As previously published on In Business Madison August 22, 2012 issue
In today’s rapid-fire world, we are veterans of change. Current levels of uncertainty, however, seem to be a new frontier. Financial uncertainty hangs over us as we recover from the “house-as-ATM” period of gluttony. Strategic and regulatory uncertainty runs rampant in our increasingly polarized political arena. Geopolitical uncertainty is closer to our backdoor than ever as we become an increasingly global community. Uncertainty reigns supreme. We are certain this is not about to change anytime soon.
What happens in an economic environment of uncertainty?
When faced with these types of sweeping unknowns, businesses tap the brakes on decisions involving the investment of capital and the hiring of people. Compare our current economic recovery to the prior three.
Source: The Economist, August 11-17, 2012, page 24. No Miracle Cure.
Normally, at this stage, our nation would be creating about 300,000 to 400,000 new jobs each month. Instead, we have averaged 151,000 per month this year and 153,000 new jobs per month in 2011. The good news is this more than absorbs the average 100,000-125,000 monthly gain in our working-age population. The bad news is – not by much, especially when you consider the 12.8 million Americans who remain unemployed.
While the path forward in this economy may be somewhat obscured, opportunities will present themselves. We encourage business executives to embrace this new reality and prepare accordingly.
- Be financially ready: Reluctance to hire and invest may make for a slow-growth macro economy, but strategic, innovative businesses will still flourish. For one thing, a reluctance to spend typically yields a healthy balance sheet. When that once-in-a-lifetime opportunity to invest, acquire, or hire comes along, you will be financially ready.
- Be strategically ready: “Know thyself” is an exercise that continues to provide valuable direction to both the life of a business and the life of an executive. Today’s competitive business environment and slow-growth macro-economic environment mean there can be little tolerance for trying to be all things to all people. If your business is best suited to meet the demands of the luxury consumer market, today’s business environment almost demands you do not waste resources figuring out the needs of the low-end, mass-production market.
- Be competitively ready: Given the hyper-competitive business environment fostered by slow-growth and globalization, you need to “know thy competition” as well. Your business can and will thrive in today’s market if you offer some type of acknowledgeable differentiation from your competitors. And it doesn’t always require a heavy financial investment to distinguish your company. For example, some discount air carriers continue to set themselves apart and attract customers with a deep-rooted commitment to customer service and relatively low-cost perks like in-flight snacks. On the other hand, frequent fliers in the Midwest still lament the loss of Frontier Airlines’ complimentary fresh-baked chocolate chip cookie.
- Be socially ready: Part of being strategically on-task requires today’s business executive to have a full appreciation of the power of social media. It is everywhere, and this is one genie that is not going to go back into its bottle. Even if your business caters to a segment of the population not known for being tech-savvy, chances are that segment has caretakers who are attached to their smartphones or tablets. Word travels far and fast! This has both benefits and detriments to a business. In a slow-growth environment, an elevated appreciation of this speed and breadth becomes a requisite to success.
Are we only adding to the business executive’s already too long to-do list? Probably. A slow-growth economic environment cannot be equated to a slow-paced leadership environment! As most popular headlines remind us, the U.S. is not perfect and economic uncertainty surrounds every business executive. Fortunately, so does opportunity brought about by our democracy and foundation of free enterprise. It is incumbent upon each of us to guard this foundation carefully through strategic business decisions made with the long run in mind. With our foundation fortified, we will be able to offer hope and growth for generations to come.
Sara Walker, CFA, is a senior vice president and investment officer for Associated Investment Management in Wisconsin and has more than 25 years of experience in constructing and managing investment portfolios for individuals, corporations, and nonprofit organizations.