Recession planning: moving strategy to the top of the list

The UK economy has defied the forecasters and narrowly avoided confirmation that it’s in recession. But let’s not get ahead of ourselves.

The worst effects the cost-of-living crisis are still to come and we’re experiencing new waves of global disruption from the war in Ukraine and China’s zero-Covid policy reversal. Earlier this month, the World Bank made it clear that the developed world can still expect to see a sharp and long-lasting slowdown.

On top of that, While economic uncertainty and geo-political turbulence are not comfortable conditions to operate in, most leadership teams are dealing with the fourth existential risk to their business model in three years. Still, organizations have been navigating tough economic terrain and black swan events since 2008.

What’s certain is that uncertainty is not going away. 

So, the onus is on business leaders to plan and make room for strategic review and adjustments, so they can appropriately manage such turbulence, including recession.

To do this, management teams need to make sure three things are front of mind: clarity on what matters to the success of the business, data-driven decision making, and agile modeling and taking action.

Let’s take a closer look at each one.

Clarity on what matters to the success of the business

Business leaders are under great pressure to innovate, adapt, and act as advocates for change. In fact, this McKinsey report on rethinking strategy for the post-pandemic era shows that nine in 10 businesses believe their business model needs to change, or has indeed already changed in 2023, demonstrating how this pressure is playing out in real terms.

What’s crucial is that business leaders pause, just for a moment, and consider a very important question: What matters most to the success of this business? It sounds like a simple question, but you’ll be amazed at the number of conversations I have with CEOs and MDs where their main frustration is around not knowing what to prioritize and whether their business offering still works.

A simple but essential sense-check on the critical success factors for the organization will reveal whether environmental issues (such as politics or the economy) significantly impact the core business offering. If the effect is great, they’ll need a sharp intake of breath and to review the business model. But more often than not, the foundations of the business remain strong and a good idea, flawlessly executed, can deliver on its original ambitions.

Leaders can then move on, with confidence and clarity, to determine what changes they need to make to support business priorities. This is where having the right data at the right time is critical.

Data-driven decision making

Before too long, and especially in times of recession, human capital will come into focus. During periods of uncertainty, it’s all too easy to rely on financial data and forecasting to inform any changes that might need to take place.

This may answer the question as to how you deliver on a set of targets. But, equipped with a refreshed sense of what sits at the heart of the business, it’s less about arbitrary target setting and instead a question of whether or not the business has the right people, doing the right work in the right place, to deliver on what matters most to its success.

The challenge is that most organizations don’t have a unified, integrated dataset that provides them with a single version of the truth, especially when it comes to people. How do you know you have the right people in the right place to execute your strategy?

Here’s where curiosity meets certainty. Leaders need to be curious about the provenance and reliability of their, so they can act with greater confidence. This means people data can’t just be the usual headcount and HR figures, but needs to delve deeper. Merging clean datasets from Finance and HR will give a more detailed view of whether the business has the right structure and organizational design in place to deliver on its goals and contribute to the core business offering.

Ask for more when optimizing your workforce

Also, business leaders and management teams shouldn’t be afraid to ask for more, especially when it’s intrinsically linked to the success of the organization.

Do I have the right skills in the right volume? Are my people in the right place? Do they deliver the right work? These are all important questions that provide clear insight into the workforce. Asking for this data will help you see your workforce as it is and, coupled with that sense-check on what matters most to the business, can assist in making critical workforce design decisions.

Visualizing your workforce in this way, and getting to grips with the data, will ensure that you always make changes with the heart of the business model in mind and with long-term consideration.

That said, while this is a crucial part of managing an organization through troubled times, it can’t be a phase that you linger on for too long. Speed is still critical.

Agile modeling and taking action

Making decisions made during times of transformation should be grounded in data and backed by the stories behind that data. Our previous research shows that in 2020 as many as 79% of businesses resorted to making important decisions based on gut feel alone, when they had no relevant experience or data to draw on.

This knee-jerk response to disruption is a gamble and could lead to missing significant risks and opportunities. That said, once the data is there and the business has mapped out different strategic decisions, it’s critical that leaders test strategies and take action quickly and effectively.

Every management book will tell leaders to put a strategic plan in place with enough contingency to deal with uncertain times. The trouble is, they deliver this advice in a way that suggests these plans are etched in stone and should only be revisited once a year, perhaps longer.

That won’t cut it in this era of immediacy.

Management teams should revisit their strategy at least every few months. Each time, they should review the core business priorities and deep dive into the data. From there, it’s about creating hypotheses and scenarios, testing the decisions they make, and taking action.

Creating a culture of rapid modeling and testing ideas and hypotheses will give leaders options and insight into the potential impact of their decisions. This is particularly critical when looking at the workforce to determine the effect of each decision or potential scenario.

Move quickly and measure your performance

Having the data and the modeling environment to hand will bring greater agility. From there, it’s about execution and measurement. Moving swiftly into well-informed action will bring about more opportunities and a genuinely adaptive and agile culture.

Measuring the performance of actions you take and regularly checking in on strategy will allow you to make tweaks and for strategic planning to become a regular discipline, rather than something you leave to the last board meeting of the year.

Not every decision will be the right one. But getting back in tune with the heart of the business, getting to grips with the right data, and enriching the management culture with a dedication to agile, strategic planning and modeling will give any organization the best possible chance of coming through from turbulent times in a stronger position.

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