When will the recession happen? How bad will it be? The answers to those questions are anyone’s guess.
What we do know is that the recession will happen – the current economic expansion is poised to be the longest since the mid-19th Century. At some point the economic cycle will turn, and the economy will begin to shrink.
Recessions happen all the time, it’s a normal part of the economic cycle. However, what’s particularly interesting about this recession is that it will be first to occur during the so-called Networked Age. The past 11 years of economic growth have created the largest influx of new workers into the work workforce since the baby boomers.
As such, many of your Millennial employees will be experiencing a recession for the first time. Over the past decade, they have risen through the ranks, taking on significant leadership roles in your company and across all industries. An entire generation of new managers and leaders will experience this new set of economic conditions for the first time, and it’s impossible to predict what will happen.
What we do know is that a recession can change many things, from the obvious to the less obvious. Let’s start with the obvious. Companies will quickly look for ways to conserve cash and protect margins, which often means slowing spending, layoffs and restructuring to cut costs. Jobs will be at risk. If you cannot prove a good ROI, your project is at risk. An increase in uncertainty will make companies more conservative and tentative. These are well known dynamics.
Less obvious is the impact of increased uncertainty on people. Coupled with rising fear in general, volatility is the name of the game. Your investments just lost a lot of value, the house you just bought and stretched to afford has left you with a mortgage that needs to be serviced, you just decided to start a family and have been surprised by the cost of having kids, and now you are worrying about your job or not getting the bonus you banked on.
The combination of fear and an increase in messy information escalates your “cognitive load,” or the need to tap into your cortex. Responses triggered by fear force you to call on more ancient and less intelligent parts of your brain, effectively reducing your IQ and decreasing the thoughtfulness of your decision making. The solution? While your brain is triggered to respond with its “dumb” parts, you need to be smarter about navigating your new work and home life.
What are the implications of this on organizations? For one, fear responses may decrease teamwork and collaboration while increasing peoples’ self-interest (aka – the burning need to keep their job). At a time when teamwork and tapping in to everyone’s intelligence is more important than ever, external stresses will likely drive your team to be less than their best.
Given this understanding, as a leader, what are you doing to build resilience in your teams? How will you help them tackle this uncertainty and thrive? Resilience can be built on both an individual and team level through intentional coaching and practice. Cultivating these behaviors not only builds a better workplace culture, it gives your people the tools to bounce back – something that’s a leg up on the competition.
One practice we know helps build team and organizational resilience is something we call Future Storming. Future Storming is the process of identifying risks and trends that might affect your business or industry vertical, combining them in new ways, and thinking of solutions to mitigate these risks. This experience helps your leaders think through different scenarios in advance of facing them, which helps them build capacity for dealing with uncertainty, strengthens collaboration, and reduces the risk and impact of unforeseen circumstances in real life.
For example, you can run Future Storming retreats where your team escapes from the siloes of day-to-day business as usual and spends uninhibited time imagining different types of futures for the business – thinking critically about how to avoid the negative outcomes and how to promote the positive ones. The focus on opportunities is essential as recessions can be rocket fuel for disruptive ideas and startups. Furthermore, customer buying criteria changes during recessions and can upend traditional relationships.
A good example of this is the cloud computing industry and how it thrived during the last recession. Its advantage was providing low cost ownership and lower capital requirements for entry, which accelerated the shift to cloud. Improved network speeds, technology, and security coupled with new business models like subscription and consumption models set the table, the recession was just the multiplier. In the next recession, which new, disruptive companies will thrive and why?
Lastly, how can you empower the new generation of leaders to drive the cost and cash flow initiatives needed in your organization? Your team needs to be capable of contributing to improved cash flow ahead of time or just in time. This requires strong business and financial acumen to understand how their decisions will need to change in tighter times to free up cash, realize better margins or returns while simultaneously continue innovating and testing out new ideas to drive the business forward. Are your Millennials ready and capable to do this? Have you developed them to be effective in such a scenario?
In good times, leaders may not be aware of how the decisions they make every day at work impacts the margins, but in a recession, leaders need to be hyperaware of how they spend time and resources. Furthermore, funding is easy to come by in the name of growth, but in a recession? Not anymore.
Learned future preparation, resilience, and the financial proficiency and confidence to drive cashflow are critical for success in this new environment. By providing tools, expectations and discipline now, you can inspire your young leaders to take control of the future. Instead of acting rashly when the increase in uncertainty tricks their brains into inaction, acting ahead empowers your leaders to drive the improvements required to be successful.
It’s time to get ready. It’s time to prepare your leaders to flourish in tough times. Prepare your team to storm the future by building the resilience and confidence necessary to make good business decisions when they are in the eye of the storm, all in the name of managing through this recession. Better yet, give them the skills to innovate new products, services and business models to propel your organization forward, and do it all while using the smart part of your brains.