Last updated: 24 September 2024
It’s no secret that the U.S. economy’s stability has been in question for the last few years. Doomsayers have been trumpeting the possibility of a widespread recession for over a year, reading the bones of decreased consumer spending, rising inflation, and global conflict to predict a massive crash. Market volatility, high-profile layoffs, and the collapse of Silicon Valley Bank lent credence to these claims for a while, the forewarnings of an impending financial disaster.
However, recent studies show that while consumer spending has stalled somewhat, the economy has managed to weather the storm. Experts no longer believe a large-scale recession is likely, but warn that rising interest rates and high levels of inflation may thwart attempts to keep the economy on track. While experts are no longer sounding DEFCON 1 alarms, their prognosis still emphasizes a need for caution and preparedness.
The threat is no longer on your doorstep; but there’s no guarantee that it won’t return. You have an opportunity here to lead through change and instill a greater degree of resilience against financial disaster, implementing cost-cutting measures and leveraging data-driven decision-making to insulate themselves from harm. In this article, we’ll outline how you can set yourself up for financial growth and stability during challenging economic times.
Approaching Cutting Costs
When disaster strikes, the first thought of many a savvy business leader is to ask about where costs can be cut. Driving profits during a financial drought by making the most of limited resources is a time-tested, time-honored strategy. However, it isn’t always the best strategy for those who have ambitions to scale – or for those who wish to keep the quality and speediness of their services intact.
The impulse to trim the fat off of operations is all well and good – until you cut off too much, and your ability to fulfill orders and ensure customer satisfaction falls off. Further, smaller companies may not be able to lay off anybody without severely impacting productivity. Not to mention, layoffs tend to have a significant, long-lasting impact on employee morale, as those who are left aren’t too happy to assume new responsibilities and may lag in performance.
What business owners like you need, then, is a way to trim labor costs without proceeding to layoffs. You can leverage any of the following strategies to mitigate costs without impacting morale:
- Increase benefits: In times when you can’t afford to increase your employees’ financial compensation, expanding their benefits pool can be a great way to retain talent without incurring additional financial strain. Benefits providers often offer a great deal of flexibility to their corporate customers, allowing you to add on additional services at a reduced cost.
- Investing in culture: Keeping current employees is less expensive, on the whole, than hiring new ones – and we aren’t just talking about a substantial spike in salary. Offering flexible working options and providing in-office amenities increases retention, keeping your employees happy and cared for even when financial recompense isn’t available.
- Exploring temporary staffing: Temporary staffing is often seen as overly expensive, but consider this: is it more expensive to hire on a full-time employee that you really only need for a limited time, with a full salary and benefits package? Or is it more expensive to hire a temporary contractor to fill the role for a defined price? Temporary staffing is a future-proof alternative to adding to payroll, as it allows you to shape your workforce as needed, when needed.
Utilizing these strategies, you can take steps to cut costs and simultaneously maintain a positive corporate culture. These resilient leadership strategies have been used to weather many a crisis, while also preparing organizations for future expansion.
Leveling Up Forecasting Capabilities
Similarly, in times of crisis, data-driven insight is key to being able to forecast and meet demand. Conduct an internal financial audit to determine where you are with key performance indicators such as cash flow, profitability, return on investment, and net income.
Your organization’s data is central to understanding where processes are working, what inefficiencies might be hampering progress, and how you can drive success even in the midst of financial uncertainty. Knowing how to read and interpret that data, then use it to drive efficiencies and provide customers with high-quality service, is essential.
As such, while cutting costs in other areas, your highest priority focus for investment should be digitalization. Being able to tie data sources across your organization into a single source of truth, and then employing team members who know how to clean, read, and action analytics, is foundational to ensuring ongoing growth.
Focus your talent acquisition efforts on hiring people who know how to use data analytics tools. New hires should know how to navigate the world of big data, how to leverage these tools to provide accurate financial forecasts, and how to leverage insights from data to provide clear recommendations for the next best steps. With these capabilities, your team can provide more than adequate support for high-level decision-making, telling you with pinpoint accuracy where profits are to be found during market fluctuations and empowering you to make decisions that drive growth.
Scaling through Challenging Times
These two tenets, cutting costs creatively and investing in digitalization, are the pillars upon which future scaling efforts will be built. Understanding how to utilize both effectively is key to balancing present challenges with future ambitions, and leaders who employ these strategies will find they can race ahead while competitors lag behind.
