Although we are starting to see signs of recovery, it is worth reminding ourselves that people are still hunkered down and living in fear about the future. But as President Franklin D. Roosevelt said 70 years ago, "All we have to fear is fear itself."
Over the past months, society has been consistently bombarded with bad news about the economy—declining equity markets reduced our 401k plans and net worth, massive job losses, increasing numbers of home foreclosures, etc. It is not surprising that automobile sales plunged by 50 percent earlier in the year, and the recent “Cash for Clunkers” program has presented the only bright spot in some time.
But these are not such strange times when you look at history. When was the last time the United States had a continuous 10-year period without a recession? The answer is: never. A look at recent history bears this out. In February 2000, the NASDAQ average was at 4700; by September 2002, it was down to 1170, a sharp 75-percent decline. The S&P 500 average in January 2000 was up to 1500, but by July 2002, it was down to 815, a 46-percent drop.
It is quite evident that we have been here before. In the five years from the 2002 low to the 2007 high, we have survived and prospered, with the NASDAQ up 139 percent and the S&P up 87 percent—and we will do it again.
The lesson here is that we must prepare for the recovery while surviving the downturn, a cycle that has been repeated many times in our history. It is not pleasant, but it is not the end of the world. We will ride out this storm and come out of it, likely for the better.
What can we do in the meantime to prepare for the eventual recovery? We need to continue to improve our skills so we are prepared for the recovery and the competitive job market that will result. Companies need to continue to develop their people and advance their continuous improvement projects and knowledge so they will be the preferred suppliers when business recovers.
In January 2009, mfg.com conducted a survey of several hundred supply-side manufacturers, and the results were somewhat surprising. Fully 45 percent of the respondents were projecting growth in 2009, while 28 percent projected their business will likely remain at 2008 levels. When asked about the rebounding of global industry, 37 percent were optimistic, 28 percent were somewhat neutral and 34 percent thought a rebound this year was unlikely.
In spite of this relative optimism, 53 percent said they had to reduce profit margins to grow, and 39 percent kept margins constant. To reduce costs, 28 percent had shortened shifts or hours, 23 percent had layoffs and 26 percent had not implemented any changes in staffing. In addition, 18 percent stopped hiring new employees, 11 percent stopped hiring replacement employees, 15 percent postponed or canceled capital expenditures, and 11 percent curtailed business travel to customers and trade shows. So while respondents were fairly optimistic about a rebound in business this year, they were also, understandably, cutting profit margins and reducing costs—contributing to the declines reported by economists and the news media. Another sign of fear and hunkering down?
Over my 45 years in industry, I have heard the screams of protest when people and companies are living in the “today”—concerned about cash flow and survival—while losing focus on developing skills and continuous improvement processes for tomorrow. We realize these are difficult times for both people and companies, but they are not really strange times. We have been here before and survived and prospered during the recovery, and we will do it again. But history has continually reminded us that those who are prepared will respond faster to recovery and show better prosperity.
Companies need to reinforce their continuous improvement efforts and the skills development of their people so they are prepared for the business recovery. People need to improve their knowledge and skills to be ready for the competitive labor market that the recovery will create. Let's be optimistic about the future. With history as our guide, we know we will recover. Don't stop your continuous improvement efforts and skills development so you can make sure you're ready when it happens. iBi
