Winners and losers in the post-recession rally

For decades, a staple of cartoons has been a scraggly, bearded, besandaled zealot in shabby robes, bearing a placard proclaiming "The End Is Near!" But lately we've started to wonder if the bus backed up to the commune and emptied it of would–be Jeremiahs, given how often and how insistently The End has been announced as the wreckage of the global financial crisis is examined. We even briefly considered opening a sandal repair shop to help make ends meet.

We're here to make a proclamation of our own. The End Is, in fact, Near. But not the one the full-time alarmists would have you believe.

It's the end of the recession that's coming, and we need to figure out how to prepare for what our friend Rick Blasgen, CEO of the Council of Supply Chain Management Professionals, has called the "post-recession rally." We believe that what we do to gear up for the turnaround is far more important than what we've done to try to survive the recession. Truth be told, how we've handled the tough times sets the stage for how successful we'll be in the post-recession period.

Leadership in times of crisis
We are distressingly willing to indulge in knee-jerk reactions to challenging events, even to the detriment of future success. Maybe this is raw, fundamental human nature. Research has shown that human beings respond to acute stress in one of two ways: the first is to run like mad away from the stress; the second is to fight like crazy.

In business, these translate to: 1) hunkering down, hoarding cash, furloughing people, delaying or can-celing new projects, restricting travel, and cutting out training and other organizational development activities; and 2) seizing the opportunities others are afraid to go after, reinventing and repositioning organizations, and adapting to a new world view.

Curiously, the former approach seems to be favored by leaders with some financial background. You know, the ones who struggle to understand the difference between headcount and human beings.

As for how this typically plays out in the business world, the traditional mega-corporations are big on flight, particularly when the burden will fall largely on a put-upon workforce. It's the entrepreneurs who are more likely to respond with reinvention, risk-taking, and new approaches.

When to start?
When should you begin preparing for the rally? It depends a little on the shape of the recovery. Recoveries come in three types: One is V-shaped, the quick, steep rebound. Another is U-shaped, with a gradual bottoming, followed by a gradual rising, followed by a sharp upturn to previous highs. The third is pie pan or bathtub-shaped, with a long, long, flat bottom before the turnaround begins. Whether the new highs are as dazzling as those previously attained is a matter of considerable debate, and there is a wealth of uninformed speculation re-garding the "new normal."

If the recovery is V-shaped, you're too late to embark on a remedial course; you should have been doing the right things all along. If the recovery is U-shaped, you may or may not be too late, because the recovery will come fast when it hits. If it's pie pan-shaped, you might have a little time, but there's still no substitute for hav-ing chosen fight over flight at the outset. Your more inventive and nimble competitors may have made good use of the long flat spell to perfect their tactics.

Of course, if we hit a double-dip recession with another downturn, there'll be, unfortunately, ample time to get ready for the "real" uptick. That's no reason to wait and see; the time to do the right things is still now.

Will this cost money?
As for what steps companies should take to prepare for recovery, the magic word is investment. When others are pulling in their horns, tomorrow's winners are investing. Specifically, they're investing in the following three areas:

• Infrastructure. This is the time to get equipment and technology that was too difficult to cost-justify when the financial buggy was careening out of control—particularly if you can get it for pennies on the dollar. Part of spending wisely is picking the right time and place, and a recession can be the right time.
• People. This is the time to train—and cross-train—and educate, so that your people are better than their people when the crisis is over. Better in competitive situations and better at building a winning team. It's the time to recruit, to get some winners on the string while they're uncertain about their futures and their current employers are treating them like dirt. When the pressure is off, you'll have "A" players in your lineup, and the competition will be scrambling to rope in some of the leftovers.
• Customers. Spend time—not necessarily dollars—educating your customers and helping them solve their operating problems. This isn't about making sales calls; it's about building stronger relationships for the long haul.

Bottom line(s)
It should be clear by now that when the rally strikes, those who haven't prepared are really going to be struggling, because they won't be ready. Not ready with infrastructure, not ready with people, and not ready with customer relationships. They will have found a way to do poorly in bad times and to do equally poorly in good times.

That's not to say companies shouldn't be prudent during difficult times—or at any time. But if all the management energy goes into destructive activities and none into building for the future, the cause is in jeopardy. We strongly urge that two-thirds of management attention be devoted to preparing for the future, and one-third to day-to-day business realities. And that balance needs to be struck at the very outset of tough times, not plugged in as an afterthought when a bright new business day is dawning.

These have been—and are—trying times. But they're also excellent times to be in business. We will learn more about ourselves and about the resilience of our associates than we might have imagined during the boom years. And we will prosper in the future because we have already stood up to the challenge, wrestled it to the ground, and replaced failed models with new products, new services, new structures, new customer relationships, and newly invigorated and committed associates. Our bold, decisive actions during the bad times will have defined the future in which we will succeed. Even if the mainstay of the new product/service line is the sale and repair of sandals.