Sunday, 25 January 2009

Why the recession could be a good thing (part 2)

In my last post, I gave you reasons why I thought the recession could be a good thing for business in the long run. Now I'll do the same for individuals. Again, I recognise that for a year or three, a lot of people could be hit badly and go through a lot of suffering. But long term....

We will learn to live within our means. I think it'll be many, many years before credit becomes as freely available as it has been for the last couple of decades. This means we'll have to save up before we spend the money, which in turn means we'll think harder before making our purchases. The end of the instant gratification culture, maybe ?

We'll learn the value of money. With less people able to get any form of credit, combined with a long-lasting distrust of banks and increasing worries about online fraud, I see a shift back to a more cash based economy. This will probably happen despite the pressure from politicians and finaincial organisations, who are keen to get everything onto plastic - in both cases because tracking the use of plastic cards gives them information about our spending habits and movements.

The benefit culture will change or end. Those who lose their jobs because of the recession, those who are genuinely unable to work, and the people who keep their jobs but have steeply increased taxes to pay for others' benefits will become increasingly bitter about the types that make not working a career choice and play the system for every penny they can get. It will need a change of government (and government philosophy) but I hope we will move towards a culture where people get benefits because they truly need them, and only after contributing to society. However, I fear that unless we get a government that cares about the ordinary hard-working citizen, we'll end up with a damaging split between a permanent underclass supported by exorbitant taxes on (the few) who work.

With the pound at a lower value and the financial sector wrecked, if we get a government which cares for more than keeping their snouts in the trough, we'll see a move back to "Buy British", with support for UK-based manufacturers and technological innovation. This will create real jobs with real companies which make and sell tangible goods. Britain still leads the world in invention, but we have the opportunity now to use those inventions ourselves rather than just selling the patents off to the highest bidder.

Finally, we will learn to reduce waste. When things break, we'll fix them. When we buy food, we'll eat it rather than throwing 30% of it in the bin unused. This will do more towards saving the planet's ecosystem than any amount of green taxes, and we'll be making the best use of our money at the same time !

Wednesday, 21 January 2009

Why the recession could be a good thing !

It's weird, I know, but the recession could actually be good for both businesses and (more importantly) the public. Don't get me wrong; a lot of people are going to have a tough time for a year or two, and I don't seek to downplay the pain this will cause.

If you look at the companies that are in the news for failing, there are basically three root causes, one or more of which apply.

These root causes are;
  1. Companies which have borrowed too heavily. This could be to fund expansion through acquisition, to prop up inefficient or outdated business models, or to pay inflated salaries to their top staff (often while the people doing the actual work are paid no more than national minimum wage).
  2. Blinkered and reactive management. You know the kind of thing; managers who treat their staff as disposable rather than their most valuable resource, directors who never visit the shop floor, and management teams who think the way they work is the best possible and won't consider ideas for improvement.
  3. Companies that have forgotten that the customer is king. They expect them to jump through all kinds of hoops, and then behave as if they are doing them a great favour by giving them a downright shoddy service.
The banks, of course, suffer from all three of these problems. Have you tried to phone one recently, or get a mortgage at a sensible rate ?

As the recession deepens, more and more companies suffering from these problems will go to the wall. I feel very sorry for the staff who will be made redundant while the top management jump ship with golden handshakes and safe pensions.

The good news is that the disappearance of these companies will leave a nice hole to be filled by newer, leaner, and more customer focussed businesses. The ones which are currently small or medium sized, but which value both their customers and staff. "No, sir, our computer system says you can't do that" will be replaced by "Yes - just give me a minute to work out how we can do that for you".

In the long term, we will all get better customer service from companies which have come through the recession and know that to stay at the top they must treat their customers right and work efficiently and flexibly. I plan to be one of those businesses !