There’s nothing spookier this Halloween than some of the headlines.
Sapio Research recently found that a whopping 95% of global businesses are concerned about a potential recession, with 45% of US businesses “highly concerned.”
Fear can drive a knee-jerk response in a recessionary environment to cut, cut, cut — marketing budgets, media spend, hiring, headcount, R&D investment.
In 2010, Harvard Business Review published one of the most in-depth studies on how businesses historically operate in a recession. Ranjay Gulati, Nitin Nohria and Franz Wohlgezogen studied 4,700 public companies before, during, and after various recessions to analyze the choices they made and how businesses were affected.
They found there were an elite 9% of businesses that flourished after a slowdown.
These post-recession winners were not the ones that cut costs faster and deeper. Those businesses had the lowest probability (21%) of pulling ahead of the competition. Nor were the boldest businesses necessarily the ones that thrived.
The companies that performed the best were the ones that found “the elusive balance” of cutting costs in some areas and investing in others — as they put it, the “optimal combination of defense and offense.”
It’s hard to find that “elusive balance” when operating in a place of fear. Setting aside the fear of recession is key to knowing how to operate in a recession.
I’ve always liked some of the acronyms for F.E.A.R. as a reminder of how fear can get in the way of good decision-making: “Future Events Already Ruined”, “False Evidence Appearing Real”, and “F Everything and Run.”
Here are a few related cartoons I’ve drawn over the years, (including a few from 2008):
