At the risk of sounding like Doctor Doom, 2010 is going to be a very tough year, but I do believe that there will be opportunities for resilient organisations (see previous blog on resilience.
UK plc is in much worse economic state than the US and quite a bit worse than most major European nations. The UK has yet to exit recession, faces rising unemployment and is running a budget deficit of 13.2% of GDP. VAT takings are down 14.2%; we have spent £190.4 billion on quantitative easing and there are worrying signs that inflation might be starting to rear its head.
Interest rates can only go in one direction – upwards – and inflation could trigger that move sooner rather than later. Higher interest rates will lead to more house repossessions and business failures which will further reduce tax receipts and increase the burden of benefit payments.
By contrast unemployment seems to have bottomed out in the US and investment there is projected to increase by 2.1% while UK investment will be reduced by -5.2% according to the OECD. Canada will increase their investment by a whopping 4.4%. So how can that be? Oh yes, by regulating their banks effectively, they avoided the credit bubble.
On the subject of bubbles, we’ve had the dotcom bubble, the housing bubble and the credit bubble – so what’s next. I suspect that it will be the sovereign debt bubble. The PIGS (Portugal, Ireland, Greece, Spain) are weighing on the Euro and a number of other nations including Dubai aren’t in great shape either.
Yet in spite of all of this, life will carry on; some organisations will fail while others will do spectacularly well. Whether the strategy is survival or growth, resilient organisations seem to do best. These are some attributes of resilient organisations:
- Resilient organisations have resilient leaders
- They focus on the longer term; it’s the short term which got us into this mess
- Productivity is the key to growth – they don’t simply cut costs
- They build organisational capability
- Resilient organisations have a clear sense of purpose which is based on customers
The keys to resilience are leadership and culture. Winning over hearts and minds is never easy but right now the “touchy-feely” stuff is more important than ever.