Reflection, action can help firms, CEOs ride out headwinds

This must have been a difficult year for owners and top executives of many companies as headwinds from geopolitical tensions, rising commodity prices, high-flying inflation, global economic recession, COVID19 coming into its third year, to name just a few, have deepened markets’ complexities.

Meta, Facebook’s parent company, announced in early November it would lay off 11,000 employees, or 13 percent of its workforce. It’s the biggest layoff in the tech industry this year. Amazon, which used to be the company with the highest market cap worldwide, has seen its market valuation slashed by more than $1 trillion so far this year.

JD’s founder Liu Qiangdong wrote in a public letter on Nov 22 that the Chinese e-commerce giant would cut the salaries of its senior management by 10 to 20 percent next year so that it can convert more contractors into salaried staff members and provide such workers with more insurance protection.

Data from the National Development and Reform Commission, China’s top economic regulator, showed that nearly 2.5 million Chinese companies were shut down or forced into liquidation in the first half of this year. Last year, the corresponding figure for the full year was around 3.5 million.

To be sure, the big picture is disheartening. Companies that hope to survive this period of multiple uncertainties are keen to do something. Some are playing by the classical management rule book and lowering costs and increasing efficiency.

But survival alone won’t suffice. For companies that hope to take the lead when the downturn ends, this is probably the best time to make a strategic change.

When the market is buoyant in general, companies are usually busy keeping up with the growth momentum to make as much profit as possible. Little time is left for them to look back, learn some lessons in retrospect and review their business model. But given the global economic slowdown, companies now have the time, or must make some, to improve their resilience.

Amid global turbulence, companies and their CEOs should study the macroeconomic trend or industrial landscape to make topdown changes. That’s easier said than done as it all boils down to a CEO’s perspective and perception. So, CEOs should keep learning, draw useful lessons from other industries or simply talk to more people so they could think “out of the box”.

US tech industry layoffs, and the less polarized global landscape, seem to suggest that institutions that are smaller in scale but provide higher efficiency are facing less difficulty.

Why? That’s easy to understand. Smaller companies may be more agile to make strategic changes at times of uncertainty. Take the capital market for example. Look at its attitude. Stock prices over the past few years show the market has been less supportive of meaningless expansion of businesses, if no proportional profit is generated.

So, the layoff trend is a good time to rethink one’s business size and embrace the so-called linear management, which has been suggested by experts for years.

When the external market is filled with challenges and uncertainties, it is probably better to look within and build the company’s own competitive edge. But, the most important thing is, never wait. Cliched as it might sound, it’s still worth bearing in mind that opportunities come to only those who are prepared.