All recessions can have a silver lining, says leading industrialist

Even the most perceptive of business leaders could not have foreseen what 2020 had in store for us, with Covid-19 sending a deep and far-reaching economic shock that is still being felt.

The aerospace and automotive sectors in particular are facing bleak times, and the combination of low consumer confidence, travel quarantines and massive supply chain disruption has definitely created a feeling that tough times lie ahead.

This is reinforced by Manufacturing Barometer (SWMAS/MGP) data that quotes 85% of companies are expecting sales to fall over the next six months; while almost 40% of firms questioned for Make UK’s Covid-19 Manufacturing Monitor suggest that it will take more than 12 months to return to pre-pandemic trading conditions.

So, it looks like UK industry, and the economy as a whole, is in a recession. It isn’t the first and it certainly won’t be the last and, while times will be hard, good companies and strong management teams will come through it in a better place to take advantage of the upturn.

Of course, this will rely on manufacturers not falling into common traps that restrict their ability to recover.

Wisdom from experience

The advice below comes from someone who guided PP Control & Automation, the firm I owned for almost 40 years, through three major downturns.

First, management teams need to get on top of their financials as quickly as they can…cash really is king in these situations.

PP C&A has successfully endured three different downturns. Image: PP C&A

Monitor payments and when they need to be made and, importantly, identify areas where you can batten down the hatches for a while. This doesn’t mean slashing budgets on areas that can boost sales (more on this to follow), but more a case of taking out any “nice to haves” that aren’t crucial to operational efficiencies and your recovery.

Second, ensure customers are adhering to your payment terms; clear and polite communication can often stop any ‘breathing space’ appearing and causing you issues further down the operational chain.

Third, my pet hate during a downturn is when companies turn off their marketing budgets. I can never understand this course of action.

The only way firms can come out of a recession is to backfill the sales pipeline and, to do that, they aggressively need to target new opportunities and tell potential clients what they can do and how they do it.

This is where you need to give your sales team the backing and collateral – printed material, digital campaigns or advertising/PR – to create leads and new opportunities.

For some reason, the UK just doesn’t place the same importance on sales as the rest of the world. I’ve long championed the need for a Degree in Sales, so we get a steady pipeline of future talent.

David Fox guided PP Control & Automation for almost 40 years. Image: PP C&A

My fourth and final piece of advice is to use the recession to make some difficult decisions.

Getting through a global downturn requires everyone pulling in the same direction and with the best interests of the company at heart. Loyalty to your staff is paramount, but this can blur your vision and prevent you from realising that the wrong people are working for your business.

Opportunity

A recession can be an opportune time to review and subsequently transform your operational model so that you re-emerge with an increased competitive edge and a stronger platform to take advantage of the new opportunities that will naturally arise.

During my PP C&A days, we endured three different downturns, all pretty severe and enough to make us think long and hard about what we were doing.

Each one saw us make paradigm changes to the business that incrementally led to the company becoming one of the world’s leading strategic manufacturing outsourcing specialists.

The downturns created an imperative to spend less time thinking about making changes and focus on actually making them. In our case, we took two major decisions.

The first was to push on with our adoption of Japanese lean manufacturing principles influenced by our relationship with Mazak, and the second was our commitment to people.

This commitment, at its peak, saw us develop our own training school, implement new continuous improvement roadmaps and offer each member of staff up to 200 hours of training every year.

I’d like to think we’d have taken these measures with or without the downturns we had to endure. However, I’m certain they wouldn’t have been implemented quite so quickly and with such purpose as they were.

So, my message for manufacturers in 2020 is simple. Act swiftly, focus on sales and operational efficiencies, and take the time to look at how you want your business to look in the future.

Recessions often sort the really good companies from those treading water, and those who come through it should be in a much better place to grow and expand.

*Header images courtesy of Gerd Altmann from Pixabay