Emerging stronger at the end of recession

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: Recession is nothing new to economies; they are generally cyclical in nature and have manifested similarly in different periods of history. The current recession is possibly different in the speed with which it enveloped the globe; however it was the same in the way it shrunk global economies, led to lay offs in companies and downgraded their projected revenues and earnings. The bust of the iconic Lehman Brothers and the crisis in the financial markets took centre stage, but unfortunately this brouhaha has pushed to backstage a large number of companies that have waded through the recession, emerged stronger and have truly utilised this phase in ‘just getting better’.

Normally, when times are lean, companies cut back. Eliminating excess and making do with less is simple common sense, whether managing a household or a company. However, the recession prompted some companies to cut so much and become so lean that they are no longer healthy—they suffer from what some experts call ‘corporate anorexia.’ Just like it is bad for businesses to over-hire and over-spend during good times, it is equally bad for businesses to have blinders on and feel that drastic cost-cutting alone is the answer when times are tough. These anorexic companies become so skinny that they’ll be the last to get healthy again.

The simple point is, no company ever shrunk to greatness.

Time and again it has been proved that the companies that emerge stronger at the end of a recession, actually invest through the recession and very wisely at that. Research by McKinsey showed that companies that beat the last recession actually increased spending in key areas. The research tracked almost 1,000 US companies over 18 years, including during those all important recession years. The companies that emerged in the top quartile after the recession actually increased spending on sales, innovation and marketing. Although this reduced their cash reserves, the companies traded short-term profitability for long-term gain. And it worked; the markets valued them 25% more than their less successful peers. Surely, no one can save their way to prosperity.