“Time to start managing for the next recession.  Downturns are a small part of the economic cycle, but they’re when major competitive reordering happens.”  So goes the headline of an article written by Geoff Colvin that was published in a recent issue of Fortune Magazine.

The author’s point is that now is NOT the time for a leader to breathe a little easier, believing that the end of the recession is very close.  Colvin argues that “This is exactly the wrong moment to let up on the mean and lean strategies you’ve adopted over the past year and a half.  It’s time to make sure not only that you grow and succeed, but also that you position your business to prevail in the inevitable next recession.”

Several companies are listed as examples to support the author’s view that “The primary factor in determining which companies won and which lost (during the recession) was the way they were managed during the boom.”

Colvin offers three imperatives:

• Make friends now with the people you’ll need later.  When the government needed business people to serve on task forces, companies sent functionaries.  But when a company wanted to lobby officials on a potential tax or regulatory change that would benefit them, the CEO showed up and had plenty of time.  Such behavior isn’t forgotten when a company suddenly appears asking for help.

• Listen to unconventional wisdom.  In the previous expansion, contrarians were saying what no one wanted to hear – that real estate and other asset prices had become insane bubbles.  When good times return, make it a priority to find the thinkers who stand apart.

• Don’t go soft on evaluations.  The best companies, like Procter & Gamble and McKinsey, are as rigorous in evaluating people during good times as bad.  Otherwise, they’d find themselves with a roster of C players when the next downturn arrives.

The article ends as follows: “Managing intelligently during the next expansion will be much more than a chance to clobber competitors.  At least as important will be preparing the organization for the make-or-break environment of the next recession.”

Excellent advice for all leaders!

Copyright © 2010 by Dan Nielsen