Sunday, June 15, 2008

Reading the Economy

Having now been in the learning and performance improvement business for 25 years I am now experiencing the third major market downturn. Interestingly, each market downturn has followed a similar business cycle:

Full Steam Ahead: All is well with corporations and the economy. Corporate profits abound with ample budgets for investment and expansion and personal income increases. In almost every instance during this phase of the market cycle, the demand for talent is greater than the available talent pool and corporations are fully staffed with full-time employees and outside consultants.

Trouble Brewing: Market uncertainty raises its ugly head as corporate profits begin to lag, rumblings of layoffs and downsizings begin, and corporate budgets are re-evaluated and pared. Normally, outside consultants are the first to be impacted as assignments or projects are either ended or not extended. The number of full-time opportunities begins to decrease and the available pool of talent begins to increase.

Market Crisis: Business takes a marked downturn with consistent stories of significant corporate losses, layoffs, and cut-backs. The general mood in the economy is one of concern and worry as the prevailing economic indicators point to a recession or stagflation. Full-time staff levels are cut and organizations re-evaluate their organizational priorities. Full-time positions are few and far between with a large number of qualified candidates vying for the few positions available. Critical projects requiring additional resources are most likely to be filled with contractors or outsourced to third-party vendors. Salaries for these positions decrease in relation to supply and demand market forces.

Signs of Life: The prevailing conversation in the business world is one of a market rebound and improving business climate. While conditions in the economy are beginning to look better, most corporations are wary of adding to their permanent headcount. The number of full-time positions begins to increase slowly with most new initiatives being staffed with outside consultants or outsourced to third-party vendors.

I find a large percentage of professionals that we encounter are not mindful of the climate in the marketplace until it is too late. Each of the phases listed above require different actions to ensure ongoing income and employment.

This mindfulness is also important for consultants and business owners. As a case in point, during the last significant market downturn, we placed a heavy marketing focus on the pharmaceutical and health care markets. These industries are historically less impacted by market recessions. It proved the correct strategy as our revenues remained steady at a time when most competitors suffered significant decreases in sales and several competitors left the marketplace entirely.

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