Efficient Plant May 2020 - 4

column | editorial

Responding
To Economic
Downturns
Gary L. Parr
Editorial Director

When your
company
emerges from
an economic
downturn, will it
be stronger and
more efficient?

4

Proud of your company
culture? Tell us about it
by entering the second
annual Reliability of
Everything Culture
Improvement Awards.
Details on p. 7.

| EFFICIENTPLANTMAG.COM

EP2005editorial.indd 4

O

NE OF THE questions we
asked in an early-April survey of
Efficient Plant readers was: Are
you planning to use any manufacturing
reductions or interruptions as opportunities to perform needed asset upgrades
and/or maintenance? The response was
basically 50/50.
That response sent me to the Harvard
Business Review to read a 2010 (remember
that period in history?) article entitled
"Roaring Out of Recession," by Gulati,
Hohria, and Wohlgezogen (hbr.org/2010/03/
roaring-out-of-recession). My goal was to
get a sense of what business response puts
you in the best position to succeed when the
economy improves.
The natural strategy, and
the approach taken by most,
is to cut costs and personnel
at every level, curl up in a
corner, and wait it out. Not
a good move, according to
the article. In fact, it may be
the worst strategy because
you emerge from the downturn weaker on just about
every front and, if re-hiring
doesn't go well/quickly,
your competitors will disappear down the road.
Another approach that
is marginally better is to
invest and expand with the intent to increase
market share when others are sitting idle.
That doesn't work so well either and you may
find yourself saddled with a lot of nonproductive overhead.
The best approaches, according to the
authors, are to be pragmatic (combine
offensive and defensive moves) and, even
better, be a progressive company that seeks
to implement an optimal combination of
offense and defense. As you can imagine,

that's not an easy way to operate, especially
when economic pressures are closing in on
all sides. The payoff, however, can be massive
for every aspect of your business.
One of the keys is improving operational
efficiency. That one component pays off in
the short term, for obvious reasons. The real
gain is the long-term benefits because those
efficiency gains don't go away when business
improves, resulting in more money going to
the bottom line.
This brings me back to that survey question. Seems that the response rate should
be much higher on the Yes side, meaning
companies are using slower business to
introduce those systems that have been on
the drawing board for years but "we simply
can't find the time to implement them."
What about those costly assets you've been
nursing along because you can't afford to
shut down production to properly fix or
replace them? Do you have plans to implement IIoT technology so you can acquire
data that will give you a better picture of
conditions and help you move to a top-quartile predictive environment? Doing so would
have unquestioned long-term benefits.
Underlying all of this is improving your
company culture. This is the time to send
the right message to everyone in the company. Rather than laying off a bunch of people,
only to learn they've found other work when
you want them back, or spending yourself
right out of business, consider that middle
ground. Granted, layoffs are unavoidable in
tough times, but creating an environment
that says to people you won't go into panic
mode when business slows, but will bring
everyone together to help cut costs, improve
performance/efficiency, and create and
market new products, will create the energy
and commitment that will be beneficial to
all when the orders start coming in. EP
gparr@efficientplantmag.com

MAY 2020

5/1/20 10:23 AM
http://www.hbr.org/2010/03/roaring-out-of-recession http://www.EFFICIENTPLANTMAG.COM
Efficient Plant May 2020

Table of Contents for the Digital Edition of Efficient Plant May 2020
