Making Sense of Economic Change
March 12, 2012
Every day we’re faced with new statistics that may shape our thoughts about where the economy is and where it’s going. For example, household borrowing grew in 2011 and, as recently as January, was increasing at an annual rate of 8.6%. GDP has been increasing for the last three quarters and unemployment is decreasing. But negative trends like rising gas prices and sluggish personal income growth make it unclear where the economy is headed.
How do you wade through the hundreds of statistics to make sense of it? A better question is: What would you do differently if you knew? One of the interesting results of a recession is that some companies emerge stronger than they were pre-recession. In 2009 during the thick of the Great Recession, management author Dr. Donald Sull, a professor at the London Business School, offered several ideas for managing successfully in a downturn including:
- Instill ongoing cost discipline
- Force hard choices
- Seize golden opportunities
Many credit unions would look at the first two bullet points and say that they have been living those tactics for the last few years. An economic downturn provides the urgency to better manage costs and force hard choices. Some credit unions found that they could operate more efficiently and reduce some of the expenses that seemed to proliferate during boom times. Others mustered the organizational will to close a branch that was not performing as hoped. “The downturn lowers their resistance to change and cuts through complacency,” says Sull.
Is now the time to breathe a sigh of relief and relax? Identifying opportunities for efficiencies and making hard choices that fit the organization’s strategy are always a good idea, regardless of economic times. Credit unions that function this way generally find themselves in a better position to weather hard times and seize opportunities when they are presented, such as investing in starting or improving upon a business line.
So what would you do differently if all economic signs pointed to a strong recovery? Probably lots of things, but the commitment to cost discipline and making difficult choices that has been forged during hard times is worth preserving.
Source: Seizing the Upside of a Downturn, Donald Sull, Financial Times, 1/22/09
