More and more news stories these days center around the R-word: recession. It certainly came up often enough at the 2019 Gathering of Games—including in Jack Stack’s keynote speech. There are plenty of warning signs to catch your attention. The list of potential culprits as to who or what might bring the country’s economic expansion to a halt ranges from tariffs and trade wars to increasingly long lead times and historically low unemployment rates.
What’s interesting is that Stack and his team at the SRC family of companies have been forecasting a recession to hit in 2019 or 2020 for the past 10 years—a process they kicked off right after the last recession just about obliterated the economy. Part of the rationale behind that forecast was experience:
SRC has been through multiple recessions since the company got its start in 1983, and they’ve recognized that they tend to run in roughly 10-year cycles.
Another lesson SRC has learned over the past 35 years is that recessions can actually be opportunities to grow a business. When Stack and his team looked back at their historical numbers, they saw that they have doubled the value of their business five years after each recession. How? By buying assets like real estate and even other companies at a discount. Of course, in order to make investments like that during a slowdown, you need to have planned ahead enough to have the resources on hand to take advantage of those opportunities.
Using their long-term forecast as a guide, Stack and his team set an audacious goal back in 2009 to build a $100 million war chest by 2019 that they could deploy when the recession hit—a plan they successfully completed in 2018.
Stack says that slowdowns can also be opportunities to fix things inside your business that you can’t afford to invest the time and resources in when the economy is booming. While it might seem counter-intuitive, Stack believes that it’s actually harder to get a company ready to take advantage of an upturn than it is to prepare for a downturn.
Consider that during the economic boom of the past few years, SRC found itself, as Stack puts it, “barely hanging on by our fingernails.” As year-over-year revenue growth spiked, it was tough to keep up with customer demand. They simply didn’t have the human capital to keep up. They were leaving millions of dollars of work on the table. The associates on hand were exhausted from endless overtime shifts; they needed relief. That’s why SRC engaged in a hiring spree to get the peoplepower on board they needed just to keep up with the opportunities ahead of them. Of course, finding qualified people in the current labor market was a significant challenge—as was the fact that SRC, like many decades-old businesses, was seeing a percentage of its workforce head toward retirement.
Since 1983, the company had been remarkably consistent in adding a steady trickle of employee-owners, often just about a dozen a year. But, between 2016 and 2018, the company brought on an eye-popping 551 new associates into their different divisions—a group that now accounts for about one-third of the entire company’s workforce.
That massive influx created significant new challenges for SRC, especially in terms of how they could encourage those new hires to embrace the company’s culture, which is rooted in the Great Game of Business. By teaching those new associates to think and act like owners, SRC hopes to address their latest Critical Number™: retention. But training that many new people also meant the company had to take a productivity hit—which resulted in unfilled business still left on the table.
That’s why the current softening in the market comes as a kind of short-term relief for SRC. It’s giving them a chance to catch up—to make investments in their people and facilities—and to prepare themselves to capitalize on the economic uptick that they expect to hit in mid- to late-2020. By then, their workforce should be more stable and productive—and ready to take full advantage of the available opportunities.
As Stack says: “The organizations with the strongest workforces by 2020 will dominate their markets. There’s no reason you can’t dare to be successful.” In other words, the time to get your organization ready for the next upturn is today—not when it’s already arrived. By then, it may be too late.
Join us next September at the 28th Annual Gathering of Games to get your own great takeaways, meet practitioners just like you, and hear experiences of failures, accomplishments and lessons learned in companies of all sizes and industries.
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