We must strive for the best but plan for the worst
Straight-talking, common sense from the front line of management
Q
A wave of job cuts is already sweeping through Silicon Valley and I fear that as recession looms, the global outlook will worsen and gain momentum. Every business goes through ups and downs but what about the workers on the rough end of the troughs? I have some savings but it’s a tricky sell to pitch my skills to prospective employers when it seems that everyone is battening down the hatches. I’m a talented worker but I wonder how I can protect myself from redundancy if things don’t improve? In your experience, how best can workers prepare themselves for the coming downturn?
A
Everything suggests that you are right to be concerned. The world is on an economic roller-coaster and, despite forecasts from the Treasury, the Bank of England and the Office for Budget Responsibility, no one really knows where we are heading. You can be sure that things won’t be as bad as your worst fears, however, you are unlikely to realise your most optimistic dreams.
You are encountering, on your own behalf, the sort of impossible decisions that business leaders will face over at least the next two years. The companies that coped best during the Covid crisis were those that scrapped rigid rules and adjusted their business model to suit a new set of circumstances. Big sections of our economy became more efficient by reshaping the organisation and reducing their workforce. Hospitality, entertainment, conference, exhibitions and the travel industry are some of the sectors that had to tear up their business plans and start again.
Uncertainty caused by the Ukraine war and the far-reaching implications of the fuel crisis are causing companies to consider the possibility of further inflation and more disruption to their supply chains. They are prepared to reassess their plans month by month. Payroll and prices must be reviewed quarterly, rather than annually, and long-term capital investment may need to be rescheduled or even cancelled in order to control cash flow. No one needs to apologise for changing their mind.
With the minimum wage rising at about 10pc over the next year it is difficult to see how inflation will fall to the 2pc Bank of England target before 2025. Despite the likelihood of falling energy costs, wage and salary increases are bound to have a profound effect on future prices – higher earners are sure to demand maintenance of differential pay grades and, with industrial action, we can expect an increase of more than 10pc, across the board. We have a tough time ahead.
It feels much like 1974, when we were battered by an industrial tsunami – inflation, strikes, a fuel crisis and unemployment. We thought it couldn’t get worse but it did. Between 1972 and 1974 the stock market dropped by 73pc, at the lowest point the former FT 30 Index stood at 145.8 (if only we had known that it was such a good time to buy).
While all this was going on, in the early 1970s, enterprising entrepreneurs were starting highly successful businesses. The list includes Richard Branson’s Virgin, Malcolm Walker with Iceland, Body Shop from Anita Roddick, Felix Dennis who built his publishing empire including The Week and Tom Farmer who founded Kwik Fit. The middle of a recession often proves to be a very good time to invest in the future.
I am not suggesting that you should hand in your notice and start a new business of your own. Quite the opposite, stay where you are and try to impress your boss so much that if redundancies arrive you are one of the colleagues who is asked to stay. It is unwise to move to another company, however successful and secure they may seem.
The next two or three years will almost certainly be tough for everyone and if your new company has to cut the wage bill, you would be in the line of fire – first in, first out.
Whether you move or stay put, there is a real possibility that you could become unemployed, so be prepared. Review your personal financial position to see how long your savings will last if you have to rely on a redundancy settlement and unemployment pay – that could prompt you to review all your club memberships and direct debits. But don’t cut yourself off from leisure activities and social contact with the outside world. Job hunting is a job in itself and the more people you meet the more opportunities are likely to appear.
If your contract allows you to take on some part-time freelance work, start straight away, it will provide an insurance policy and could be your lifeline if you lose your job. Who knows, it may become a start-up business that is the foundation of your future fortune.