Make the right decisions in time of crisis to gain long-term competitive advantage

Economy March 08, 2014 00:00

By Nattavut Kulnides
Special to

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Over the past few months, Thailand's economy has once again faced stresses and strains due to the political situation.

As we all hope for the best, organisations nevertheless do need to prepare for whatever may come. 
Crisis also brings opportunities. Some organisations make bad decisions during a crisis that jeopardise their business position long after the crisis has passed, while others make bold and right ones that enable them to outperform the competition.
Crisis also offers a crucial test of a company’s culture in terms of how it treats its employees in bad times – because when the good times return, employees will remember. 
Six HR actions  
A number of researches and case studies on how organisations leverage economic downturn and turn crisis into people advantages offer six key recommendations on what to do:
1. Act on strategic workforce planning – move away from short-term cost pressure and consider the long-term need. Most companies do not fully understand how a downturn will affect their need for people and how lay-offs will affect their future. 
Instead, organisations need to identify who are the strategic workforce, the technical workforce, core and non-core. While outsourcing and non-core can be downsized or delayed in recruitment terms, the strategic, technical and core workforce needs much careful evaluation before cutting job offerings and delaying recruiting. 
2. Initiate an innovative compensation scheme – flexible and innovative solutions are required. Whether companies will be adopting a flexible or a restructuring approach, they can take several actions relating to pay – such as postponing tenure-based raises and deferring bonuses – that can help to smooth out cash flow and reduce the need to lay people off. 
While organisations might not be able to raise much of the fixed compensation, they can link variable pay to certain performance targets on both the cost and revenue sides.
3. Rethink high-impact recruitment – there is a rare chance to get talent. In this buyer’s market, smart companies are selectively taking key employees from competitors or the market place, wherever they become available. While some companies may find that their finances limit their ability to attract talent, others are using the chance to hire strategic and technical workforce people that are usually in high demand. 
Hit hard by an economic crisis, German luxury carmaker Daimler Benz was still looking to hire about 300 new engineers and about 1,500 apprentices in 2009, while most auto-makers were cutting back their staff, consolidating, liquidating or being sold to new owners.
 4. Enhance employee commitment – this goes beyond conventional employee engagement. Employees are most effective when they are motivated and committed. They will respond to the challenges of a recession if their leaders are honest, direct and empathetic about the difficulties and create excitement about the opportunities. 
This entails ensuring the future and business possibility of the organisation in order for staff to put their minds and energy into something productive and add value, rather than wasting time on job portals and listening to media on how bad your organisation is doing. 
5. Ingrain leadership capabilities – any average executive can lead in time of prosperity, but it takes an exceptional one to lead during a crisis. Most organisations look at executive’s track record of success in time of economic stability, but not so much at original thinking and street-fighting spirit when the market starts to act “not according to the textbook”. 
Farsighted leaders have used times like these to prepare their organisations to sprint past their less agile competitors. 
6. Rethink communication in crisis – be precise on your game plan. Executives need to spell out their message, expectations and reasoning as bluntly, clearly and frequently as possible, showing the links between rhetoric and action, values and decisions, goals and metrics. One-on-one communication, an open-door policy and active listening all are essential in this environment.
Organisations need to be proactive, and executives must make sure they address rumours and faults in a timely manner and not leave it to luck. 
Many organisations become aware of issues far too late, when they land up on social media and even on national television. 
Opportunity amid crisis 
 In summary, in an economic downturn, organisations need to re-evaluate talent to address current and future requirements. They need to hire and secure critically now as this is a buyer’s market, and they need to invest and be ready for the tide to turn. 
   Organisations also need to balance short-term actions with long-term strategies, and need to communicate openly and keep people engaged. 
Finally, in these difficult times, the best companies will find the courage and the conviction to make fundamental changes in strategy, business models and organisation that will eventually help them create a high-performing organisation that has a long-term competitive advantage. 
Nattavut Kulnides is managing director of ADGES Consulting. He is also an adviser to the Human Capital Management Club of the Thai Listed Companies Association, and an adjunct faculty member in the subjects of competitive strategy and strategic human resource management. He can be contacted at