What’s going on, Mr. Greenspan?

For SBT
This was not the article I had intended to write this month. I was prepared to discuss “reverse Internet auctions,” a sore spot for many TEC members. Actually, the subject I do want to talk about is very much related – the economy, our economy, our lives as business leaders in the middle of this apparent economic dilemma.
What’s happening? Our members tell us that the manufacturing sector is clearly in the dumps big time. They don’t expect to see a recovery until well into next year. The major players, regardless of the industry, as we all know, are all suffering huge losses. The one exception might be pharmaceuticals and medical. That’s about it. Everything else has come to a screeching halt.
But ironically, the screeching halt is less prevalent in some of our geographical areas than others. Milwaukee seems to be especially hard hit, but northeastern Wisconsin and Madison seem less so.
Why the halt? Should we blame it on the Fed and its decision to raise interest rates last summer? Should we blame it on OPEC and the impact it has had on energy prices? Should we blame it on the dot-coms that promised a lot and delivered virtually nothing? Why should we talk about blame at all? What about dealing with the reality of doing business in this new century and its new rules? Aren’t we all trying to figure out this new reality – these new rules?
There will, our TEC members say, be a significant shakeout this year. And we are told it may have been long overdue. Too much economic overconfidence coupled with the belief that this amazing growth would steam along forever, they claim, has exacerbated the present problem.
We all know the strong and smart players will survive, the weak will falter. Manufacturing will continue to suffer harshly, down anywhere on average from 15% to 40%, our surveys show, depending upon the industry. The ag and automotive markets are especially hard hit. We had one packaging TEC member report that his sales in May fell 40% alone in that month from a year ago. He serves those markets.
Retail will continue to suffer as well, because consumers who read, see and hear the bad news will continue to retreat and curtail heavy goods spending or impulse purchases. Service industries dependent upon manufacturing will suffer similarly, we think, although not quite as badly because they typically have less tied up in expensive capital assets.
But are we now in a full-blown, big-time recession? And does it matter if we use the dirty word or not? This is a downturn with unusual markings, and it clearly has a global pinch to it that is different. TEC members doing business in Europe and Japan, for instance, say that their foreign customers are equally perplexed. But there is good news, and I hope that my thoughts correspond with your own, assuming you are a business owner who prefers an optimistic viewpoint.
Just a few ideas. Slap me if I’m wrong:
– Don’t let morale dissipate in your company. Regroup.
– Get rid of the dead weight in your business.
– Go after your competition now with a vengeance.
– Get very close again with your key customers and vendors.
– Tell your bank what’s going on.
– Cut fat, but don’t cut the body of your business.
– Think of new ways to promote your business.
– Make a personal statement to your employees if necessary (e.g., cut your own personal perks).
– Take some time to rethink the future of your business.
– Keep the marketing budget intact.
– Turn to trusted advisors.
– Keep your banker closely informed.
There are no easy answers in an economic “flip-flop.” But hold onto the fact that a solid company with strong leadership, with a clear focus on its future, will always emerge as a victor in an economic downturn/recession. Cutting off your nose to spite your face has been proven historically to never work.
I’m assuming that a fair proportion of this readership may not have experienced this kind of a downturn/recession before; it’s a possible first for you. I’ve been through five recessions, all unpleasant. But as I have said before in this column, winners win. That’s the long and short of it. Do the right things now. Hang tough, get good counsel, and stay cool. And remember, the bad news will, in fact, end.
Until next month, good luck as you anti-recession or anti-downturn it!
Harry S. Dennis III is the president of TEC (The Executive Committee) in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at 262-821-3340. His column appears in every other issue of Small Business Times.
July 20, 2001 Small Business Times, Milwaukee