There’s a misconception that core business priorities, shifted by the recession, will bounce back after the recession is over. In fact, these priorities typically shift permanently as a result.
Before a recession, when everything is going up, companies tend to go on autopilot and focus less on how they’re providing their core service or product. But then, when the economy is on the downturn, organizational priorities shift to value and efficiency, and suddenly, businesses have to scramble to refocus their attention on creating business processes that deliver their product or service efficiently and cost-effectively while making difficult personnel, product, policy, process, and service decisions.
Another common misconception is a recession only carries financial risk. But if you look at performance management, and this concept of a balanced scorecard, a recession actually poses many threats to your business.
The four legs of performance are customer value and satisfaction, efficient use of capital resources, process efficiency and quality, and the capacity for learning and growth. As you can see, financials are only one-fourth of good business performance. And what’s more, because these four legs are so interconnected, if one falters, stability in all four areas will suffer.
For instance, if your core business is providing software to customers, you may have been on autopilot for a little while and forgotten to think about where your resources are best allocated to provide a fast, reliable, and affordable product. Since the economy has been good, your customers have also been a little more lax on where their money is going. But when a recession hits, customer priorities will quickly shift and they will look for a product that better suits their new needs.
Let’s look at a hospital as a different example. The same number of patients are likely to fall ill, but their insurance status may change with their employment status. As a result, patients may shift from preventative medicine to emergency room visits, and with fewer insured, where will funds come from to treat these patients? Will staffing levels be prepared for the shift? How will an increase in complaints and incidents be handled?
No matter what your core business is – providing software to customers, banking, or healthcare, etc. – identifying ways to create more value and efficiency before a recession will be crucial to surviving it.