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Survival Strategies in an economic downturn Western Europe research by Executives Online. This report is drawn from an online survey conducted among senior executives and experienced interim managers based in Western Europe at the end of 2008. Our survey sample of over 300 included 45% employed executives, one fifth interim managers on assignment, a small percentage employed in a non-managerial capacity, and one third either interim managers not currently on assignment or not in the labour market.
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“Success is how high you bounce when you hit the bottom”
Western Europe Survey Report
BouncebackSurvival Strategies in an Economic Downturn
George Patton
Contents
1
2 Introduction
3 Method and Survey Sample
4 The Challenges of an Economic Downtown
5 Leadership and Uncertainty
6 Business Impact
7 Impact on Recruitment Policy
8 The Experience Factor
9 Looking Ahead
10 Greatest Challenges
11 Potential for Opportunity
12 Lessons to Remember
Executives Online offers a unique, fast-track approach toexecutive resourcing and thus maintains strong relationshipswith leading companies as well as with executive talent inthe marketplace.
We undertook a survey of the many key players in the WesternEurope business arena to gain some perspective on the impactthat the current trading downturn is having on organisations,and to glean insights, lessons, and learnings that can help anycompany to weather - and perhaps even benefit from - thecurrent economic climate.
First we gained a broad assessment of the current marketplacesituation, understanding what activities and attitudes wereshaping response to the crisis. Then we focused specifically onrecruiting and staffing issues, probing how companies wereadjusting their recruiting policies in light of the downturn.
Finally, we asked more forward-thinking questions, to learnwhat respondents saw as the biggest challenges andopportunities – and what lessons they would offer formanaging through a recession.
We were excited by the positive thinking that we found inthe marketplace despite the less-than-favorable economicconditions, and impressed by the strategic insights and savvytactics offered. We are happy to share these findings withyou and hope you find them inspiring as well.
Anne BeitelManaging DirectorExecutives Online
2
Introduction
Current situationl Challenges in a downturnl Leadership and uncertaintyl Business impact
Impact on recruitmentl Actions underwayl Experience factor
Looking aheadl Challenge and opportunityl Lessons to remember
Respondents by Country
This report is drawn from an online survey conducted amongsenior executives and experienced interim managers based inWestern Europe at the end of 2008. Our survey sample of over300 included 45% employed executives, one fifth interimmanagers on assignment, a small percentage employed in anon-managerial capacity, and one third either interim managersnot currently on assignment or not in the labour market.
Method and Survey Sample
3
To provide perspective, we asked about their employmentstatus during the last recession in the early 1990s. At thattime, more than half were employed as executives ormanagers, a fifth were employed but in a non-executive ornon-managerial capacity, 5% were working as interimmanagers or other independent executive professionals,and 19% were not in the labour market.
Employed in executive/managerial capacity–45%Interim manager not on assignment–23%Interim manager on assignment–22%Not in the labour market right now–8%Employed in a non-managerial capacity–2%
2%
45%
23%
22%
8%
Employed in executive/managerial capacity–56%Employed in a non-managerial capacity–20%Not in the labour market then–19%Working as an interim manager or other independent executive professional–5%
20%
5%
19%
56%
Status of Respondent
Status ofrespondentduring lastrecession
Currentstatus
Austria 1Belgium 59Denmark 3Finland 3France 12Germany 20Greece 10Italy 54Norway 3The Netherlands 73Portugal 18Spain 31Sweden 19Switzerland 9Unspecified 8
Total Respondents 323
4
The Challenges of an Economic Downturn
The greatest challenges facing clients or employersright now were varied yet inextricably linked, andremaining optimistic and committed was cited ascritical.
When asked what were the greatest challenges facing clientsor employers in the current economic climate, some consistentthemes emerged:
l A downturn in demand, decreased sales
l Cash flow problems
l Reduced access to capital and credit
l Budget cuts and freezes, especially for more strategic initiatives
l Declining confidence
l Resistance to change
l Lack of skilled people
l Attracting the right talent
Not surprisingly, these elements are inextricably linked – lowerdemand leads to fewer sales which leads to slashed budgetsand less access to capital – and thus in this downward spiral,the ability to attract quality talent becomes compromised aswell. Other "softer" themes emerged which affect this spiral,such as lack of confidence and the persistent uncertainty thatcan cloud even the most straightforward business decisions.
Remaining optimistic and committing to strategic initiativeswith an eye toward the long-term health of the business wassomething mentioned repeatedly.
The greatest challenge in thiseconomic climate is to prioritiseand reduce activities to enablethe company to meet profitobjectives – but still remain in aposition to maximise opportunitiesin the upturn.
"
"
Conservative behaviours and fearbecome more evident in economicdownturns.
Uncertainty can affect a company’s leadership ina variety of ways. In this recession, almost half ofsurvey respondents are seeing those effects toinclude more conservative behaviours. Nearly athird noted more fear, but almost a quarter didindicate that company management had beenmaking great efforts to reassure the team.
Leadership and Uncertainty
5
45%
27%
22%
5%
160
140
120
100
80
60
40
20
0Has become
moreconservative
Is fearful, andit shows
Has made greatefforts to reassure
the team
Has becomemore
risk-taking
How has uncertainly affected client leadership?
num
ber
of r
espo
nses
Beyond attitude, however, uncertainty has impactedcompanies' short, medium, and long-term projectsand additional changes are expected over the next12 months.
6
Business Impact
A "stick to your knitting" attitude and short-termthinking can result as companies focus narrowlyon surviving the downturn.
While some respondents noted “no change” in behaviour, forthe majority of companies, there is less appetite for long-termreturns and a renewed focus on:
l The "short term"l Retention of existing clients/businessl Core activities
Risk-averse thinking, excessive caution and delay, and slowdecision-making have also been witnessed, particularly aroundmaking new investments. Companies are adopting a “wait andsee” attitude before committing to any expenses. Initiatives ofany sort are examined in great detail and require numerousapprovals and sign offs before they can move forward. In somecases, projects are being reduced in scope or broken up intosmaller, more measurable chunks to make the investment morepalatable and the payoff more attractive. Spending and budgetcuts, and restrictions on travel are also a reality.
Recruitment has been impacted in the same way; staff hasbeen cut in many places and there are hiring freezes or holdson external recruitment and relocations in some firms. In othercases, recruitment is just stalled and involves lengthier hiring
cycles. A priority right now is to establish stability in theshort-term, with the hope that growth-oriented initiatives –including hiring – can be resumed in the medium to long term.
New ideas are put on the shelfwhen money is involved and onlythe most needed expenses areincluded in the budget.
In some cases, new avenues of opportunity are being pursued.There is some increased emphasis on new product development,as companies look for opportunities in “next-generationtechnologies and growth engines.” Companies are also lookingbeyond their borders for new markets, and new brands andlower price points are being rolled out to broaden currentmarket reach.
We believe that it’s time to createnew opportunities and to invest innew marketing strategies to keepcompetitive and to keep thebusiness on a positive trend.
"
"
"
"If client has taken actions, which areas aremost affected?
R&D8%
Recruitment28%
Operations/Manufacturing
23%
Marketing13%
Training10%
Sales18%
Of key company activities, Recruitment hasbeen affected the most by the economicdowntown.
Among companies who have taken action in response tothe economic climate, Recruitment has been affected themost, followed by Operations/Manufacturing. Sales andMarketing have been impacted as well, although manyrespondents noted the importance of keeping up sales andmarketing initiatives to help maintain company momentumespecially as the economy begins to recover and newopportunities emerge.
What changes has your client or employer made to its recruitmentpolicy in response to the economic situation?
Impact on Recruitment Policy
7
Companies are cutting back somewhat on permanentrecruitment, but some are increasing their use ofinterim managers and other contract employees as ameans of staffing amidst uncertainty.
Specifically around recruitment policies, employers are makingchanges in response to the economic situation, with almost40% opting for delayed recruitment and one third freezingrecruitment outright. By comparison, contract employers havebeen affected somewhat less, with a third noting a reduceduse of consultants and almost a fifth citing reduced use ofinterim managers or other contractors. Balancing that out, 9%of employers have increased their use of interim managers orother contractors and 8% have increased their use ofconsultants. Another change is a shift toward the use of lessexpensive recruitment services.
Saving on recruitment costs is certainly important at anytime, but it becomes even more pressing during an economicdownturn. Survey respondents raised a variety of concernsfacing them around recruitment, with top themes includingretention of strong performers, identifying strong performers,and keeping recruiting expenses down. With uncertainty aboutthe future, businesses are reluctant to commit to the long-term fixed costs of permanent recruitment.
Companies are taking a range of actions to address theseconcerns, with varying degrees of success. In terms ofpermanent recruitment, measures include:
l Requiring a robust business case be put forward beforepursuing any recruitment
l More cautious recruitment with longer timeframes andmore thoughtful decisions
l Alternate (lower cost) recruitment strategies
l Leveraging interim managers or consultants to solvespecific issues
There is a growing emphasis on hiring temporary or interimstaff rather than going straight to permanent personnel.Contract resources, which can be hired on short-term ormedium-term contracts, can ease the recruiting burdenamidst economic uncertainty. Citing faster results, morecompanies are using interim workers which allow them toaddress staffing gaps quickly and with less risk than thatinvolved with permanent recruitment.
When shareholders do not expect greatreturns, that is when a company canmake investments in people and thenseize market share from competitors
Frozen recruitment
Delayed recruitment
Reduced use of consultants
Reduced use of interim managers or other contractors
Used less expensive recruitment services
Hired more junior (less expensive) people than planned
Increased use of interim managers or other contractors
Created new roles to deal with the expected difficulty
Used more senior (more capable) people than planned
Increased use of consultants
Used recruitment services with lower/no up-front fees
No change
37%
33%
31%
20%
14%
13%
9%
8%
8%
8%
7%
6%
"
"
Management experience during a previouseconomic downturn was seen as critical bythe majority of respondents.
When asked whether experience of a recession was animportant criterion for businesses in the recruitment of seniorstaff during a financial downturn, three-quarters ofrespondents said “yes.” While many cautioned againstassuming that lessons from previous recessions would applydirectly in this one, the majority still conceded that havingworked through similar business conditions in the past wouldlend helpful knowledge and experience for the present.
Some of the rationale in this was around experiencedmanagers being less likely to “panic” or be driven by fear. Awillingness to make the necessary changes to weather aneconomic downturn is certainly important, and as “mistakescan be costly,” previous experience is helpful.
A senior executive with recessionexperience will have the good ideasand natural leadership to manage theteam in this difficult period . . .because downturns require bettermanagers, and better experience.
The more powerful message was that experienced executiveswould realise the importance of strengthening the businessduring the downturn, knowing “how to cut in the right areasto protect the future.” A realisation that “things always turnaround” would help to avoid the “knee-jerk reactions” thatwould fundamentally damage the long-term health of thebusiness in the name of short-term expediency. An exclusivefocus on cost cutting would likely damage the business andleave companies poorly positioned to take advantage of newopportunities that would arise both during the recession, andcertainly at the time of the inevitable economic upturn.
Interestingly, senior executives who had been through aprevious recession in a management capacity were more likelyto note the importance of longer-term, strategic thinking thanwere their more junior, less experienced colleagues.
8
The Experience Factor
Previous experience was seen to bring:
l “the knowledge of which plans and strategies can work ina recession”
l “the ability to manage the risks”
l “a more mature and less emotional response to the crisis”
l “the vision to see beyond the immediate situation”
Perhaps just as importantly in terms of organisational stability,experienced leaders were seen as being able to convey thisconfidence amidst crisis to more junior staff members.Recruitment was an area that many felt should not be ignoredduring an economic downturn. Taking advantage of theincreased labour pool, many saw the economic uncertainty as agreat time to seek top talent to enrich the company’s workforce.
Experienced managers will understandthat this is an inevitable part of thebusiness cycle and will have some ideaof what to do in order to minimise therecession's impact on the organisation'slong-term viability.
Yes, it is important75%
No, it’s notvery important
25%
"
"
"
"
Is experience of a recession/downturn animportant criterion for businesses in therecruitment of their senior staff during afinancial downturn?
When do you believe we will start to see an improvement in trading conditions?
Looking Ahead
9
25%
32%
24%
8%
By June 2009 By Dec 2009 By June 2010 By Dec 2010
Opinions varied as to when there would be an improvement intrading conditions, with some feeling hopeful as soon as June2009 and others believing it would be more like December2009 or June of 2010.
8%
2%Later than Dec 2010
We haven’t seena negative effect
10
Greatest Challenges
Of the many challenges facing client or employer businesses,respondents were split over which might prove the greatest.Almost 40% cited the need to time investment right in orderto capitalise on the post-recession upturn. Over a third worriedthat too many cuts right now would impact readiness forfuture growth. Just less than a third felt that rememberinghow to think optimistically again would be a challenge.
0 50 100 150
What will be the greatest challenge to your client’s or employer’s business coming out of recession?
39%
29%
36%
Timing investment right tocapitalise on coming out of recession
If we cut too much now, wewon’t be ready for growth again
Remembering how tothink optimistically again
number of responses
Potential for Opportunity
11
Almost a third of respondents saw greater needfor their services as interim managers.
Despite the obvious issues and problems that would arise inan economic downturn, many noted that there could beopportunities too. Focusing on “what’s really important” and“achieving a leaner, more cost-effective organisation” wereseen as strong opportunities for just under half of thosesurveyed. Almost a third saw greater need for their servicesas interim managers.
0 50 100 150 200
What opportunities do you see in these types of trading conditions?
18%
15%
15%
Focus on what’s reallyimportant, and cut the rest
Achieve a leaner, more cost-effective organisation
Companies need my services as aninterim manager more in a downturn
Develop “counter-cyclical” products and services
Employees are more loyal in such an environment
Marshall organisation and resources toposition for when there’s growth again
49%
27%
44%
number of responses
12
Lessons to Remember
Learning from the past is perhaps the best way toapproach the present; while the current downturnmay be different from those in the past, the sameforward-thinking attitudes and strategic actionsstill apply.
Survey respondents felt that many lessons could be gleanedfrom the last economic recession and applied to this one.The overall tone of response was one of balance, restraint,and positive attitude. A variety of lessons emerged across allkey business areas, including staffing, cost management,marketing, and customer relationships.
An intelligent, balanced response is keyl Avoid knee-jerk reactions
l Don’t overreact to market conditions
l Be cautious, but don’t panic
l Make calm, logical and appropriate decisions based onfact rather than fear
l Ensure that strategies and resources are in placesufficiently to take advantage of the market when itstarts moving again
Keep your focus on what makes a differencel Get back to the basics
l Drop anything that is not contributing added value
l Don’t delay investment decisions; now is the time todevelop new initiatives and move ahead of the competition
Manage costs aggressively, but strategicallyl Maintain a low cost base
l If necessary, cut back quickly and deeply so you’ll onlyneed to do it once
l Limit cost and staffing cuts to areas that will not impairfuture recovery
l Restructure without compromising valuable resources
l Cut all non-essential costs and then build gently for theupturn
l Reduce debt and maximise cash for the opportunities thatwill come
l Do not avoid investment just because the outlook isuncertain
l Plan for the long term
About Executives OnlineWe offer a unique, full-service process which isa balanced blend of technology and personalservice.
Executives Online delivers fast-track headhunting – interimmanagement, project management, and permanent recruitment– leveraging our 60,000-strong Talent Bank of seniorexecutives. We source talent globally, via the Talent Bankwhich is built and drawn upon by each of our growingnetwork of offices around the world.
Our approach attracts both the best candidates and the mostchallenging opportunities, and enables us to rapidly andeffectively match them together in successful placements.
Make staffing a priorityl Listen to staff fears and concerns
l Be honest with staff and brief them effectively andregularly to avoid rumours
l Offer staff assurance of their contributions
l Ensure that the best people aren’t unnecessarily lost
l Preserve valuable, experienced staff by talking to themabout future opportunities
l Use downtime to train staff as that is more difficultduring busy times
l Leverage flexible working contracts and the use ofinterim or fixed-term appointments
l Return to a simpler and cleaner organisation structure
Stay close to your customersl Talk to your customers every day
l Focus on maintaining service to clients at constant prices
l Don’t compromise on quality and keep your clients happy
l Understand what new requirements your customershave now
l Provide support in areas where existing clients areexperiencing difficulties
l Build stronger customer relationships through adversity
Continue marketing with an eye toward theupturnl Do not cut marketing spend: continuing to communicate
with customers is critical
l Leverage innovative sales and marketing techniques tosolidify customer relationships
l Keep investing in strategically important areas
l Maintain your share of voice in the market
l Be bold in approach
l Invest in innovative products and services
l Remain positive and identify opportunities whereverthey arise
13
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