We’ve been plodding along economically for quite a while now. This middling US and Worldwide economy has really frozen a lot of normal business activity. Senior managements at software and hardware companies generally view minimal risk for a significant downturn at this point, but also have long been waiting for clear signs of a robust upturn which would change their decision-making calculus.
The recent news has been pretty good; per our latest job reports in the US we’ve now had north of 200K jobs created for 5 straight months–for the first time since the late 90’s. Is now the time to take a look at more aggressive investment decision-making?
It’s an economic argument that I could spend the whole article on. So let’s assume for a second that this does represent an inflection point on the way to a significant economic upturn–what should the C-level managers do now?
It’s pretty obvious that once you believe the fog has lifted and there are clear sailing ahead, your investment plan becomes more aggressive. This assumes, of course, that your individual market conditions support such optimism. But even if believe the fog has lifted, it’s still probably too early to act impulsively or without caution. So where are the best places to begin your increased investment program? My recommendations may surprise you a bit:
First–take care of your staff
First and foremost I believe you need to take care of your tired and disgruntled staff–if need be. I’m sure many folks won’t agree with this, since it doesn’t seem like the best place to ignite new growth. But this has been a brutally long and difficult recession for all the worker bees out there. Those who haven’t been thrown out of work entirely have often been required (by necessity) to double up or triple their workload, while subsisting on raises (if they got them at all) that haven’t even kept up with the minimal rate of inflation. Many out there are exhausted, feeling poor and depressed–they need to see some light at the end of the tunnel.
A number of studies over the last couple of years have shown that a large percentage of workers are dissatisfied with their positions and show a willingness to switch jobs if they could. Fear of not having ANY job, as well as a general lack of opportunity due to the poor job market has prevented them from seriously looking to date. However, as the economy improves the job market will eventually shift from a buyer’s market for employers to one favoring job-seekers. If you wait until this shift finally occurs to take care of your people, you’re likely to lose a lot of good folks. So at least for the people you need to keep, fill in those areas with additional manpower to relieve the current staff as well as increasing raises and other perks as much as you can. Nothing will cripple your new growth initiatives like high turnover and staff instability that creates operating inefficiencies.
Next–relieve current capacity constraints
After you’ve made sure to stabilize any potential negative impact on the staffing end, the next places to put resources are areas that are holding back growth that can happen NOW. This means different things at different companies. In a tech hardware manufacturing company it may mean investing in a second line in an existing plant, adding a second/third shift or certifying an additional contract manufacturer. In a software company this might mean adding additional sales reps to focus on your newest product line, or adding to the marketing budget to broaden the new product’s market recognition. It might even mean adding support staff to ensure that new or existing customers are served properly as your growth accelerates. The best areas to invest in will be highly dependent on the specifics of your particular business. The important thing is to evaluate your business with an eye towards identifying bottlenecks that will hold you back as economic growth naturally enhances your growth prospects.
Finally–place (at least) small bets for long term growth
After you’ve covered the short term (people) and medium term (potential bottlenecks) priorities, it’s time to turn your attention to the more classical avenues for growth investment with your remaining resources. This might mean major hiring of additional developers for new product initiatives if you’re a software company, building new plants for new products or otherwise greatly enhanced production capacity for hardware companies, or opening new sales offices in target growth markets. Most of the steps that you might take here are actually more obvious from a growth perspective that the previous two points, but they are bigger ticket items than the steps outlined above. Choosing where to invest wisely is crucial here because the bets are so large. If you’re going to place these bets early in the upturn of the business cycle it’s really prudent to do so in a manner that mitigates risk, if possible: partner to share investments, build out in stages, hire for one product line at a time instead of all at once, etc. Taking these types of risk-mitigating steps will minimizes the pain inflicted by a false alarm on the upturn, or a quick turnaround in economic fortunes.
That’s my outline of a general plan for getting ahead of the growth opportunity ahead. What’s yours? Post a comment on where your priorities lie.