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 This could be to fund expansion through acquisition, to prop up inefficient or outdated business models, or to pay inflated salaries to their top staff (often while the people doing the actual work are paid no more than national minimum wage).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 !

No comments: