways leaders can build engagement and resilience in their employees. This article describes the 10 most intriguing discoveries that emerged from the research to help leaders and their teams survive and ultimately thrive through current and future challenges
Author Marcus Buckingham notes that in times of hardship, it’s beneficial for managers to remember the strength of small, nimble teams: “People function best in teams, so anything leaders do to help them feel a part of a small, high-performing team — whether or not they are colocated — will boost workers’ engagement and resilience.”
Scott D. Anthony
In this article from 2020, Scott D. Anthony explains that, somewhat paradoxically, short-term uncertainty makes it even more important to think about what’s next. Take the example of Shantanu Narayen, who took over as CEO of Adobe in December 2007. Narayen came into the company in the middle of the financial crisis but was able to launch a transformational digital strategy using a SaaS model.
While uncertainty might make leaders unconsciously prioritize past approaches, Anthony writes that these are the times to innovate forward:
“Of course, leaders must make sure they preserve the present and ensure that their employees are safe, their operations are effective, and they can manage their cash flow,” he writes. “But it is even more important in uncertain times to have a clear and compelling vision of the future. A clear vision highlights once-in-a-lifetime opportunities to double down on growth strategies while competitors are on their heels, to acquire assets that would otherwise be unaffordable, to strengthen capabilities required to create tomorrow’s business model, and to accelerate moves in new directions.”
Boris Groysberg, Whitney Johnson, and Eric Lin
Volatility in an industry should concern not only the companies within it but also the people who work for them. To stay ahead of developments that could disrupt your professional life, you must make two evidence-based diagnoses: How volatile is your industry? And what explains the volatility? Taking the time to examine these questions can help equip you to pivot preemptively when facing uncertainty.
As the authors write: “Taking refuge in a stable industry is not an option for many people, and stable industries may not remain so for the duration of your career. But you can take charge of your career trajectory by scouting for early signs of industry volatility and getting ahead of them at your company, identifying other companies in your sector where your skills will be in high demand, and developing highly portable skills that will travel across industries.”