We outline the key steps your organisation can take to stay strong during times of economic and political uncertainty
The past 12 months have seen a return to economic uncertainty in the UK after a period of comparatively solid growth post-credit crisis. However, with growth in emerging markets (China in particular) slowing down and the UK’s vote to leave the EU at the start of the summer, both the FTSE and other global stock markets have been subject to huge amounts of volatility.
The fast-changing economic and political conditions have also had a direct impact on business confidence. A PwC survey of UK CEOs at the start of the year revealed that 23% expected the global economy to decline in 2016 . Fast forward six months and a post-Brexit poll by YouGov showed that 49% of UK businesses are pessimistic about the country’s economic outlook over the next 12 months .
Here, we look at seven steps businesses should be taking now to strengthen themselves ahead of any economic slowdown.
1. Focus on talent
According to the Chartered Management Institute’s (CMI) Future Forecast  recruiting the right employees is the top priority for managers in 2016, with 58% stating it was ‘very important’.
Patrick Woodman, Head of External Affairs at the CMI, believes that attracting and retaining the best talent is the ideal way for a business to prosper, regardless of any wider economic issues: “You need to hire the right people. Once you achieve this it’s important to retain them by focusing on developing existing talent and making better use of their skillset.”
Dr John Glen, Director for Customised Executive Development at the Cranfield School of Management, believes that communication is the key to achieving retention. “In order to keep your best talent during tough times you need to share your vision with them,” he explains. “It’s important that your employees understand your strategy, what it means for them and their role in it. That way you remove uncertainty, which is likely to reduce the chance of losing key people.
"Organisations should be concentrating on process improvements, productivity gains and the simplification of what they are doing"Nicola Robinson, Knowledge Manager, CIPS
2. Add value through procurement
Procurement is often responsible for a large percentage of an organisation’s spending, but it is important to look beyond simply seeking bigger discounts in order to make efficiencies.
Nicola Robinson, Knowledge Manager at the Chartered Institute of Procurement and Supply, CIPS believes that a narrow view of procurement efficiency is not helpful: “It’s important to look at unlocking value beyond price reduction,” she says. “Organisations should be concentrating on process improvements, productivity gains and the simplification of what they are doing – that’s where value comes from, and the knock-on effect of this work is usually cost savings that will benefit the business anyway.
“Value-based procurement is where you align work closely with suppliers and find ways to improve the process to achieve your organisation’s overall goals.”
3. Target new growth areas
While many organisations will rightly prioritise efficiencies during leaner times, business must still go on and Dr Glen points out that it’s important to be aware of opportunities: “With established markets slowing down, businesses could look for growth potential in new geographical markets or market segments that they don’t currently serve or have underserved.
“Newly emerging economies such as Latin America and sub-Saharan Africa are growing quickly,” adds Dr Glen. “Obviously there are business, political and regulatory risks attached to these places, so it’s important to manage that, but it can be reduced by launching a tried and tested product or service in a new location, or by entering a new market segment aimed at existing customers.”
4. Cut down on red tape
A massive 82% of UK CEOs believe that over-regulation is the biggest threat to their business, according to research by PwC . And while organisations can’t control new regulations, the CMI’s Woodman believes that equipping key employees with the knowledge required to meet new rules and regulations is worth the investment.
“Establishing relationships with public bodies is essential to increasing the number and standard of professionally qualified managers and leaders,” Woodman explains. “This will vastly improve your prospects for long-term survival, increasing productivity and growth, which are currently undermined by a knowledge shortfall among managers and leaders. This is particularly relevant for giving managers the confidence to effectively manage changes that arise as a result of economic changes.”
5. Manage risk
Uncertain times tend to increase organisations’ awareness of risk and while it may have taken less of a pivotal role in businesses during recent growth periods, the uncertain economic landscape is likely to see more emphasis put on risk management.
Dr Glen comments: “There is a natural move towards considering risk as times get tougher, but it’s important that there is an explicit recognition of what the risks for your business are when key decisions are made.
“It’s important that people are open about any risks and discuss how to evaluate and reduce the impact they could have on the business. That way you are going forward with your eyes open and are ready to react to that risk, if needed.”
"The number one factor affecting productivity is the quality of management and leadership"Patrick Woodman, Head of External Affairs, CMI
6. Boost productivity
Research by the CMI shows that productivity in the UK lags behind many other countries including the USA, France and Italy [source to follow] with the main reasons cited being bureaucracy (30%) and organisational culture (27%).
The common factor here, according to the CMI’s Woodman, is leadership. “The number one factor affecting productivity is the quality of management and leadership,” he explains. “Managers can’t work effectively with their hands tied behind their backs. We know that two in five managers don’t feel empowered to take necessary decisions; so it is little surprise that so many firms report they are bloated by bureaucracy.”
By backing management to use their judgement you can reduce bureaucracy, streamline your business and increase productivity.
7. Pay attention to cash flow
Research by American Express  in 2014 showed that 93% of UK businesses were experiencing delays in getting paid. While it’s always important to keep a tight grip on cash flow during periods of growth, late payment may not impact organisations too much, but during an economic slowdown, maintaining some cash reserves and having a good cash management process become critical.
Dr Glen is a firm believer in not extending payment terms: “When it comes to cash, the real focus for organsiations should be on getting cash into the business efficiently,” he explains. “The relatively strong growth period over the past few years has led to payment slipping from 30 days to 45 and up to 90 days in some cases. This is something that should be reviewed and tightened up now so that you have a clear view of when cash will be coming in and out.”