Managing in a downturn

September 19, 2011

Wisdom is timeless, which is why two Harvard Business Review articles published in 2001 and 2008 are still as valid and thought provoking today as when they were published. (The references to the papers are listed at the end of this blog.)

In an economic crisis and industry downturn Rigby considers that there are three phases and critical dos and don’ts to be aware of in each stage. 

Reflect on how you reacted in phases 1 & 2 and how you plan to react as phase 3 emerges.

1. Storm clouds gather.

Don’t act as if the storm will blow over.

Do prepare for the worst with contingency planning.

2. The hurricane hits.

Don’t focus on quick fixes for short term survival.

Do look beyond the bad times by for example building customer loyalty and driving ongoing improvement.

3. Skies clear on the horizon.

Don’t shift into a high spending mode, rather accelerate smoothly.

Do repair and retool. Continue to improve and reinvent, and be prepared for future changing markets.

There is a danger in this current ‘hurricane’ economy to think that there is nothing more to do, this has lasted so long and we have done everything there is to do. We just need to weather the storm at this point since everything is beyond my control. Well that is not true. There are always opportunities to improve.

Research by Olson et al shows that only 13% of issues impacting an organization are driven by external factors, that is are outside management control.

External factors / Outside management control

  • Economic downturn
  • Geopolitical changes
  • Regulatory actions and
  • National labor market inflexibility.

So what are the other 87% within management control, the problem factors we can attempt to work on?

Internal factors / Within management control

  • Un-sustained financial acquisition model
  • Unrealized synergies
  • Misconceived economics
  • Curtailed or inconsistent R&D funding
  • Slow product development
  • Inability to set new standards
  • Disruptive competitor pricing or value shift
  • Misperceived operational impediments
  • Customer strategy dependence
  • Internal skill gap
  • Narrow experience base
  • Loss of key talent
  • Weak decision making structure
  • No strategic planning
  • Incorrect competitive metrics
  • Inflexible financial goals

At this point, let us just focus on one area, the customer.

When was the last time you researched and studied your market and customers to ensure you still fully understand the dynamics? They haven’t stayed still!

Are you still focusing on translating customer insights into new or updated product and services?

Are you aware of what changes your competitors have made, how you compare to them and what differentiates you from them? Yes, there are existing homes on the market and that may be your biggest competitor. Do you know what the market is like for these existing homes, have you detailed your value over them? BUT you are also competing against the new home market, you are not alone. Do you fully know those competitors; are you able to articulate what differentiates you from them?  Are there options such as creating a more affordable model, remodeling, offering to finish basements on your past homes, what are your warranty costs, what is your defect rate, the list of considerations goes on.

We need to keep moving, keep improving, are there ideas above that you can consider?


Moving upward in a downturn, Darrell Rigby, HBR, June 2001.

When growth stalls, Olson, VanBever and Verry, HBR, March 2008.

Denis Leonard has a degree in construction engineering an M.B.A. and a Ph.D. in quality management. Denis is a Fellow of the American Society for Quality, a Certified Quality Manager, Auditor, and Six Sigma Black Belt. He has been an Examiner for the Baldrige National Quality Award Board of Examiners a Judge on the International Team Excellence Competition and a Lead Judge on the National Housing Quality Award. A former Professor of Quality at the University of Wisconsin, he has experience as a quality manager in the home building industry as well as construction engineer, site manager, and in training, auditing, and consulting with expertise in strategic and operational quality improvement initiatives. His work has achieved national quality, environmental, and safety management awards for clients. 

Denis is co-author of The Executive Guide to Understanding and Implementing the Baldrige Criteria: Improve Revenue and Create Organizational Excellence.


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