Surviving (and Maybe Thriving) in a Downturn

On the night of November 20th I pulled out the mattress on the sofabed in my living room so my business partners could get a good night’s sleep before our board meeting the next morning.  Hours earlier, the CEOs of the U.S.’s three largest automakers testified before Congress, pleading for financial assistance.  Suffice to say, they weren’t sleeping on roll-away beds; instead, reports suggest that they had spent roughly $20,000 apiece to fly to Washington in private planes.  Although the irony – flying private to appeal indirectly to the struggling American taxpayer – served as great fodder for late-night talk shows, most found the flagrant disregard for fiscal discipline to be not funny, but rather blatantly offensive.  At a total cost of $60,000, these CEOs spent the annual compensation of one of their employees in just a few short hours.

With the U.S. and global economies facing incredible uncertainty, most businesses don’t want to find themselves in the same situation as The Big 3.  Here are some suggestions to help you survive the downturn.

Management Suffers First
While many would argue that the primary responsibility of management is strategy, I take a different view.  Yes, the strategic component of an executive’s job is important, but I would argue that it’s substantially less so than providing insulation to her employees.  If the bottom part of your org chart is larger than the top part, then it’s probably safe to say that the bulk of your company’s productivity comes from non-management personnel.  Therefore, if you are in management, it certainly behooves you to make sure that those below you are free from worry, distractions, or anything else that could impact their effectiveness.

In tough economic times, the importance of being a good insulator increases significantly.  External anxieties creep into the workplace as people worry about layoffs and sustainability.  This is not the time to be flying private.  In fact, I think more executives should take a cue from the management at a small start-up in the Boston area that I’ve advised.  The two founders recently took voluntary pay cuts from their already modest salaries to ensure that their employees wouldn’t have to worry about their own paychecks.

Do What You Do and Do It Well
With spending in decline, any inclination that you might have to engage in a radical overhaul of your product or service offering should be considered with the utmost caution.  That’s not to say that tweaks or enhancements to the existing offering should be taken off the table, but rather that they need to be carefully evaluated.  In boom times, when cash and credit flow freely, businesses can take certain risks feeling secure in the knowledge that a misstep won’t mean the end.  As markets become increasingly averse to risk, so too must companies.

In lieu of risk, your focus should be…well…focus.  That means really understanding what it is that you do best and building on top of that.  To the extent that you’re going to overhaul something, the best bet might be positioning.  For example, “Using our product will save you money” has an especially nice ring to it these days.  Remember, the odds are that your customer base is making the same kinds of budgeting decisions that you are.  It might not be as sexy or exciting as creating a completely new product, but it’s likely going to be the best strategy to ensure you come out the other side.

Look at Your Numbers
In tough financial times, avoiding your financials can be a bit like hiding from the doctor when you don’t feel well.  You know that going is the best thing for you, but you also know that it might not be a pleasant experience.  In recent weeks, I’ve spoken with a variety of executives who have looked at spreadsheets and made tough decisions.  What does it mean when a company can cut headcount by 50% with no discernable loss in productivity?  It means that they should have taken a hard look at their numbers much earlier.

For companies that have been judicious with their spending, an economic downturn presents an interesting opportunity.  The talent that comes on the market is suddenly plentiful and relatively inexpensive.  Years of flying coach and sleeping on couches have resulted in my being a buyer.  At Twistage, we’re increasing headcount and projecting year-to-year revenue growth.  And we’re not alone – there are many other companies in a similar position.

Economists are united in predicting that the immediate future is going be rocky.  However, with fiscal discipline and prudent decision making, you can survive the coming shake-out and emerge with a stronger business than the one you have today.

David Wadler has been the CEO of Twistage since co-founding the company in 2004. He has been instrumental in building the company into a significant player in the online video space with clients including The Canadian Broadcasting Corporation, PerezHilton.com, Fast Company TV, The New York Observer, Mochila, and more. Mr. Wadler has broad experience in the software world, ranging from start-ups to Fortune 500, on both the technical and business sides of organizations. Based in New York City, he is a graduate of Brown University and holds a degree in economics.