Business Survival in a Recession

1 January 2017

The key to business survival in recession is leadership” To what extent do you agree with this view? There are many different ways in which a business can use techniques to survive in a recession and here leadership is the key focus. To explain fully I will be focusing upon such ideas as the type of leadership management used, motivational effects where a business motivates the demoting factors such as ‘cuts’, for example sack employees to reduce costs that may viable save a business, the role of leaders in setting about change and management in bringing about the idea of change/ new instructions.

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Yet as well as the positives there are the negatives to a leadership styles and how its managed within a recession, so such factors as limited resources from change, an example being the reduction in the workforce size, the role of stake holders that ask the questions whether one leader is enough in a recession in comparison yet the leadership throughout the whole organisation. Particular business example such as ‘British Airways’ and ‘Sainsbury’ case studies and finally the external factors that inhibit a business chances for survival in a recession.

Most certainly one of the most relevant points to make about a business trying to survive in a recession is the type of leadership management that is in place. For a success full leader and many styles can be used in times of desperate measures; here I would suggest during a recession that an Autocratic style of leadership needs to be followed, clear expectations for what needs to be done, when it should be done, and how it should be done. Although for the short term this aggressive direct approach needs to be considered to get a business through the hard times it had to face.

For example with Margret Thatcher who was in power during the last recession in the 1990’s had to use this style of leadership to get the country out of the problem, yet left certain problems in doing so. If this is not to be the most productive method of leadership during a recession managers may adopt the Democratic leadership style where leaders offer guidance to group members, but they also participate in the group and allow input from other group members.

Although the type of leadership is successful in producing high quality it is less productive than that of an Autocratic leadership style. Motivational factors are essential for a business survival in a recession whether it’s for the employees/ staff or the customers who have the purchasing power. Both these groups need to be aimed at by the higher authorities of a business to allow for a good circular flow of income to keep the business stable in hard times such as the recession.

Although this motivation may comes in many different ways some being bad and the others being good, for a business such motivational factors as making ‘cuts’ and redundancies of employees to allow for a business to keep up with costs will see demotivation amongst labour workers but may see improvement in the costs in which they have to pay. Reduction of stock and capacity utilisation will see a lower work ethos, as less produce will be produced. By not overstocking and hoping that it will sell a business may have to adopt a ‘JIT’ or just in time method of production to satisfy orders the have at present rather than in the future.

So here leaders/ managers must make the decisions to implement whether to make the changes needed to allow the business to survive for the time of the recession or maintain their current workforce and level of stock and hope the business is successful and can still sell their products. The introduction and bringing around of change is in some cases problematic for a business in terms of the employees views of change and valid in times where its essential to keep the business floating.

Such examples as General motor’s, IBM, and Sears are ones that need pushing for organizational improvement, whether they are external members of the board, major investors, or top executives; they must deal with cultural and behavioral obstacles to change. Specifically, attempts at organizational change must consider three key features of organizational life: the firm’s culture, the leadership of the change effort, and the existing network of power. Company culture is important because it can make or break a company. Companies with an adaptive culture that is aligned to their business goals routinely outperform their competitors.

Company cultures evolve and they change over time. As employee leave the company and replacements are hired the company culture will change. If it is a strong culture, it may not change much. However, since each new employee brings their own values and practices to the group the culture will change, and with this could include different motivational factors and views of other workers; so its vital for a business to include employees and workers in the changes a manager/ leader may wish to implement so such things as strikes and revolts do not occur.

The roll of stakeholders in a business is essential as they can decide where a business should go and what should be done during times of recession. Here employees, investors, sharholders, customers and suppliers are all stakeholders that need to be satisfied in order for them to continue to invest within the business to keep it running. Employees should all see where the business is heading, and where it is heading towards otherwise they might see little point in changes in changes that have been made and may become suspicious.

It is very important that the changes are explained clearly to employees and that any fear they may have are properly addressed. Investors are important because the business relies on their investment to finance the decisions that it takes. They may become worried that the business has no overall direction and look for other places to put their money. If they are unhappy this could leave the business weakened and prone to take-over. Shareholders are interested in any decision that effects the dividends that they receive is their share of profits.

Any decision that will reduce profits, even for a short while, will not be popular with the shareholders. So here the managers of the business would want to avoid this in such poor economic times, so they would have to consider how shareholders will feel about the decisions made. Customers will be concerned if the decisions affect the price, quality, or service of the product they may change their buying habits if the product does not meet their requirements. Suppliers will want to get regular orders with prompt payment, these may be effected by the decisions made by the business.

To conclude I do feel that the key to business survival in recession is leadership. For example a business that had a bad leadership style during the recession was British Airways where Willie Walsh’s decisions where poor communication amongst the companies stake holders saw strikes and grounded airlines. With the limited flights due to the poor leadership the business has lost a large amount of profits and the costs the company has to pay in order to compensate customers; the company now and is still in problematic times to regain the motivation and reassurance of the customers.

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