Survival Kit for Tough Economic Times

Outsourcing is another excellent way of converting fixed to variable cost. Instead of paying a full-time equivalent to perform in-house billing, it may be more cost-effective to outsource this function. Outsourced companies are experts in their area and will usually collect as a percent of productivity.

Staffing lay-offs or salary reductions can definitely reduce overhead. The million-dollar question is: whose salary is the first to go? Strong-willed companies often realize that high executive compensation just doesn’t make sense during an economic downturn. In a befitting article called “The unkindest cut of all: how one company’s founders have gone about cutting their own pay to help their business stay afloat,” the author describes an economic reality that founders and executives may face.⁴ As one executive put it, “It’s the price you pay for being a founder.”⁵

Maintaining Solid Leadership

The economy will cycle between positive growth, stagnant and negative cycles. Over the last 10 years, the U.S. economy has generally been very strong, experiencing very short lived and mild economic slowing from 2000-2002.⁶ Recent economic indicators for the last two quarters have showed slowing in several major areas including gross domestic product, new housing starts, rising unemployment rates, rising costs of oil and gas, and the sub-prime loan mortgage crisis.⁷ During these times, solid leadership is paramount to survival.

How can we best prepare for the lean days ahead? First, maintain strict focus and avoid distractions. Revisit the organization’s strategic plan to determine future direction and the manner in which resources such as capital or people will be allocated. Most organizations develop a business plan that includes plans for resource allocation over time as the organization becomes more financially sound. During strong economic growth cycles, plans focus on expansion, growth, replication, or expenditure. Take time to develop a plan for negative economic cycles so the organization is well prepared to execute it should the need arise.⁸

There are some common techniques which can be used for strategic analysis. These include a SWOT analysis or PEST analysis. A SWOT analysis serves to detail the organization’s strengths (S), weaknesses (W), opportunities (O), and threats (T).₉ The PEST analysis reviews the political (P), economic (E), social (S), and technological (T) environment within which the business operates. Today’s rapidly shifting political agendas, weak economic projections, dichotomous social framework and advancing technological infrastructure make our business in healthcare challenging indeed. When leaders specifically address these areas and outline the organization’s near-term and far-term goals, some stability is achieved within a constantly changing environment. Strategic planning, however, is just as inconstant as the market and cannot predict how the market will evolve. A key component, therefore, to the strategic planning process will be to allow a certain degree of tweaking, tinkering and testing in today’s turbulent business climate.

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