Business as usual in the Aftermath Economy
By Andy Perkins, Vistage – https://www.vistage.com/
Many business leaders are seeking advice on how to survive a recession as they watch signals suggesting an impending economic slowdown.
According to our latest business Confidence Index, UK and Irish business leaders are facing the pressures of the current economic climate with confidence down by 4% from the last quarter.
Persistent high inflation is pushing interest rates higher, which is offset by historically low unemployment rates driven by workers seeking better compensation.
The result is the “Aftermath Economy,” which is defined as a period of low-to-no growth as the economic aftershocks of the pandemic and other crises subside. A recession may or may not be in our future in the UK and Ireland, but what is assured is a period of instability as business conditions reset and realign for a yet-to-be-named growth cycle.
The foundation for business growth, whether in a recession or not, requires four key areas of focus:
The hard learned financial lessons of the pandemic remain in effect. Cash flow, access to capital and a diversified supply chain create the financial foundation to manage through any downturn without having to make dramatic cuts.
Inflation will force a continued increase in costs that must be managed through strategic price increases. Rising interest rates will make CEOs consider investment decisions that have a clear ROI.
The cost of labour will continue to increase, however, cutting headcount should be a last resort.
The ability to operate at full capacity requires a fully staffed, trained and experienced organisation powered by cutting-edge tools and technology. Highly engaged workforces have higher retention and productivity rates.
Providing an empowering and secure workplace equipped with the best tools, technology and led by high-quality bosses creates the optimal platform for performance.
CEOs should control the elements of execution by defining and amplifying the culture, and providing the physical tools and workspace. They choose and empower bosses to promote strategy, define activities and goals, and maintain standards for performance.
Workforce velocity – which is measured by quit rates, open headcount and days to fill – is a phenomenon of the Aftermath Economy. Stubbornly high quit rates are fuelled by an insatiable demand by small and medium sized businesses for talent.
While big companies, particularly those in the tech industry, have announced mass layoffs this year, 60% of Vistage CEOs plan to increase headcount. This, in turn, leads to increased open headcount rates that are taking longer to fill with someone less experienced and asking for more compensation.
Competing for talent begins with retaining the current workforce. Compensation matters, but now flexibility and employee experience become competitive differentiators in the never-ending talent wars.
4.Get close to customers
Everyone is dealing with the Aftermath Economy, including your customers. They are struggling with the same economic, workplace and workforce challenges. Getting closer to your customers is always the right answer, but more so in the aftermath.
Communicating price increases provides an opportunity to reinforce value and understanding of the customer’s needs. Partnering in hard times yields benefits when growth returns. It’s also an opportune time to call on your competitors’ top accounts to determine if there are needs that you can fulfil better than your competition.
While CEOs need to focus on nailing the fundamentals in order to see growth, there’s also scope to adapt as leaders, along with their executive team, to uncover new opportunities in the aftermath.
Business evolution isn’t a one-off event, it’s an attitude. In order to drive enduring success, during a difficult financial period business leaders need to remain agile enough to assess, align and act when opportunities arise.
As Robert Oppenheimer, “father of the atomic bomb”, once said: “Technology happens because it is possible”. The rapid development of AI between 2012 and 2023 shows just how much the technology has grown. The release of ChatGPT last autumn has only worked to spike interest as AI becomes more accessible for all, unleashing incredible potential in individual productivity and business performance.
Within the last ten years computers have become more powerful by a factor of 100 million. This increased processing power enabled AI models to become better trained, and to process a great deal more data. What’s more, in 2012 AI models were trained on specific data sets, covering around 150GB of data in total. In 2023, they were able to access the entire internet: an estimated 10,000GB of data to work with.
Looking at the data from the latest Vistage Confidence Index the majority of executives leveraging AI, are using it towards operations (46%) and sales and marketing (45%). Interestingly, only 20% are using AI technology in talent management and hiring, with more than half of respondents (51%) believing that these solutions will have no impact on personnel. Just 6% of business leaders believe that AI applications will replace staff and 13% claim it will reduce staff numbers.
The value of AI will drive individual productivity just as tools like Microsoft Excel did for ledgers. A worker’s ability to leverage AI in their job will quickly move from a competitive advantage to a role requirement. It will have broad corporate value meshing massive amounts of business data into previously unseen patterns.
What it won’t do is make critical, strategic business decisions. That still demands a leader’s instincts, judgment and perspectives…for now.
Growth goes one way, but change takes you anywhere. For businesses of all sizes and across all sectors, that’s what technology – and specifically AI – is currently doing, and will continue to do at a rapid pace. Are you ready?
In any case, growing forward in the Aftermath Economy will be hard. It will likely take 18 to 24 months before we find the path to the next growth cycle. Until then, CEOs will need to adhere to the disciplines of finance, focus on the principles of business execution, embrace an evolved workforce and provide them with a high-performance workplace. CEOs will also need to adapt as leaders along with their executive teams to uncover opportunities in the aftermath.