8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 1/26

Will a Double-Dip Recession reverse the

trend of buyers “delaying outsourcing”

during a slump? Here are 10 factors toconsider…

August 22nd, 2011

Whether you buy, sell or advise on outsourcing, please click to complete our brief study and youmight win an annual subscription to HfS Research

Organizations have always been wary of outsourcing during recessions. While today it

delivers cost-reduction to clients in spades (proven emphatically during our recent state-of-

outsourcing study), many organizations have proven, in the past, to push it down the

priority-list of radical cost-reduction measures, when they fear for their very existence.

With the threat of a “Double-Dip” recession very much a grimreality, HfS believes this cycle is likely to be broken. Let’s

discuss1) Outsourcing planning has been at an all-time-high coming off the last economic crash.

Many companies have been busily planning to increase the scope of their outsourcing contractsin mature outsourcing areas such as IT, call center and print/document management, in additionlarge numbers seeking to make first-time moves into emerging areas such as F&A andProcurement (see our recent data). We’re also experiencing a shortage of available advisors to

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 2/26

help clients with their contracts, with the management consultants and boutique advisorsenjoying a strong resurgent in client-demand for advisory services.

2) IT Outsourcing is a proven commodity in today’s market and BPO is no longer a

daunting or “unique” strategy. During previous economic slowdowns, many companies

regarded outsourcing as potentially disruptive to the business, often viewing it as a unique andsomewhat risky strategy. However, as the IT outsourcing market has become a mainstreamcommodity for the large corporations, whose IT management have honed their expertise withmanaging outsourcers and global sourcing operations, utilizing offshore IT is today a tried-and-trusted cost reduction tactic employed by the vast majority of the Global 2000. Hence, it waslittle surprise that the leading offshore IT services providers continued to grow their businessesthroughout the last downturn. Moreover, while many areas of BPO that posed substantial cost-reduction gains were definitely viewed as disruptive last time out, we believe services such asF&A BPO are now proven mainstream offerings with over 800 organizations having now takenthe plunge.

3) A lot of fat was cut during the last downturn – in many cases, outsourcing is the onlyoption for productivity gains. Quite simply, most organizations can only lay-off so many staff over sequential years of tough conditions, until they reach a point where there is no more wiggle-room to find any more costs to shave. You can only request your managers to increase their numbers of direct staff reports so much, and have them take on only so much extra work, untilyou get to the point of negative returns from your staff output, In addition, organizations arefrequently losing their best staff who’ve been burned out and demoralized during drawn out periods of staff retrenchment. In many cases, outsourcing is the only logical option to open upadded resource, and free up your internal talent to focus on adding value to the business, asopposed to plugging leaks. Outsourcing can provide that opportunity to re-energize your toptalent, having freed up new resources and eliminated the ongoing cost-pressure.

4) The rise of Global Business Services is encouraging buyers, previously wary of 

outsourcing, to embed it into their global operations strategies. Our research shows that 90%of enterprises (greater than $1bn revenues) have shared services and 97% manage outsourcingengagements. However, the majority of them have yet to gain from combining shared servicesand outsourcing into one well integrated management framework, which we term as “GlobalBusiness Services”. A well-executed Global Business Services strategy is distinctly differentfrom the narrower focuses of shared services and outsourcing, as it identifies corporateobjectives and encourages internal functional silos to collaborate with each other and third partyservice providers to create breakthrough operational capabilities that drive business outcomes(click here to learn more).

As more global enterprises grapple with managing these hybrid environments, the more new-thinking we are seeing around aligning shared services with outsourcing. Additionally, whenyou examine the client strategies of the leading management consulting firms, they are allfocusing their client advisory on helping them benefit from Global Business Services; it’s nolonger about approaching ”outsourcing” in a silo, but as an enabling operational lever thatenhances a global operations strategy.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 3/26

5) The realization that we’re in an interconnected global economy is forcing the issues.

While the last Recession taught us that our global banking systems were all interconnected, thesubsequent issues surrounding government debt have reinforced the issue that our economies areintertwined to the point where we have to consider global issues and global resources in our day-to-day businesses. The capability to leverage global skills, less costly resources, data and

knowledge via outsourcing partnerships is becoming increasingly valued by business leaderswho want their operations to be global . Moreover, the better providers can support rich analyticsacross global operations, the more valuable these outsourcing partnerships are becoming for many of the maturing clients. Many organizations know they have little choice but to exploretheir global sourcing opportunities to survive in this environment – and outsourcing has a major role to play.

6) The middle-market is fast opening up. Traditionally, outsourcing of IT and business process has been reserved for the major corporates, who have much larger arbitrage opportunities, and can command the attention of the top-tier providers. However, themiddle-market tier, typically those firms with revenues between $1bn-$3bn is now exploring

outsourcing opportunities aggressively, particularly with the second-tier of providers beingforced to explore smaller opportunities with such intense competition at the high-end. Moreover,our recent research has shown the satisfaction levels within the mid-market are actually higher than those experienced by the high-end – often because they have to offer-up broader process-scope and need to reach an end-state quicker (click  here to view our insights about the “Band-Aid” effect). We believe the success of middle-market outsourcing will drive this marketforward, especially in light of the tight economic conditions.

7) The increasing availability of new global sourcing locations. It really isn’t all about Indiaand the Philippines for IT and BPO services these days. It really is a global market for outsourcing, with significant strides gained from Latin America in recent years and the

emergence of the USA and Canada as price-competitive “home-shore” locations, especially for sourcing services that require a lot of customer and business intimacy. With states such asMichigan (for example, read GE’s recent announcement) are now proving competitive from a price and talent availability perspective, we believe the make-up of many sourcing engagementsare going to involve many broader location options for clients. Moreover, a Double-DipRecession will only raise the political issues of sourcing locations to new heights, especially witha contentious Presidential election in 2012.

8′) The pressure to explore new productivity thresholds by accessing horizontal and

vertical “Business Platform” solutions.

“Business Platforms” enable customers to leverage business services through subscription-oriented, consumption methods via a business platform that integrates Cloud Computingtechnology, SaaS and Business Process Outsourcing functionality. Business Platforms aim to provide customers with business services that can help drive innovation, flexibility and cost-reduction, while providing business outcomes to clients.

Essentially, providers are looking to business function leaders to bypass their IT departments andacquire “Business Platforms” that are readily available, for example in horizontal areas such as

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 4/26

expense management and carbon-management, or industry verticals, such as pharmacovigilanceor merchandizing. Today, we’re largely only seeing components of broader business functions being supported in the Cloud by providers, but we expect this to accelerate as providers aspire tooffer more Business Platforms as they are developed.

With intense competition between the providers to push Business Platforms to clients, the greater the pressure on business leaders to run pilots and start exploring opportunities to externalize processes with providers where it makes business sense to do so. We firmly believe BusinessPlatforms are the future of outsourcing, as the worlds of IT and business process deliverycontinue to merge. A Double Dip recession will surely encourage some organizations to look atmore radical, disruptive means to reduce cost and improve productivity, and Business Platformswill provide some options to explore.

9) The career path of the global sourcing executive is fast taking-shape. Sourcing is becoming big business. A few short years ago, there were barely enough executives inthe industry to fill a lecture-theater, who were true experts in forging a career out of managing

complex outsourcing engagements for buyers. In most instances, the responsibility for managingan ITO relationship fell to the CIO, who tended to delegate most of the PMO responsibility to adirect report. Similarly, the CFO would tend to ask their shared services leads to take over thePMO functions for BPO engagements. At first, many resisted and focused too heavilyon administering punitive SLA schedules. However, as outsourcing has become mainstream,ambitious senior IT and business operations executives know they need to have provenoutsourcing PMO expertise to be taken seriously for career advancement for many leadingcorporations. They also know that successful outsourcing is only possible by continuouslearning and relationship development with their provider partners. HfS has observed asignificant mindshift since the last downturn to approach outsourcing more strategically andrecognize the benefits it can bring during tough economic times for their business. The focus on

 blending outsourcing into global operations and shared services is significantly changing thementality towards embracing what outsourcing has to offer, as opposed to resisting it.

10) And finally, your views, please! Complete our brief survey to share your views,

experiences and intentions of outsourcing with the imminent threat of a “Double-Dip”

Recession. All answers will be treated with the strictest of confidence, and you can receive acopy of the study findings. Whether you buy, sell or advise outsourcing services, your opinion ishighly valued – please

The undisputed facts about outsourcing, Part

1: Buyers are saving money, but aren’t seeinga whole lot more

May 29th, 2011

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 5/26

We would like to thank personally all 1,335 of you who took the time to compete our State of Outsourcing 2011 study we’re conducting with the London School of Economics OutsourcingUnit. This is the largest ever study that’s looked at outsourcing, which included all industrystakeholders (buyers – both business ops and IT practitioners, service providers and advisors). Aspecial shout also goes out to our partner, the Sourcing Interests Group, for inviting their 

members to participate, in addition to our 53,000 loyal readers.

We’ve been sifting through the findings these past few days, and let’s start here:

Engagements struggle to deliver business value beyond costreduction

Whatever the motives buyers have when they outsource, the first critical metric they must reachis to save the money they were promised at the onset of the engagement. And we havespectacularly good news for the entire outsourcing industry – the cost savings targets are being

met – and being met well, with over 95% of current buyers viewing the engagements as effectivefor reducing their operating costs. And half of them are really pleased with their cost-reduction progress, the other half seeing progress as “somewhat effective”. However, that’s pretty muchwhere the good news tapers off, as the rest of the results are pretty modest…

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 6/26

After cost-reduction, how is outsourcing faring?

Business Process improvements. Barely one-in-five buyers feel they are experiencingsignificant improvements from accessing new expertise and transforming processes with their current outsourcing initiatives. Half of them do see some effectiveness gains, while more than a

quarter are seeing no effectiveness gains at all with their business processes. Considering manyof these processes were likely non-core/non-strategic to begin with, which is why theyoutsourced them in the first place, it’s unlikely buyers are clamoring for process improvement inthe initial phases, instead waiting patiently for their providers to serve up experts, process mapsand best practice examples to harmonize processes. As many buyers quickly discover, if processimprovement is not in the contract, it will unlikely materialize without additional investment.

HfS believes those providers looking to develop real utility across their clients, proactively needto encourage them to adopt common best-practice process workflows. This means they needthe availability of process consultants to drive the agenda with their clients. And theseconsultants should largely be based onshore (spending time onsite) to work with the retained

team. This should be a major differentiator between providers – those that can quickly helpclients to evaluate improvements, versus those who simply want to shift as much of the work offshore as quickly as possible and keep margins to a maximum.

Introducing new technology. This is an area where buyers should be experiencing far moreeffectiveness than they currently are, with 56% only seeing modest progress and 31% nonewhatsoever. Too many engagements are still largely centered on shifts in labor-based services,as opposed to any genuine technology transformation. It’s hard to gain improvements in processes beyond a certain point if they are not IT-enabled, and clearly most outsourcing clientsstill run the same processes off the same technology platforms that they were using pre-outsourcing. Like above, clients quickly discover if it’s not in the contract, they needed to

 budget for it – whether it’s the latest SAP upgrade, or implementation of a new expensemanagement tool. If providers want to build true utility, they not only need their clients to havesimilar processes, but the more they can be enabled on the same technology, the more replicableand scalable their services will become. And if these technology platforms can be delivered inthe Cloud (even for components of functions), the easier they are to provision for clients.

HfS believes providers need to aggressively introduce new platforms to their outsourcing clients,and drive the IT-enablement of their business processes. Those providers which can acquire or develop unique technology IP to support their outsourcing clients are at a clear advantage. If clients are using highly customized IT platforms, for example in the capital markets industry, providers need to have the consultative skills to IT-enable the outsourced business processes

effectively.

Innovation. As we discussed last year (read post here), at least 50% of clients take innovationvery seriously when they outsource. And where they may be struggling to achieve innovationwith their outsourcing engagement today, they at least see the potential to achieve it in the future.Innovation is a progressive goal, once clients have got their processes operational and are in a position to explore new and creative ways to improve growth or productivity. Providers need towork with their clients to develop an innovation agenda as they operationalize their outsourcing

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 7/26

model, and their clients need to be encouraged to plan and budget for an innovation strategyfrom the onset of their engagement. Turning around to the board after two/three years to request budget for “innovation” is going to be a lot harder than if it was embedded into the initialagreement with some contractual provisions to cater for future innovation needs. Once the ink on the outsourcing contract has started to dry, corporate leadership has likely already turned

attention to other priorities.

HfS believes innovation needs to be addressed front-and-center – right from the onset of anoutsourcing initiative, and not as an afterthought. It’s like changing the wheels of a care whileyour driving – the world isn’t going to stop suddenly to allow for an innovation plan to bedeveloped. It needs to be in the works constantly as the engagement matures.

The bottom-line

HfS views this data as an important success factor for the outsourcing industry. The initial goalof outsourcing – to drive out cost – has succeeded, and succeeded with flying colors. However,

the findings also point out that the sequential business needs that need to be addressed are fallingshort. Our concern at HfS is that costs are like hedgerows - once trimmed they always grow back. Providers cannot afford their clients to struggle. After their transition to a workingoperational outsourcing model, corporate leadership isn’t going to keep reminding their shareholders about “that stellar 30% we took off the bottom-line three years ago”. They aregoing to be looking for their next improvement metric. And the only way to achieve that, is toconstantly look at harmonizing process and enabling it with better technology. Outsourcingshould provide an opportunity for buyers to take advantage of the talent acumen and IP their  provider can deliver. If buyers really do care about continuous improvement, then they will seek out a services partner which can prove, through multiple client experiences, that they have thediscipline, culture and motivation to work with them over the long-haul.

It all started when a rating agency downgraded US. Now, everybody is afraid of US hittingdouble-dip recession which will pull the whole world down once again. But is it seriouslyhappening?

Economists and experts have come up with a mixed response. Some say US may hit a slowdownand not recession, but others fear two consecutive quarters with negative growth.

“Simply because of intellectual failure, US and Europe are likely to hit another round of recession,” said economist and professor of IIMA, Sebastian Morris. Now instead of managingdemand locally, world has to learn global coordinated demand management, believes Morris.

“The economy of US can be saved from recession only with some strong economic policydecisions. Government will have to control fiscal expenditure,” he said and added that thisrecession is not going to end soon.

But Bakul Dholakia believes that the chances of US seeing recession are very less. Theeconomist, former director of IIMA and director of Adani Institute of InfrastructureManagement, said,

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 8/26

“Technically to call it a double-dip recession, US has to see two consecutive quarters of negativegrowth. In 2009, the GDP of US showed negative growth of -2.6% which increased to positivegrowth of 2.8% in 2010. In 2011, the growth is estimated to be 3%. If US has to hit double-diprecession, the economy has to fall from 3% growth to zero and further down to negative growth,that too for two consecutive quarters. This seems difficult.”

At present, US is facing problems because current account deficit and fiscal deficit are not under control. “In 2008-09, the globe was hit by recession because the whole financial sector collapsed.This time, the financial sector is strong, the only problem is with the US and Europe economy,”said Dholakia.

Also, the US will hold presidential elections next year. “In past 20 years, it is seen that in presidential election years, the economy of US booms. In 2008, the chances of re-election of  president were less while in 2012, Obama can be re-elected as he is eligible for a second term,” believes Dholakia.

Hence, looking at all the facts, figures and possibilities, it seems US may hit a slowdown but notrecession, he said.

Talking about impact on India, Dholakia said that like 2008-09, India may see slowdown. “If worst comes and US hits recession, the export industry of India will see a decline in trade. In2008-09, India grew by 6.7% while in 2010-11, the growth was above 8% and for 2011-12,growth is estimated around 8.5%. So chances of slowdown in India are also less,” he said.

Stock markets across the world are seeing heavy correction in past one month. “In short-term,say between three months and six months, there is no relativity between stock market andeconomy. So it will not be correct to compare poor markets with growing economy,” explained

Dholakia.

Any of the following three possibilities could lead to global recession, believes economist andconsultant, Nayan Parikh. “At present, of the three rating agencies, only one has downgradedUS. If one more agency does, there are chances of global turmoil.

Another possibility is if S&P downgrades US further. Then recession will hit the whole world.And the third possibility can come from Europe. If any of the European sovereign defaults, thewhole world can collapse,” said Parikh.

There is not a single economy in the world, including India which is immune to global turmoil.

“Earlier, we were talking of GDP growth of 9% and now the rate has come down to 8% or 8.5%.If recession hits, of which the chances are on the higher side, the Indian growth will come downto 7%,” said Parikh.

Relatively, the slowdown may not be as bad as it was in 2008, he believes. “We may see jobcuts, fall in exports and fall in production. If globe hits recession, India may witness slowdown,”said Parikh.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 9/26

CEOs interviewed by Price Waterhouse Coopers in their 11th annual survey of CEO economicconfidence indicate the lowest confidence figures in continued business growth since 2003 in North America (35%) and Western Europe (44%). In North America, this figure is down from53% last year. In the Asia Pacific, Latin America, and Central and Eastern Europe, CEOsindicate much greater confidence in continued economic expansion and business growth.

Given the downward spiral of CEOs' confidence in the United States, and with all of the talk about the uncertain economy in the U.S. and Western Europe, what have you done in your company or department to plan for the possibility that the downturn continues in severity andfurther impacts your employees?

These are some of the actions I recommend as you plan for your employees, for your HumanResources department and for the other departments within your business, perhaps for your whole company, as economic uncertainty continues.

Overall Company or Departmental Response to Continuing Economic

Uncertainty

• Take a look at your strategic plan, your mission statement, vision statement, values, andannual goals. Is your strategic framework sufficiently articulated to help you make itthrough a serious downturn? Has it been sufficiently communicated to your employees sothat they are not afraid, they trust their leadership, and they feel they are headed in ashared, positive direction?

Asking them to participate in the conversation is an important commitment to utilizingyour employee talent and dedication. Discussing the impact of your strategic framework:mission, vision, values, and goals, on each employees' job is the step that helps them

"own" the strategic direction. Without this step - they are just puzzled. Sorry.• Be aware of your company's and your industry challenges. Is your product or service

essential no matter what happens in the economy? Does your product save time, savemoney, or otherwise make itself indispensable even in a down economy? If notimmediately determinable, how can you reposition your product or service so thatcustomers begin to see it that way. The customer loyalty and the brand recognition youhave built over time will become even more critical in a continuing economic downturn.

• Have you done contingency planning to identify your potential risks and the affects of economic uncertainty on your business or function? What  potential scenarios are mostlikely to unfold for your organization? What will you do differently in the variousscenarios you consider, and, in the short term, is there any way you can change the

 potential impact of the various scenarios? As an example, what areas of your HumanResources department need to change or grow to deal with an economic downturn?Staffing? Benefits? Employee morale programs? Retirement planning? Employeetraining channels?

• You need to communicate that your leadership team is doing forward thinking, forward planning, and discussing possible less-than-positive contingencies. Most of your employees don't care what the specific plan is. But, it is critical to their retention andsense of well-being, that a plan exists, that they know a plan exists, and that they

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 10/26

understand that someone is really minding the shop. And, in my experience, even the bestcompanies are bad at communicating all of this.

• Employee Impact of the Company Response to Economic Uncertainty• You may want to look at your plans for hiring employees this year. For employee  

morale, and to look as if the ship has a captain, it is better to decide not to hire additional

staff than to risk having to downsize later.• If  downsizing becomes necessary, deal as humanely as possible with your employees: 

the employees you let go and the employees who remain. Communicate, communicate,communicate during the whole process. You must appear rational, thoughtful, and fair inyour process for employees to continue to trust you and to retain your position as anemployer of choice.

• Find ways to buffer your employees to minimize the impact of an economic  downturn:--Have telecommuting policies in place.--Encourage employee carpooling.--Sponsor  brown bag lunches and book clubs.

--Provide training in-house minimizing the need for employee travel and inconvenience.--Effectively communicate the redeployment of any internal resources to minimizeemployee distress. And, change your expectations of the group that has fewer resourcessimultaneously.

• Provide investment information - not recommendations - so employees can make  good choices for their future.

• Support more casual dress code policies so employees are not spending the big bucks  either trying to impress or to create an entire formal set of clothing used only for work.

• Adopt Health Savings Accounts (HSAs) so healthy employees can build up savingsand less healthy employees can set money aside for health care costs.

• Offer more team building activities for employees outside of work that are  

inexpensive, yet involve employee families in bonding, not in finding expensiverecreational activities. Ice skating, picnics, renting a movie theater, Halloween costume parades at work, discounted tickets and transportation to sporting events, pot luck suppers, a popcorn machine and DVDs shown in the company lunch room for families,are all inexpensive ways to build the team. You are limited only by your imagination butyour sponsorship of such activities is viewed as employee-friendly and employee-committed.

• Employees will  bring their economic stress into the workplace. An employee whosespouse is laid off has real and troubling economic concerns. An employee who is havingdifficulty selling his home, after purchasing a new home, is experiencing considerablestress struggling with two house payments.

Expect these concerns to spill over into the workplace and prepare your managers. Theyneed to understand that they walk a fine line between expressing concern and askingquestions if an employee's performance changes, and turning into counselors. Counselingis not a role for which they are trained nor is it advisable to involve themselves toodeeply in the personal affairs of their reporting staff. Pay attention and coach managerswho stray too far from the line.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 11/26

• Offer your employees training sessions at brown bag lunches that provide information  about recession-related topics. Educate employees about how they can cut their creditcard debt, how they can make and stick to a budget, and how they can increase their savings return. Offer educational sessions, too, for the Baby Boomer generation of employees, who will soon be retiring or working less, about 401(k) distribution,

stretching retirement savings, and perhaps, how they can avoid retiring.• Putting these plans in place should make your business, and especially your employees,

recession-proof in the midst of economic uncertainty.

Double-Dip Recession Scenarios for

Your Organization

Like most people, I hate to consider the prospect of a double-dip recession. There’s been a lot of  pain and suffering over the last several years and I shudder to think things are going to get worseagain.

It’s as if we’re all part of a large tribe that wandered into an economic bog. Some peopledisappeared entirely, some came through it just fine, but a majority emerged in various stages of trepidation, exhaustion, or even injury.

 Now it appears the tribe may not have crawled out after all. Perhaps we only scampered up ontosome more solid ground for a short while and are approaching another quagmire.

If that’s true, then what’s next? Profits at large corporations have risen, partly because they’vefigured out how to do more with less. But that doesn’t mean there are a lot more cuts to make.Many if not most workforces are already lean because employers have been reluctant to hire. Asa result, many employees are working long, stressful hours. And small businesses are sufferingnarrower profit margins.

Unemployment is still at 9.1% in the U.S. As for employees themselves, here’s how the NewYork Times put it:

Employees have always received more than half the total national income, until now. In 2010,

the percentage of national income devoted to wages and salaries fell to 49.9 percent, and itslipped a little more to 49.6 percent in the first quarter of this year. That continued decline mayhelp explain the economic worries of many Americans who have jobs but still fear they arefalling behind.

Whether another recession hits or we simply limp along at slow rates of economic growth,employers are going to have some hard choices to make. Below are four scenarios showing howthis could play out at individual organizations over the next year or more:

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 12/26

Scenario One: Burnout City

In this scenario, a company that suffers through a double-dip recession makes an explicit or tacitstrategic decision to focus solely on costs and revenues. As a consequence, it pushes existingemployees harder and looks for other efficiencies while instituting stress-inducing events such asrestructurings and layoffs. The result can be an extended period of employee burnout that,ironically, affects loyal and conscientious employees most. They are the ones who put forward110% for years on end, but this extended work effort can ultimately place a strain on everythingfrom team relationships to overall engagement. In this situation, trust in leadership is eroded and political infighting occurs. This creates morale problems that feed on themselves.

Scenario Two: The Performance Priority

In this scenario, an organization decides it can’t focus solely on revenues because it mustmaintain a positive corporate culture in very difficult circumstances. What this requires above allelse is a prioritization of performance management and planning. That is, the organization needsa clear picture of how well individuals and teams are performing. To achieve this, it creates or maintains a performance management system that is accurate and trusted by employees as wellas managers. When performance data is in, the organization identifies areas where, if  performance were boosted, it would have the maximum positive impact on revenues and culture.Once this is accomplished, leadership creates development, management and incentive plans that

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 13/26

focus on these areas, but it does so in such a way as to create excitement about new opportunitiesfor learning, career growth, and potential rewards.

Scenario Three: Soliciting Salespeople

In this scenario, there is no double-dip recession but the recovery continues to be slow as Europecontinues to work through its debt problem and unemployment remains high in the U.S. Theexecutive team of the single-minded organization knows it needs to boost revenues and that ROIis best served by hiring seasoned sales and member-services employees, the latter focusing onupselling.

This strategy can, in fact, help improve the financial status of the organization over the short-term but it can also create stress on other parts of the organization as product demand rises butthe ability to meet that demand remains the same. This puts pressure on the organization to prioritize or increase efficiencies. Service organizations may be especially hard hit because it isnot easy to generate the same economies of scale prevalent in manufacturing organizations. The

result is added work stress on service- or product-delivery employees, which results indivisiveness among different functions. Combined with salary freezes and a lack of rewards for  people who are working longer hours to meet demand, this can lead to a fractured corporateculture.

Scenario Four: Capacity Planning and New Hiring

In this scenario, there is also slow growth but the managerial approach is different. Rather thanfocusing only on sales-related hires, management engages in capacity planning in order to learnmore about:

1. current hours worked and productivity per exempt employee2. stresses and bottlenecks in the current organization3. the capacity for meeting customer needs in other areas if more sales personnel are added4. the expected ROI associated with each new hire

By studying capacity, the organization will be better able to make good hires without sacrificingquality or creating a resentful and divided culture.

Conclusion

 Now is the time to consider these issues. The next few months will tell if we are in the grip of a

double-dip recession or if we will continue our slow-growth trajectory. Companies should be prepared either way. I prefer the “mixed emphasis” scenarios because I think they will lead tomore sustainable success over a period of years, but I expect there will be plenty of cases of “single-minded focus” occurring, especially if another recession hits.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 14/26

Scenario Planning: How Can it Help Your Business Adapt 

and Thrive?

Photo Courtesy of www.istockphoto.com/

The sense of uncertainty lingering in the air like a heavy fog. The feeling of hesitation andinsecurity for what the future holds. The underlying sense of pessimism everywhere.

 Now, all this is is of a double-dip recession. Some media outlets seem to be chomping at the bitto declare that that’s already the case. The U.S. credit rating downgrade and market turmoildidn’t help matters.

A tool within reach that allows me to make sense of the uncertainty. It’s called scenario planning, and it’s already changing the way about the future. This simple-yet-powerful tooloffers serious benefits for the small business owner. It can help you:

Get a grip on the political, economic, social, and technological factors that could impact

your business down the road.

• My top two factors can be boiled down to unemployment and healthcareregulations. Over the past year, I’ve seen a direct correlation between thelabor market and sales; people will put off buying new shoes if they don’thave jobs. The second factor is something that could increase my costs andlimit my growth. But within this hotly contested political environment (andthe 2012 elections just around the corner), nothing is set in stone; a newCongress or President could alter the healthcare regulations.

Weigh the tough decisions that shape the future of your company.

• Scenario planning is great for adapting to the changing marketplace. When itcomes to making big decisions about your business, it’s equally capable.Imagine, for example, that you’re thinking about buying a smaller competitor.Using the approach outlined here, you can create alternate futures that couldimpact your decision. Knowing these possibilities – and “living in them” bycreating detailed scenarios – can inform and guide you during the decision-making process.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 15/26

Plan for low-probability, high-impact events.

•  This tool is also very good at helping you plan for the low-probability, high-impact events that could shape your business. This article notes how the CEOof AutoNation used this approach to become more profitable during therecession. That’s an impressive feat, considering the auto industry’s turmoil.Regardless of the environment you’re facing, this type of thinking – whichreally boils down to living in the future – is essential for your long-termsuccess.

So how do you do it? Scenario planning isn’t something that requires a lot of time or effort. Itcan be boiled down to five simple steps. First, create a planning time horizon – for example 2-3years. Then...

• Step 1: List and prioritize the outside forces that will impact your businessover that time period.

• Step 2: Using the two most important factors, make a grid; one factor is the

X axis, and the other is the Y axis. The two ends of the axis are oppositeextremes (for example, fewer regulations vs. higher unemployment, or stableregulations vs. lower unemployment).

• Step 3: Brainstorm what the possible future will look like for the fourquadrants on your grid. (fewer regulations and higher unemployment vs.stable regulations and lower unemployment, etc.)

• Step 4: Figure out the implications of each of the four scenarios, and thendetermine specific actions to adapt to those changes.

• Step 5: Develop metrics to track your two key factors over time.

This online tool, which guides you through these steps in deeper detail, can be used to recordyour thoughts and save your scenario plan. (As the instructions point out, the tool can also be

used to get a grip on the personal factors in your life. Very useful stuff!)

To make the most of the scenario planning tool, consider these questions:

• What shifts are taking place within your industry?

• What external forces keep you up at night, and how could they impact yourstrategy?

• Is each of your scenarios plausible and distinct from one another?• Have you involved your senior management in the planning process?

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 16/26

• One of the great things about scenario planning is that it doesn’t require a lotof time or energy. Next time you have an hour to spare, sit down and start towork through the process. If you’d like to see a case study of this tool inaction, check out this link.

• As you develop your different scenarios, it’s important to bring in a widerange of perspectives. Check out this link for useful ideas that can help youpaint a full and accurate picture of the (potential) future, as well as avoidcommon scenario planning pitfalls.

 Your answers allowed you to develop a sales effectiveness-sales management process with

built in accountability and a strategic plan that provides a roadmap to success. You are nowin a position to take advantage of any opportunities that may present themselves?

Leadership is About Taking Action 

Leadership is often measured by your ability to take action. Yes, sometimes that means

shooting from the hip by taking "calculated" risk. It becomes a function of how fast you can

analyze a situation, take action and make things happen. The more proactive you are, the

more productive you will become. This earns trust and respect. There is no greater reward

than accomplishing a difficult task. However, you can't complete a project if it never gets

started. Effective leadership means employing the following tactics by you and your

management team.

• Create self-imposed deadlines to stay focused. Don't create undo pressure but do make

timeline commitments. Create milestone markers to judge progress on all initiatives. These

can be termed mini goals leading to your ultimate goal. Assign KPI's (Key Performance

Indicators)

• Don't be a perfectionist. Unless you are a brain surgeon don't let perfection or analysis

paralyze you or your team into inaction. Sometimes good is good enough. The slogan "Good

is the enemy of Great" does not always apply. Remember, once you decide on your initial

actions you can always go back and adjust or react to circumstance. Remain flexible.

• Don't prioritize based on how difficult a problem is and leave it for last. Prioritize based onthe impact on your goals, importance and success. We face both easy and hard issues every

day. Generally, it is better to get the tough ones out of the way first. Taking on the easy

tasks first allows us the opportunity to "lolly gag" in our actions to avoid the more difficult

tasks. Also, as a leader you must learn the art of empowerment and delegation.

Build up your defenses by striving to be proactive in everything you do. Taking action is

always the best way to conquer challenges and master change. Doing nothing should never

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 17/26

be an option.

Change is a Fact of Life 

Without change, your company becomes stagnant, uncompetitive and boring. A leader's

major responsibility is to create change, instigate change and then manage change

effectively. In spite of the fact that creating change is a key competency required to be an

effective leader, most people resist change. This includes leaders themselves. However,

effective leaders accept change as a positive force and they are able to convince those that

follow them that change is nothing more than a roadmap to a new and better destination.

Creating induced change during tough economic times is not an option it is a necessity.

Creating change, managing during turbulent times, or fostering growth in a recession

depends on your skills as a leader and your ability to empower your team. No one person

can make a company successful. It takes a lot of people, but one person with a command of 

leadership can transfer enough influence, creating enough leadership amongst themanagement group to guarantee success.

One thing you must continuously consider when evaluating the organization you structured

to meet and beat economic challenge is............................

"In Tough Economic Times ---- Average Performance Just Isn't Good Enough!"

• Ernst & Young Client Portal • Library• About us• Newsroom• Stay Connected• Global (English)•

• Home•

Insights• Industries• Services• Careers•

• Home• > Newsroom• > News releases

þÿ

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 18/26

• > Triggering a double-dip recession through fiscal consolidation rankednumber one risk for governments

• Newsreleases

• PR

contacts• PR

activities• Analyst

relations

• Factsandfigures

• Print• Email •

Triggering a double-dip

recession through fiscal 

consolidation ranked 

number one risk for 

governments

A new cross-border study explores

the top 10 business risks and

opportunities globally for

governments and public sector

organizations. 

London, 26 July 2011 – Generating a double-dip recession through fiscal consolidation isthe number one risk for the government and public sector, according to a new cross-border study conducted by Ernst & Young. Based ona series of in-depth interviews withgovernment and public sector commentators

and more than 100 government and publicsector representatives in 15 countries, Turn

risks and opportunities into results exploresthe top 10 business risks and opportunitiesglobally for governments and public sector organizations.

Risk continues to dominate the agenda. Theissues of reduced spending limited economicgrowth, sustainability and security, having allcontributed to this era of uncertainty thatcitizens are experiencing around the world, but with these changes also come opportunity.

On a global level, concerns about a secondstemmed largely from fears that fiscalconsolidation in Europe and the US – following government bailouts during thefinancial crisis – would lead to a major 

Contacts

Mélodie Deniz Ernst & Young Global MediaRelations

+44 20 7980 0475+44 78 1063 0576

 

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 19/26

reduction in government spending with potentially negative economic effects.However, growth in the emerging markets andrecovery in many developed economies

despite the ongoing debt crisis is reducing therisk of a global double-dip recession.

In the wake of the economic crisis, therebalancing of power in global governancestructures has become increasingly clear. Theexpansion of the G8 to the G20 will likelyencourage specific groups of countries to playan increasing role in global governance,including ad hoc alliances and regionalgroupings.

Philippe Peuch-Lestrade, Global Government& Public Sector Leader at Ernst & Youngsays, “Initially, in many countries,governments implemented across-the-boardcuts due to a need to act quickly. This was anecessity at the time but now governmentsshould really pursue selective cuts designed todecrease spending where possible, while atthe same time increasing investments in areasthat will encourage economic growth.”

Promoting CSR practice for alternative

public service delivery models

Delaying climate control and sustainabilityinitiatives was ranked as the second mostsignificant risk and is expected to have alasting influence over the next few years.Other risks that will rise in importance includeinsufficient investment in education, failure tomanage costs of pensions and health care for an aging population, and weaknesses in publicgovernance and poor accountability.

Public debate on sustainability has beensidetracked by the global economic crisis. Theresulting policy uncertainty and failures to provide consistent price signals make itunlikely that the investments necessary for thedevelopment of a green economy will be

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 20/26

made. Explains Peuch-Lestrade, “To manageclimate and sustainability risks, governmentsneed to guarantee transparency in carbon policy and introduce new regulations that will

shape consumer preferences. Governmentsmust remove uncertainty surrounding theseinitiatives as soon as possible as uncertainty isa disincentive to investment.”

Concludes, Jan Peter Balkenende, Partner atErnst & Young Netherlands and Former  Netherlands Prime Minster, “The changingnature of the nation-state, the growth of CSR and the public sector debt burden will drivesignificant changes in many countries’ public

sectors. The concept of the modern nation-state is becoming less relevant, meaning thatthe role of governments will change and dothings in a new way. There will be a shiftfrom traditional concepts of the nation-state toa more international approach, and morecooperation with various partners in society.”

Top 10 risks for governments in 2011

1. Triggering a double-dip recessionthrough fiscal consolidation

2. Delaying climate control andsustainability initiatives

3. Failing to manage debt and fiscalpolicy

4. Speculative financial attacks andsovereign debt downgrade

5. Insufficient public investment ineducation

6. Inability to maintain deliveryeffectiveness due to reduction of resources and HR transformationneeds

7. Failure to manage costs of pensions, health care, and elderlycare for an aging population

8. Inability to address internationalterrorism and border controlissues

9. Failure to plan for long-termdemographic shifts

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 21/26

10.Weaknesses in public governanceand poor accountability

Top 10 opportunities for governments in

2011

1. Strengthening new forms of global governance

2. Overhauling financial sectorregulation

3. Reviewing the core purpose of government

4. Driving change through IT5. Developing new delivery models6. Increasing public-private

partnership7. Industrial policy to encourage

growth in leading-edge sectors8. Rethinking regional and urbandevelopment

9. Promoting and enhancing CSRpractice for alternative publicservice delivery models

10.Enhancing the role of government in the economy

- Ends -

About the methodology

Ernst & Young interviewed a panel of 12 professionals in the government and publicsector, asking each interviewee to identify thetop risks and opportunities for governmentand public administrations bodies in 2011, aswell as risks and opportunities “below theradar” that could rise in the top 10 in yearsahead.

The panelists were selected for their demonstrated insight and leadership within

the sector, rather than as a representativesample.

We also interviewed 29 Ernst & Youngleaders and directors from around the globe,who contributed their knowledge on the risksand opportunities covered in this report.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 22/26

We asked the interviewees to comment onthese risks and opportunities with regards tohow they saw them evolving over the nextthree years, and for their views on how

governments should respond.

The panelists' risks and opportunities weregrouped and aggregated to form a strategicchallenge list for the government and publicsector.

The second phase of our research was toconduct a large-sample survey of companiesand governments in 15 countries in order torank the strategic challenges, obtain forecasts

on whether these challenges would be more or less important in 2013, and discover howleading organizations in each of the sevensectors are responding to these challenges. In15 countries, a total of 112 interviews wereconducted for the government and publicsector.

About Ernst & Young’s Global

Government & Public Sector Center

Around the world, governments and not-for-

 profit organizations are continually seekinginnovative answers to complex challenges.They are striving to provide better services atlower costs and to ensure sustainableeconomic development, a safe environment,more transparency and increasedaccountability. Ernst & Young combines private sector best practice with anunderstanding of the public sector’s diverseneeds, focusing on building your capability todeliver improved public services. Drawing onmany years of experience, we work with youto help strengthen your organization, deliver value for money and achieve lastingimprovement. Ernst & Young’s GlobalGovernment and Public Sector Center bringstogether seamless teams of highly skilled professionals from our audit, tax, transactionand advisory services. We are inspired by a

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 23/26

deep commitment to working with you to helpyou meet your goals, achieve your potentialand enhance public value. It’s how Ernst &Young makes a difference.

About Ernst & Young

Ernst & Young is a global leader in assurance,tax, transaction and advisory services.Worldwide, our 141,000 people are united byour shared values and an unwaveringcommitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.Ernst & Young refers to the globalorganization of member firms of Ernst &

Young Global Limited, each of which is aseparate legal entity. Ernst & Young GlobalLimited, a UK company limited by guarantee,does not provide services to clients. For moreinformation about our organization, pleasevisit www.ey.com.

This news release has been issued by EYGMLimited, a member of the global Ernst &Young organization that also does not provideany services to clients.

Should You Prepare For A Double Dip

Recession?

By Linda Stern | Jun 7, 2010

inShare 

5

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 24/26

The prospect of a double dip recession in the U.S. and the world isspooking investors and economists alike. We haven’t really recovered from the deep recessionwhich started at the end of 2007; now there are signs that we could be heading back into another  before we ever get the growth in jobs, home prices, and production that would signal a realrecovery.

The signs of a double dip recession are statistical, and they are emotional, too. Stock market prices — a leading indicator of economic activity — have dropped 11 percent in a little more

than a month. The M2 money supply, which also heralds economic activity, is down 0.3 percentfrom its January level. Bank lending remains slow, and consumers still seem reluctant to buyanything big like a house or a car without a fat government credit bringing them to the table. Oh,and all those new jobs that were created in May? A head fake, says MoneyWatch’s JillSchlesinger . Almost all of them were temporary government-created Census jobs.

There are all of those worries out there, too: the possible collapse of the Eurozone and the end of the euro; that horrendous oil spill and the resulting economic hit to the Gulf (and possiblyAtlantic?) coastal communities; the prospects of more war in the Middle East; and the giantdebts of individual consumers and sovereign nations, including the U.S. Ugh.

But before you head to the basement with your gold coins and canned goods, consider this: Mosteconomists still do not believe we are headed for a double dip. Some, like Templeton AssetManagement’s Singapore-based chairman, Mark Mobius, see the current global struggles as a bargain-hunting opportunity. The optimists point to Fed Chairman Ben Bernanke and say he willcontinue to make credit as cheap and easy as he has to, to keep everything chugging along. Andthat stock market slide? Remember that it comes on the heels of a 71 percent rally betweenMarch 2009 and April 2010. A recovery takes time, and there are reasons why it’s better to havea slow recovery than a runaway one.

Bottom line? There are risks here that we could dip back into recession mode, but it is not acertain, or even probable path. Here’s what you can do about it now:

• Take the gift. The slow and scary nature of this recovery is a gift for anyone with debts, because it is keeping interest rates near historically low levels for a long, long, time. Usethis opportunity to refinance any variable rate debts that you can lock in at today’s lowrates, and also to pay off those loans as aggressively as possible. The less debt you have,the better off you’ll be regardless of where the economy takes us next.

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 25/26

• Hedge your bets. I’m not talking about investing in crazy, hard-to-understandderivatives, I’m just saying that you don’t know what’s coming, so keep your portfoliovery diversified. It’s good to have some stocks, some bonds, a house, and some money insafe, safe certificates of deposit and money market mutual funds. Diversify further withsome foreign holdings and perhaps a few shares in a commodity fund. Whatever happens,

you’ll be spreading your risks and be poised for some profits.

• Keep reading the tea leaves. There will be more signs of economic progress (or lack thereof) this week. On Wednesday, the Fed will release its beige book review of economic conditions and Bernanke will talk about the economy. On Friday, we’ll get asense of retail sales, consumer sentiment and business inventories. Europe will keepchurning out daily economic developments. The stock market will keep going down, or up, or both. Hold on to your hats.

• Should Your Business Fight Every

Unemployment Claim?

•

• By: Rebecca Mazin|• Contact• Filed In: Staffing & HR  • 2011-08-29• inShare• Share

• Print• You finally summon up the nerve to fire that employee who can't seem to come in to

work on time any Monday, Wednesday or Friday. You got tired of the endless excusesabout traffic, public transportation delays, and childcare complications have exceededyour patience level.

• The final straw was when you heard one employee comment to another that "It'sTuesday, so Sal will actually be on time." Sal had to go.

But that feeling of regaining control over your business only lasted until you got a noticefrom your state unemployment office. Sal filed a claim for benefits stating he couldn't getto work on time due to family obligations. As the steam begins to escape from your ears,

you pen a blistering reply with a long list of reasons why the claim for unemployment benefits should be denied.

• When your company' reputation is at stake and there's money on the line, it's your  prerogative to fight every unemployment claim. So you should fight, right?

•  Not necessarily. Here's why.• Pick Your Battles

First, take a dee[ breath before you fire off your real feelings about the ex-employee. As

8/3/2019 Ob Double Dip Recession

http://slidepdf.com/reader/full/ob-double-dip-recession 26/26

hard as this may be for a small buisness to take, you need to recognize thatunemployment is designed to err on the side of leniency in giving benefits.

• Claims are usually denied in cases where an individual does not meet the formula for having worked long enough; if they were unavailable for work for no good reason; or if they were were terminated for misconduct. The unemployment definition of 

"misconduct," however, is much stricter than that applied by most employers. Poor attendance records are rarely considered misconduct. That employee who sauntered inlate every other day was granted benefits when the local Department of Labor saw thatthey had to spend time dropping off their kids at daycare.

• The goal of unemployment benefits is to keep people actively engaged in the workforcewith the ability to look for a new job. In our weak economy, benefits have been extendedto encourage people to continue their searches. No one wants the long term unemployedto simply drop out of the labor market all together.

• So go ahead and write your response, but remember that there's no reason to be nastyabout it. Also be sure to seek professional advice before taking on a prolonged battle tocontest a claim that will ultimately be granted anyway.

•

I was once surprised, for example, when a manager won unemployment benefits after shequit to move out of state. It did not take long to learn that the claim had beengranted because her husband had been relocated by his employer, giving her no choice but to resign and move away.

• Don't Add Fuel to the Fire

If an employee does something truly egregious, like stealing from you, then by all means-- clearly state your case, and provide details with evidence that you conducted athorough investigation. But when an employee is terminated for a lesser offense andclaims that they are being treated differently because of their race or nationality you maywant to hit the pause button. As with any claim of discrimination it's time for a thoroughinvestigation. It may also be time simply to allow the claim for unemployment benefits to proceed. The angrier the ex-employee is, the more likely they are to file a charge of discrimination.

• Take the time to look at the big picture for your unemployment claims. One or twoclaims should not change your strategy. At the same time, pay attention to reports of  payouts. Last year one of my clients identified a seasonal worker who, after a layoff,continued to collect when back on the job. The employee was fired for falsification of information, and the Department of Labor took over to collect on the unearned benefits.