Christine Christian, chief executive officer of Dun&Bradstreet Australia and New Zealand says businesses can move ahead, but with caution. Recovery does not mean a return to pre-GFC boom times.
“You need to be careful and not ridiculously naïve,” Christian says.
“We have just experienced one of the worst economic downturns in history and to think overnight we will be back to pre-GFC levels is ludicrous.”
She says recovery can be a dangerous period for many businesses. “We have been plotting failures for decades now. Our research shows that business remains vulnerable to financial stress and failure in the early years of economic recovery.”
“We have examined business failures in the recovery period. Following the dotcom bust of 2000, business failure jumped 20.5% as the economy returned to positive growth.”
The key to expansion in this market, she says, is to treat it as a managed investment program and to watch cashflow carefully. That means companies need to get teams refocussed on recovery and growth opportunities but, at the same time, totally accountable and watching carefully.
“The smart companies will be those who have carefully and realistically assessed the market opportunity and demand, but they have not been so shell-shocked that they don’t do anything at all.”
“It’s really about having a very realistic view of where the market is at so you are not over capitalising, but at the same time you don’t want to be frozen to the point where you are so shell-shocked by what happened that you miss the boat. It’s about getting very robust business cases and staying on top of these cases and making sure everyone responsible for that part stays focused.”
Unlike a boom time, she says, companies now have little margin for error when funding is hard to access.
BIS Shrapnel senior economist Richard Robinson believes the recovery will well and truly kick in next year when there is a return to business investment. In the meantime, the upturn in housing will continue to drive growth, although it will not be that strong. Don’t expect another boom until the end of this decade, he says.
“There is enough momentum going on to drive the recovery this year,” Robinson says.
“But it’s not going to be an enormously strong recovery. It will be along the lines of what we have seen in the last quarter or two. The two big factors that are weighing against recovery now are the spare capacity and the cost and availability of money.”
Robinson says the big challenge and priority in this upturn will be maintaining staff when the job market is starting to recover. The trick will be working out how to retain them without necessarily handing out massive pay rises at a time when cashflows need to be monitored and interest rates are likely to rise. The challenge in the recovery will be about getting close to staff.
“A number of businesses instigated pay freezes during the downturn and a lot of employees are now asking whether that was justified,” he says.
“If people start securing better deals elsewhere, because they probably haven’t been looking around for the past year or so, that could become a key challenge.”
“In the absence of giving a large pay rise, which they can’t afford, businesses will have to get close to their people and makes sure that conditions beyond pay are amenable to keeping their staff.”
He says businesses might want to start hiring as part of their strategy for recovery.
“What you might want to be doing is looking to hire people. You would be wanting to plan, not so much for a strong economy this year, but certainly in 2011 and 2012, the economy will be picking up.”
“So probably some time this year, you might be wanting to get people in at a lower level to train them up. Maybe it’s a good time to take on apprentices and trainees. If you get in now and train them up, by the time that business is picking up they will actually be able to make a contribution.”
How does management change its downturn mindset? Robinson says the mindset is changed for you.
“Once you start seeing the figures and the work is coming through, you have to change your mindset.”
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