(A Different Kind of) Winter is Coming; Prepare Accordingly

By VP of Talent Theo Song

While it’s July, and Europe and the U.S. are experiencing widespread heat waves, some form of economic winter seems inevitable, with central banks acknowledging that curbing inflation is more important than mitigating the risk of recession. With still-remarkably tight employment and high inflation, this is not your standard winter.

On the one hand, take just one look at the financial markets and the portents are obvious: The money you had saved up for the kids college tuition…they might have work while in school. That ultra-low 30-year fixed rate mortgage you were hoping to lock last year…rates have doubled. Monthly inflation is approaching double digits.

At the same time, unemployment remains stubbornly low, capacities tight, and select companies continue to deliver earnings. This causes some to question whether a different playbook is needed, with many economists re-referencing the 1970s and 1980s.

Many businesses have benefited from economic tailwinds over the past decade with the low cost of capital, institutional money flowing into the financial markets, globalization which brought new consumers while lowering the cost of production, increased bandwidth and speed, and innovations in technology. In years past, it was relatively easy to raise capital with VCs funding people and ideas, and PE firms paying multiples of revenues. Subscriber growth and brand recognition were focal points. Financial planning, analysis, and budgets were thought to be old school.

Everything’s changing, but don’t take my word for it.

Elon Musk, the world’s richest person was recently quoted as saying, “I have a super-bad feeling about the economy.” The CEO of the largest tech platform in the world, Mark Zuckerberg shared, “Realistically there are probably a bunch of people at the company who shouldn’t be here.”

Business leaders should reference the playbook below and determine where these principles apply:

  1. Boards and C-Suite:

Remember those 30+ initiatives you came up with at the strategic offsite? Some of them are more important than others. Figure out the five to seven things you need to focus on to help your company flourish in economic tumult. You have a fiduciary duty to shareholders, and an obligation to employees. For the latter, be upfront about nice-to-have projects, while prioritizing need-to-have initiatives. The best-led companies will not just survive any tumult, but also take market share over the next 24 months.

  1. Business Unit GMs and Divisional Leaders:

Revisit your budgets and inevitable revisions. Know the key drivers of financial performance inside and out. Make financial planning and analysis priorities, and look for ways to enhance productivity where possible. Make investments in the most important priorities, but only the most important. If there is an opportunity for deferred capex, consider pushing. Fund essential projects below-the-line. Continue to hit your numbers, and even exceed the financial plan.

  1. Customer Facing Leaders (e.g. Sales and Marketing):

Maintain a steely focus on your customer-centric go-to-market plans. To existing customers, give more attention – in-person, where possible. Cross-sell and bundle services that are complementary. Increase share of wallet. Retain customers that are on the fence, and let your company know about success stories to elevate morale. And with pernicious inflation, focus on increasing value by following HPA’s 7 Ps framework.

Unpredictability is stressful, but passivity is an enormous mistake. Now is not the time to panic. Instead, take the concept of “strategic planning” and apply it to your career. Leaders can prove their mettle by demonstrating flexibility and a willingness to do whatever it takes for the business to not only survive but thrive.

As Chance Gardener said, “In the garden, growth has its seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.” Today’s varying signals should cause us to be mindful, take attentive action, and guide our firms through any winters.

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