With 111 months of positive economic recovery under our belts, we’re long overdue for another slowdown. Here are six ways to make sure your distributorship is ready for it.
Economic “boom” and “bust” cycles—aka, expansions and contractions—in the U.S. averaged 38.7 months in expansion and 17.5 months in contraction between 1854 and 2009. According to the National Bureau of Economic Research, there were 33 business cycles between 1854 and 2009, with each full cycle lasting roughly 56 months on average. And while they vary over time, between 1945 and 2009 the average business expansion was approximately 58 months, while the average contraction was approximately 11 months.
The Great Recession ended in June 2009, which means the recovery is now 111 months old, by CNN’s count. Put simply: we’re long overdue for a slowdown. “We’d all like to think that the good times will keep going on forever, but they won’t,” says Dov Baron author of Fiercely Loyal: How High Performing Companies Develop and Retain Top Talent, speaker, and president of consulting firm Full Monty Leadership in British Columbia.
“Markets fluctuate; they have ups and downs. That’s the natural state of things,” Baron emphasizes. Of course, anyone who took an economics class in high school or college understands the basic ebbs and flows of the world’s economies, but that doesn’t mean they’re preparing for the worse when times are good. In fact, most businesses are content to ride the wave of prosperity and then wait to deal with the downturn when it actually happens.
This is a flawed approach, says Baron. “The ‘ego’ part of our minds likes to cling to safety,” he explains. “In other words, if something is working, we like to think that it will always work regardless of changing economic conditions, competition, and/or customer preferences.”
6 Steps to Take Now
The good news is that it’s not too late for electrical distributors to start thinking not only about how they’ll continue to thrive right now, but also how they’ll survive when the inevitable happens. Here are six steps to start taking today:
- Recognize that you’re operating in a disruptive world. As the middlemen in the industrial transaction, distributors rarely get a breather between disruptors. Right now, for example, everything from competitors like Amazon Business to changing B2B customer demands to a lack of skilled labor are putting interesting challenges in front of electrical distributors. “We’re living in a time of massive disruption on many different levels,” Baron points out. “Because of this, what you’re doing in an ‘up market’ probably isn’t going to work in a ‘down market. It’s time to recognize this and start making changes.”
- Focus on inclusion and collaboration. If you’re stilling running your distributorship based on age-old hierarchies and management structures, now it’s the time to “flatten” those hierarchies out and make room for new ideas, feedback, and mindsets—all of which can come from your existing employee base. That means moving away from a “we’re the bosses and leaders, so we make the decisions” corporate culture, to one that invites feedback, innovation, and new initiatives.
- Create meaningful work. When the last recession hit, companies were still enjoying a “normal” national unemployment rate and had a pool of recruits to choose from. This time around, we’ll assumedly be going into the downturn from a much weaker position on the recruiting/hiring front. Keep this in mind, says Baron, and understand that your goal should be on keeping your existing employees loyal while also finding new team members. To get there, take the time to create meaningful work for those valued employees. “If you want people to stick with you through the next downturn, they’ll need to be able to ‘feel’ an emotional bond to your organization,” Baron says. “They want to know why they’re there, how they’re contributing, and what positive differences they’re making in the organization.”
- Ask, don’t tell. While you’re coming up with ways to stoke more collaboration among your team members, be sure to ask them what they want. Baron recently worked with a firm that was struggling to reduce its employee turnover, and that couldn’t understand why the foosball tables, latte machines, and breakroom bean bag chairs it had invested in weren’t working anymore. “Did they ask anyone if they actually wanted those things?” Baron asks, “The answer is ‘no.’ Instead, they researched the market without ever talking to anyone within the organization about it. As a result, the value of the beanbag chairs and latte machines was completely destroyed.”
- Maintain a small business feel. In 2008, a lot of people lost faith in large companies, and in their futures within those companies. They began to trust smaller enterprises that eventually weathered the storm to come out stronger and ready to take advantage of what would become an extended economic recovery period. To continue riding this wave of “trust in small business,” Baron says electrical distributors of all sizes can borrow a page from these smaller entities. One way to do this is by creating a close-knit, inclusive culture that makes everyone feel like they’re contributing to the greater good. This is particularly important for millennial employees, who rank “being in a role I’m passionate about” above salary and other benefits.
- Commit to running a purpose-driven organization. Built around purpose-driven leaders, purpose-driven organizations understand the importance of employee engagement and how to relate personal and organizational purpose with improved performance, according to Six Disciplines. A recent Harvard Business Review study found that 71 percent of executives rank employee engagement as very important to achieving organizational success. Yet, only 24 percent said their employees were highly engaged. This differential describes “the engagement gap,” and companies worldwide are clamoring to find effective ways to close the gap. “To ensure your company’s longevity in any market conditions, you must create a purpose-driven organization where people come every day to do meaningful work,” says Baron, who adds that statements like ‘Our purpose is to be the best in the electrical distribution industry’ don’t cut it. That’s not your real purpose. That’s just some crappy mission statement that everyone uses.”