Decision-making challenges facing CEOs and their top strategists will be more difficult in the second half of 2009 than they were during nearly two years of recession, according to a [email protected] article titled “Managing in an Upturn: Focus on Customers and Keep Expectations Low.” The article explains that managers have to make risky decisions on issues like increasing production back to pre-recession levels: Acting too soon could make a company waste millions on unsold inventory, while inaction could lead to significant lost revenue opportunities if the economic recovery is strong and takes place quickly.
“The big challenge is managing expectations. Good times may take some time to return, and the path may be bumpy,” says Wharton management professor Peter Cappelli, director of the Center for Human Resources. Capelli adds that a bad scenario would be if companies believe things are [back to normal] and then business hits a snag, requiring more cost cutting and layoffs. “So the task is how to prevent companies from getting unreal expectations once business picks up," he notes.
Quoting management experts, [email protected] says that the current economic uncertainty also offers an advantage, too, by making it a good time to focus less on short term goals and more on the big picture. That includes strengthening relations with existing customers, looking at shedding unproductive units while strengthening the core brand, and putting an emphasis on branding and on research and development in order to be ready with new products when the recession is over.
Meanwhile, not everyone is optimistic about the extent of the economic recovery, says [email protected]. San Francisco Fed President Janet Yellen, in a speech near the end of the summer, warned of a less than robust recovery that may be shaped more like a "U," with an elongated bottom, than a "V," suggesting a rapid recovery.
Wharton operations and information professor Morris A. Cohen says that inventory management and recruitment are the most difficult issues facing executives right now. "[We are in] the worst downturn since the Great Depression, which means that perhaps what happened over the last 20 years doesn't apply," he says. "Maybe this is [like the] one-in-a-hundred-year flood. People are more risk averse. They are saying that just because it worked out this way the last three times, doesn't mean it will work out this time."