Monday, August 31, 2009

Booms and Busts

The current financial conditions are unlike any previously seen in the history of the world. A perusal of the last 15 years indicates that cyclical patterns of high growth and frenzied activity alternate with periods of decline and layoffs. This pattern does not seem to be abating in the near future and it seems that booms and busts will be part of a way of life for all of us for the next 15 years as well, whether we like it or not. This situation only reinforces the need for both individuals and organizations to position themselves strategically for the turbulent future advancing upon us. While it may not be possible to exactly predict the timings and nature of the booms and busts, certain basic steps can be taken to ensure a smoother ride.

Firstly, for individuals, training and certifications in their chosen area of expertise should be undertaken in order to separate themselves from the herd. Continuous learning and self-improvement are no longer the activities of a few “nerds” but a necessary part of survival for everyone nowadays. Individuals must also keep up with the latest in industry innovations and stay aware of the latest tools, techniques, methodologies and standards. Those who have kept themselves at the cutting edge will be in a superior position for advancement as companies scramble to make themselves more efficient and competitive.

Which brings us to organizations and what they can do during financial swings from a process standpoint. During the boom periods, companies have a tendency to focus entirely on taking advantage of the business available and not caring much about the way the growth and the new business is being handled. This, then, translates to a skewed and mismanaged growth that is inefficient and costly. Furthermore, the profit generated during good times is rarely saved and kept aside for the rainy day. Companies, like individuals, must save and set aside revenue for use during lean times. The tendency to operate only for the quarterly result is not a good strategy for the long term and senior management and the board should understand and support this way of doing business.

During the busts, the companies should then call upon the revenue saved from the good times and instead of laying off people, put them to work in making improvements and efficiencies for the future. A lean period is a good time for a company or organization to become CMMI certified or ISO certified utilizing staff that are freed up due to diminished business. That way, when the good times roll in again, the company is now more efficient and better positioned to take advantage of the new business.

Granted that this is very theoretical and a bit on the Pollyanna, “in a perfect world” perspective, but what are the alternatives? Haphazardly growing frantically during the boom period and then laying of people and losing market share during the bust? Clearly, both individuals and organizations must plan for the cyclical market conditions that are now a way of life in the most intelligent manner possible. Assuming that things will go smooth and steady in the future is hazardous and foolhardy at best.

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