5 Not-so-Great Great Things About the Recession

Yesterday on CNET Rafe Needleman posted his list of 5 great things about being a CEO during a tech recession. So that's a great title; but not so great when you get right down to it. I can't resist adding my own "on the other hand" to focus back on the cloud (I hate to say) and away from the silver lining. (And Rafe, if you're reading this, sorry man, I really like your work, but this needed some additional comments.) What follows is Rafe's list with his explanations in the quote boxes, then my comments.

1. The downturn will kill off your most annoying competitors
You may be in a crowded market now, but you won't be for long. Companies are going to fold in this downturn. Less competition from silly companies that aren't playing by the rules of good business means you can focus more on your product and on getting your message straight compared to the remaining competitors that really do matter.

I think this applies mainly to the Web phenomenon of companies losing money to gain eyeballs, which was already pretty much obsolete anyhow, even before the recession. Just to cite one obvious example, consider the annoying competitors who are preying on ignorance, misrepresenting the truth, and tricking people. They won't go away that easily.

2. You can hire cheap
See No. 1. There will be unemployment. The job market will change from a seller's market to a buyer's, which means you'll be able to hire better people cheaper. Maybe not so good for them (be sure to salary up when things improve). But good for you.

I wish he'd said you can find good people who wouldn't otherwise be available. In my experience, which includes 20 years of running a high-tech company, hiring cheap is a bad idea, and particularly hiring below market rate or below what somebody is worth. Put the emphasis on the "be sure to salary up" addition and this looks better, but still. People who feel they've been backed into a wall and forced to take less just don't feel good about it, and that's a bad way to start a relationship.

3. You can lay off at will
Unhappy with your organization as it is? Worried about the effects on morale of shutting down that experimental project you keep in a corner? Worry no more! While a year ago layoffs might have been seen as desperation play and thus acted as a staff morale killer, if you do judicious layoffs today the remaining staffers will be glad to see you trimming the fat so they get to keep their jobs. Plus, it will get your investors and board members off your back.

Recession or not, you shouldn't ever let morale worries keep you from cutting things that aren't working. The team always knows what isn't working and you don't get points for keeping that going, and you don't need a recession to turn it off. 

That goes as well to the idea that you have people on board that you'd like to get rid of. What's wrong with you? That was bad business all along. You don't get points for "nice-person" management by keeping people who aren't carrying their share. The other people resent it. There too, recession or not, you don't have accountability without the cause and effect of good or bad performance, and you need accountability. Always. Recession or not. 

And there's also the real worry that you cut people in a recession too quickly, without the right analysis, adding costs when you have to replace them too soon. Don't forget the real costs of replacing somebody who's been with you for a while and knows the job. 

4. Your customers will cut you some breaks
Users and customers who like your product are far less likely to give you hard time about minor flaws in your service. If they like you and want you to stay in business, they'll understand that you have to focus on the core of your operation, and on generating revenue, to stay afloat.

It's not just that I want to argue, but I don't believe that. Do you forgive flaws more easily when times are tough? That's like saying the bright side of family money problems is that your spouse and you will forgive each other more readily; I don't think that's true.

5. Whatever doesn't kill you…
Yes, it's true. Tough times focus you on what really matters. You will have to spend the majority of your time on revenues, customers, and product, and far less time on offshoot projects and handholding nonproductive employees. On the other side of this economic phase–if you make it there–you will have a better company.

So there we're getting somewhere. This sounds like getting back to fundamentals. Right on.


  • Tim Berry says:

    Mac, just for the record, that part of the post is direct quote from Rafe Needleman. That's what you disagree with. And my comments the follow are much more along the lines of what you're saying than what he's saying.

    However, you bring up an interesting point, which might be matter for a future post. One thing I think I've seen in real business is the idea that the people who perform well don't necessarily root for the people who don't perform well. Where you and I both agree is that nobody likes to see team members who are doing their part get sacked. Furthermore, people who aren't performing shouldn't have been tolerated in the first place. Where Rafe may have a point on both of us, though, is when the performers see some non-performers leaving.

    I've had some experience with keeping people on too long, and with employees wishing we'd been tougher on non performance. It's an interesting angle on running a business.

    Thanks for the comment. Tim

  • Mac says:

    I generally agree with everything you've said about these points, with one exception. The part of #3 which says: "if you do judicious layoffs today the remaining staffers will be glad to see you trimming the fat so they get to keep their jobs"

    Anybody who believes that frontline employees will ever "be glad" to see layoffs is smoking crack, no matter how necessary they may have been.

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