The current global economy is undergoing a slowdown. Several industries have also been witnessing declining growth, few of them for years. While most talks about recessions are predictions, there is no doubt that businesses are already going through tough times. Declining demand is leading to a significant reduction in sales and overall growth. Layoff as a cost-cutting measure is becoming common news.
In this blog, we discuss how organizations can take a few important and timely actions to deal with the situation, and prepare themselves for the difficult times ahead.
What Is An Economic Recession?
An economic recession is defined as a period of general economic decline during which the gross domestic product growth is negative for six months, that is, two consecutive quarters or longer. Economic indicators besides GDP, like income, employment, retail sales, and manufacturing decline sharply. The slowdown is visible much before a recession hits the economy and is spread across sectors. In fact, some scholars define the phenomenon of recession as a significant decline in economic activity spread across months.
What Are the Current Indications Of An Economic Slowdown?
The Indian economy is currently undergoing a slowdown, with GDP sliding for the past several quarters – 5% in the April-June quarter this year. Several sectors are witnessing a decline in growth, spreading from the auto sector to other segments. Other indicators include reduced export and import and large-scale retrenchment of workers, among others.
Globally, consumer confidence is on the decline. The manufacturing sector has slowed down across major economies, which has also been affected by the ongoing international trade wars and other geopolitical factors.
What do resilient companies do differently during a slowdown?
Different companies and businesses deal with slowdown differently. Several studies have been made to understand what works and what doesn’t. The goal was to find out why some companies fared better than others during a recession and even beyond.
Most of the research findings had one point in common – they found out that resilient companies were well-prepared to deal with the tough times, while others adopted stop-gap measures and reacted in haste during a crisis.
Bain studied a group of 3,900 companies heading into the last recession a decade ago. Its May 2019 article says the winners “…moved deliberately to capture opportunities before the recession.”
One of the challenges that the resilient companies dealt with in advance is – cost and efficiency. All companies go for aggressive cost cutting during a recession. But businesses that came out strong during and after a recession are the ones that focused on cost restructuring as well as efficiency improvement. They took the right action much ahead of the crisis.
As per a recent article in Forbes, “…achieving resilience will require a new, flexible approach to operations. This approach applies next-generation levers such as digital, analytics, and automation, and integrates them to cut across silos and sustain the impact.”
While all businesses struggle to cut costs, not all cut costs and improve efficiency at the same time. Resilient companies know that cost reduction and increased efficiency measures can go hand in hand. They leverage automation and digital technologies to significantly reduce their operating costs and increase flexibility. This should be the goal of any organization, irrespective of the economic climate.
Here are a few steps businesses can take:
(besides balance sheet discipline)
01. Remove Workplace Inefficiency
Inefficiencies at the workplace eat away company resources. A slowdown is a good opportunity to deal with all such issues. Inefficiencies may result due to several factors but mainly it is because of manual processes. Managers and employees continually struggle with lack of accountability, finger-pointing and blame games, missed deadlines, and frustrated workers.
For example, the lack of a proper method of tracking and monitoring staff attendance may lead to unpunctuality and wastage of time. If no records are maintained, work hours and timings may not be adhered to. This is a serious issue at a time when organizational resources are constrained.
Contract laborers are mostly paid on an hourly or daily basis. A proper tracker or counting method should be in place – one that is also integrated with the payment system.
VersionX’s process automation systems help businesses digitize the way they manage staff and casual laborers resulting in huge savings in time and effort, and not to mention error-free payments.
02. Prevent Pilferage And Fraud
Pilferages and fraudulent practices are a result of a lack of monitoring system and gnaw away financial resources over time. Every business, be it an office, retail, factory, hospitality, etc., across sectors, suffers from pilferage. Pilfering is just another word for stealing – a result of employee or customer theft and dishonesty.
Across the globe, pilferage amounts to losses in billions. Such losses incurred by businesses are also hard to retrieve. The only way companies can reduce these losses is by preventing such malpractices. And the only way these fraudulent practices can be prevented, even eliminated, is through effective controls – by automating the monitoring and tracking system. And no, we’re not taking of CCTV cameras. Effective measures can be as simple as setting proper notification and alarm systems to alert the right person as soon as a violation takes place. The knowledge that there is an alarm system itself would make an employee or any person think twice before committing any theft.
03. Automate, Reduce Human Intervention
Automation serves several purposes like increasing efficiency, reducing and preventing errors, and requiring less or no human intervention. There are of course levels and degrees of automation that a business can invest in. A slowdown may not the best of times to spend money, a time when a business is tightening its purse strings. But businesses should be open and willing to invest in the right kinds of systems, those with high ROI and that help reduce inefficiency and improve efficiency in the short as well as the long term.
Human errors result in heavy costs. But these can be easily prevented by automated processes and real-time data. Automated notifications and checks help remove inefficiencies.
Advancements in cloud and digital technologies have led to many innovative products in process automation and security. These are not some of the most heavy-duty investments and even small businesses can invest in these software and systems.
04. Use Analytics to Measure Results
Any manual process makes the processing of data prohibitively slow and difficult. Data can be related to any aspect of the business but if it is required to be collected manually from multiple registers, different documents, or spreadsheets, it is a waste of time and effort. And very importantly, no work or business insight can be gained out of such data. During a slowdown, resources are scanty and growth is slow. Businesses need to be lean and agile. Therefore, they should be able to measure as much as possible.
Digital management solutions can automatically resolve this issue. These systems are inherently capable of tracking and measuring all types of data.
05. Use Analytics to Forecast Problems
The inbuilt reporting tools of digital solutions also allow businesses to identify the outliers. Digital systems help businesses to easily identify problems beforehand since most data is generated in real-time. Thus, management can tackle potential issues well-ahead and prevent problems by revealing unusual or hidden patterns.
It is, of course, not possible to make exact predictions. But to be able to make informed decisions based on accurate data and analytics is of a huge advantage during a low phase.
06. Invest in Innovative & Smart Security Systems
Physical security is one area that cannot be compromised with just because resources are tight due to an economic slowdown. Organizations need security and protection at all times, and budget cuts should not impact their security goals. In fact, several studies have noted that dramatic economic decline significantly increases the risk businesses face of which one is physical security risks.
However, instead of focusing only on laborer cost cuts, smart companies take this as an opportunity to invest in tighter and smarter security systems and processes that increase accountability. With technological innovations, the price of these innovative systems have also drastically come down, resulting in lower overheads than manned guards. Tightening security processes using innovative products is one way of ensuring that physical security does not get compromised.
07. Paper = Waste & Error
The amount of paper an office uses is the amount of inefficiency and waste it deals with. In today’s digital age, softwares and systems help businesses easily take the paperless approach in almost every area of work. A business should not be having to deal with papers to accomplish the same tasks.
Paper passes, forms, etc. should be done away with. These are increasingly being replaced by the digital system such as digital passes and forms that save paper, time, effort and, very importantly, costs. These systems also allow the management to start monitoring and enforcing policies properly as compared to paper-based forms.
08. Enable Self-Service Options
This might look like a small step, but it goes a long way to ensure that processes are not only made people-independent but also streamlined. Self-service as a concept is gaining popularity in various sectors. With the help of digital systems, self-service kiosks can be installed to automate several processes. For example, any task that involves issuing passes and tickets can be done using self-kiosks to save time, effort, and money. In businesses, it can be used for visitor management, customer queue management, vendor management, laborer management, etc.
The self-service kiosk can remove an entire layer of personnel, thus ensuring a fully paperless process and task automation. This reduces processing time as well as provides accurate data analytics.
An economic downturn places a lot of pressure on the finances of any business. Reducing losses and cutting costs becomes critical. However, the measures that a business takes need not be sudden stop-gap arrangements but a well-prepared plan to deal with an impending recession. Studies have shown that companies that show resilience during an economic crisis, grow a lot faster than the rest once the crisis is over.
Besides improving financial discipline, process automation is one of the important steps that businesses should focus on as part of their preparation in dealing with the slowdown. Integrated digital systems are valuable technologies and tools any business should invest in during a low phase.
We discussed that the goal of every business should be to achieve improved efficiency, reduce losses due to errors and fraudulent practices, and make an informed decision. What is important is that these are business goals that all organizations should aim towards irrespective of the economic climate. And the good news is – ROIs on products that make these goals achievable is becoming ever more attractive to businesses of all sizes.