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  • Pavala Malar Nadan A/L Mariappan .

    Member
    January 3, 2022 at 3:08 pm

    Some of the important managerial challenges at times of crisis are as below:

    1. Employee lay-offs and benefit reductions. Employee morale deteriorate.
    One of the major challenges is to reduce cost by laying off staff. Fewer workers will be required to complete more tasks. Employee’s morale may deteriorate due to work overload, work becomes more difficult, compensation increases are halted, and the threat of additional layoffs continues.

    2. Cuts to quality of goods and services. Customer dissatisfaction and inconvenience.
    In an effort to reduce cost, the organization may compromise the quality of its products or services, and hence their desirability.
    For instance, airlines companies may add extra seats per plane, cramming the already crowded passenger even more. Airlines routes to the higher cost or marginally profitable destination would be cancelled and will leads to customer dissatisfaction and inconvenience.

    3. Less advertising and marketing. Consumer spending will fall.
    As organizations tend to spend less on advertising and marketing in all mediums such as printed, TV or online to save cost, consumers confidence weakens and their spending will fall.


    Some of the recommendation we can adhere to manage crises efficiently at times of recession / economic downturn are as follows:

    1. Understand the true impact of the recession / economic downturn on business.
    We must determine how different sectors of client base will react during a downturn, their price sensitivity, and their loyalty to product or service. We should also evaluate the strength of competition. Will the slowdown be viewed as a danger or an opportunity by them? Then we must adapt approach to the new circumstances and determine whether the new strategy has any repercussions in other areas, such as supply chain, production capacity, or financing requirements.

    2. Identify profitable products and customers. When resources are scarce, understanding the profitability of particular consumers and products is vital. We should devote time and resources to staying close to profitable products and clients once we identified them. We must comprehend how the downturn affects consumers and persuade them of the benefits of our product or service. If we fail to do this, we are at risk of losing consumers to our competitors.

    3. Cost reduction.
    During recession / economic downturn, cost control and reduction must be a top priority for management. We need to ensure to move from existing cost base to a reduced cost model. This will involves a comprehensive reappraisal of the company model in all of its elements, as well as long-term managerial commitment. The quickest way to achieve this is by segregating between essential and desirable expenditure.


    References:

    The Investopedia Team. (2020, September 9). The Impact of Recessions on Businesses. Investopedia. https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp

    Wahyudi, J., & Satar, R. (n.d.). Managing effectively in a downturn, turning challenges into opportunities. PricewaterhouseCoopers Indonesia. https://www.pwc.com/id/en/publications/assets/managing_in_a_downturn.pdf