Inside business: Vision is the first casualty of recession

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The Independent Online
ONE OF the criticisms most frequently aimed at executives over recent years is that they have become so adept at cutting back, they are ill-equipped to deal with expansion. But now it seems they are not so good at managing downturns, either.

Extensive research carried out by Stephen Tappin and Rob Anderson, two consultants with PA Consulting, suggests that business leaders who put all the emphasis on "battening down the hatches" are getting it wrong. In seminars they have begun holding for chief executives in Britain and overseas, they are stressing the need to "focus on being opportunistic".

The essential idea is that recessions are not bad news for everybody. This isn't just the simplistic argument that companies prospering before the recession power ahead of the competition; the collapse of such companies as Polly Peck and Coloroll in the late 1980s and early 1990s showed that recession can cause soaraway names to crash back to earth. However, less spectacular companies can find themselves at the head of the pack by being in the right markets and having the necessary controls and systems in place - in short, by being well managed.

It has already been pointed out that the economic turmoil in the Far East has given some companies the chance to acquire cheap manufacturing facilities in South Korea and other countries. And the same principle can be applied elsewhere. Although Mr Tappin and Mr Anderson stress that no two recessions are absolutely alike, previous recessions can provide important lessons.

The key is to avoid falling into what might be termed recessionary thinking. In past downturns, many companies have improved their prospects by buying - on the cheap - cash-strapped organisations that are either competitors or in fields they would like to enter.

But doing this means getting away from the "either/or" habit that seems to pervade so much of business. Managers appear to think they either have to be expansionist or cost-cutters - hence the adage that marketing specialists become chief executives in buoyant times but accountants take over when the going is tough. The truth is that companies can only go on acquisition sprees during tough times if they are well managed.

One of the keys to being well managed is possessing information about the environment in which you are operating and the specifics of your business. Sadly, it seems that chief executives are better at the former than the latter. Thanks to countless surveys, they are in little doubt that Britain - and much of the rest of the industrialised world - is headed for recession. But such certainty is not always echoed in views on their business sector and their particular business.

So the recent survey finding by KPMG that half of companies cannot identify customers on the brink of defection, and nearly as many cannot identify the principal causes of customer churn, can be seen as all too typical. These statistics are made all the more serious by the same survey's discovery that 70 per cent of companies would focus on retaining existing customers to beat recession.

In other words, they have heard all the stuff about how it costs so much more to gain a new customer than to hang on to an old one, but they have no clue as to how to deal with the problem.

This is just one instance of how managers baulk at getting involved in the nitty-gritty of running increasingly complex organisations. And it is another illustration of the need to get away from the either/or approach.

In the modern world, senior managers need to have the vision to see their way through turbulent conditions, and the determination to get to grips with the specifics of their markets and their companies.

One final word from PA Consulting: the idea that there is such a thing as a recession-proof sector is losing ground. Thanks to the increased blurring of sectors - retailers are involved in financial services, for example - managers need to be on constant guard against complacency.

But that does not mean they should become so conservative that they miss opportunities.