As the global economy heads back into financial crisis, business leaders are refocusing on what they need to do to succeed in uncertain times. However, many are at risk of repeating the mistakes made by companies responding to the financial crisis of 2008 and of failing to take the action necessary to emerge from the current crisis as winners.
PA’s Managing Uncertainty survey, conducted in the second half of 2011, asked more than 200 senior business leaders across the world how their companies had reacted to the financial crisis of 2008 and what actions had proved most effective. Their responses provide important insights into the management strategies companies need to adopt to manage change and uncertainty successfully.
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The responses to our Managing Uncertainty survey show that, while the initial signs of the financial crisis were visible in September 2007, it was only in September 2008, with the collapse of Lehman Brothers, that most companies realised the serious impact the crisis would have on their business.
By contrast, PA’s Managing Uncertainty survey shows that companies that performed well in the 2008 financial crisis observed what was happening early and acted faster than their competitors in response.
To respond effectively to the current uncertainty, companies should emulate the actions of those who performed well in the financial crisis of 2008 by preparing to act more quickly and more decisively than their competitors.
Develop early warning mechanisms
Many business leaders failed to recognise the nature and severity of the 2008 financial crisis because they did not have the necessary information. To avoid this:
ensure your company has early warning systems in place to highlight potential changes on the horizon
supplement traditional market research with qualitative studies, and question employees, customers and providers about unusual trends they may have noticed
guard against making data fit expectations
develop a culture that encourages a diversity of views and accepts challenges to long-held beliefs.
Move fast to orientate your company
Our Managing Uncertainty survey shows that, even when the reality of the financial crisis became clear, most companies found it difficult to orientate themselves. They faced an unfamiliar balance sheet recession rather than a conventional inventory cycle one and this tended to cause paralysis. As a result, even the companies that were quickest to act still took more than four months to do so.
Yet our survey shows a direct correlation between speed and success in decision making. While there is a tendency in an unfamiliar crisis to ‘wait and see’, businesses that responded faster were far happier with their decisions, despite having had less time to make them.
Create a structure to support rapid action
Acting fast is the key to securing competitive advantage in the face of uncertainty. Prepare your company for rapid action by ensuring the following elements are in place:
Uncertainty is set to remain a central feature of the global economy and so it is imperative for businesses to become better at acting quickly in response. PA’s Managing Uncertainty survey identifies proven management strategies for companies looking for effective ways of responding to the current wave of economic and financial uncertainty.
To find out what lessons our Managing Uncertainty survey holds for your organisation or to learn about PA’s work helping clients react quickly in uncertain times, contact us now.