We have been very busy at ALP over the last two months.  During this time our clients have gone from saying that the recession was not really affecting them to all being affected in some way.  Few are making redundancies, but the changes to the economy are working through to the shop floor.

In the summer, when we launched our web site some clients wondered why we were so bearish about the questions we were asking at the top of each page.   “Couldn’t we be more positive?”  they wondered.  This month, no one is asking that.  Having worked with a lot of financial services firms, we got a sense of the looming challenges from late spring.  This caused us to review everything we did to assess its relevance in a recessionary market.  And our assessment and research into the challenges ahead tell us that we got it right.  

Job No. 1 Focus on Liquidity.

Whilst we have been expecting these changes, even we have been surprised at the speed.  The initial response from organisations has been the traditional and essential one –a focus on liquidity. Hence, the cutting or freezing of budgets.  Without cash, there is no business and there are no great ideas.  So this has to be job number one.  

A Cyclical and a Structural Recession.

However, from our research into past recessions, everything about this recession suggests that the cyclical problems are accompanied by structural ones.  Further, property-led recessions are always worse than normal recessions.  What does this mean?  It means that this isn’t one of those storms where you can fill the cupboards [focus on liquidity], then stay indoors and wait for it pass.  This storm is the kind that you must tackle head on.

Job No 2 Move Quickly from Liquidity to Productivity.

One of the structural changes that is taking place is a levelling of the world economy. The extraordinary involvement of the G20 nations instead of the G8 at President Bush’s November Summit in Washington give the clearest sign imaginable that we are finally going global.  The migration of work from developed nations to countries such as India and China will only increase.  Any trade barriers that may have been erected to protect local jobs will be much harder to keep given that India and China are holding most of our debt.  

Securing the Future is simple – Increase Productivity by 500% more than the Historical Average.

This means that if we wish to keep our high paid jobs then we must find ways to dramatically increase productivity.  By dramatic we estimate  per annum improvements of 5-10% a year for the next decade will be required.  This is a mere 500% increase based on the UK‘s  historical average.    Simply, liquidity won’t do this.  The only thing that will is a fundamental re-examination of how we work and why we are working.  To do this, you need to persuade your colleagues to look at how you work together and find ways to explode your collective effectiveness.  You simply cannot get these levels of productivity improvements without looking at the wider system.  

The good news in all of this is that it means removing the constraints that get in everyone’s way, ensuring any processes are there to serve the employee instead of controlling them, encouraging rapid prototyping and innovation (creativity that makes a profit), and focusing on values – the key driver of long term sustainability within a firm.    All these things improve the feel around the organisation and help counteract the negative effects of all the doom and gloom in the news.

You Don’t Have to Beat the Recession.

In spite of these challenges our research and our experiences of the last twelve months leave us bullish about a firm’s ability to make these improvements.  Some clients in conversation ask us why we are so positive about a company’s potential to increase their performance by so much.  Our experience tells us that if people and organisations have a big enough ‘why’ to change, then the rate of change can be extremely fast.  Further, on a purely selfish level, a company does not have to beat the recession. Actually, you can’t do that.  What you can do (and all you need to do) is to beat your competition -gain a greater share of what work or business available, manage resources for the long term and be ready to take advantage of any opportunities that will come your way.   Right now, most of your competition will be focussing internally and will not be watching their customers or you as closely as they should. So you are unlikely to get a better opportunity to strengthen your market position.  Are you ready?