We are in the midst of a global recession (well depression really). The prognosis doesnt look great for the immediate future. What this will mean is lower industrial growth, stagnation in services, increasing unemployment, need for Corporates to tighten their belt to protect their bottomlines.
There is a myth that Organizations have to maximize profit all the time. This is a creation of the modern capitalist world. This is not true. Organizations have been too happy to rake in extra ordinary profit when the times were good. On the corollary they should be able to sacrifice profit for organizational health during the lean periods. The objective should be to retain the position and build the company for the future. When the going is good, most organizations do not have time to introspect and plan for the future. But recessionary times are ideal to take a deep breath and make directional changes.
I have seen Organizations fall into a trap during lean times by doing the following,
1. Cutting down on Manpower and/or reducing Employee compensation
2. Considerable reduction in Marketing expenses
3. Cut back on new Product Development activities.
All the three have disastrous consequences. Loyal, good employees are as concerned about the recession as the Organization. This is the time to call them and say, "Look, we are going through a bad phase. This is temporary. We want to assure you that we value your contribution over the years and look forward to what you can achieve in the future. We will prepare this company for the future. No Salary/Benefit cuts will be implemented. In fact, we will give you additional benefits to uplift you during this touch period". Imagine the impact of such a statement on employees morale.
Ditto for point number two. Customer loyalty is created over a period of time. Reducing marketing expenses, especially advertising, can be counter-productive. Customers need to be reassured that their favourite Company and Products are in great shape. So keep on communicating with them.
New products cannot be built in a jiffy. It is a long drawn process. Slashing new product development budget is akin to slashing your throat. This is time to prepare the company for the growth phase post recession. More money has to be spent on Product Development and Market Research.
If all these means substantial reduction in profit, so be it. Why should shareholders alone not feel the pinch of the hard times?
