Pandemic vs. Recession: What’s Different and How to Prepare
Overnight, the COVID-19 pandemic entirely changed how businesses interacted with their employees and customers. Anywhere we turned, it was impossible to survive a conversation without the term “unprecedented” being used to describe the pandemic’s effects. Many were caught unprepared, and all were forced to either sink or swim. Now, as we continue to recover from the lasting effects of the pandemic, troubling signs in the economy point to a new period of economic turbulence.
Don’t believe it? Let’s observe the facts.
- The U.S. gross domestic product (GDP) declined both in Q1 and Q2 this year.
- The S&P 500 just posted its worst first half since 1970.
- Inflation is soaring to levels not seen in decades, as indicated by both the consumer price index (CPI) and the producer price index (PPI).
- To combat inflation, the Federal Reserve raised interest rates by 2.25 points in the last four months. These rates will likely only continue to climb.
As many would tell you, this is nothing to lose our heads over, but it does beg a few questions. Namely, how do we proactively prepare for a recession, and what new challenges will the recent pandemic pose during recession times?
Fortunately, unlike the unpredictable onset and effects of the pandemic, recessions are regular and predictable parts of business. Indeed, since World War II, a recession has struck the U.S. economy approximately every five years. Because these recessions aren’t new, reliable wisdom from decades of navigating reduced financial times suggests businesses ought to do a few key things:
- Build up cash reserves
- Protect and expand your customer base
- Secure credit
- Examine your operating expenses
- Finance before the next wave of recession begins
That’s all sound advice under normal business conditions, but the pandemic took the status quo of normal business operations and turned it upside down. If the pandemic taught us anything, digital transformation and the application of emerging technologies are required in order to keep pace. These hard-learned truths and changes to the “new normal” need to inform your businesses’ preparedness plans to not only weather the coming recession — but thrive in it.
Consider these three significant status-quo business changes and how you can respond in kind with technological adoption.
- Your customer’s expectations around doing business have changed.
What started as health and safety precautions have turned into a preferred method of interaction. Customers have shifted away from traditional, highly interactive ways of doing business in favor of contactless service. Even in a B2B context, prospects might do all their research online without ever reaching out to your business development. If they do reach out, they will likely opt for virtual interactions with limited opportunities or desire for in-person contact.
What does this mean? With far fewer chances to capture new customers, deliver excellent service, and build customer loyalty for long-term retention, you must maximize every touchpoint of the customer experience to avoid alienating or losing a customer/prospect altogether.
Today, chatbots leveraging Robotic Process Automation (RPA) and Artificial Intelligence (AI) technologies can help you deliver 24/7 contactless service options for customers who prefer to help themselves. In addition, attended RPA can further streamline customer experience by augmenting your real human customer representatives with easily retrievable customer data, allowing them to maximize the conversion potential of fewer customer interactions.
- Your relationship with your employees has changed.
Pandemic-induced changes to the workplace may have been more significant than those of customer behavior. Working from home opportunities, geographic dispersion of the workforce, and reduced business travel have changed how people work with one another and what people view as worthwhile work. Furthermore, attracting and retaining great talent has become increasingly challenging, and labor costs for available work continue to climb. As a result, businesses are left in a classic ‘do more with less’ conundrum.
You can quickly achieve more with less by maximizing the revenue-generating power of your existing workforce. Start by reducing employee workload to tasks that drive business, and automate the rest. RPA and automated workflow tech shine for this purpose as they can automate low-effort, easily repeatable processes like data entry and task routing to restore critical time to your employees. Consider how boosting the productivity of your existing employees will be far more effective and cost-efficient than hiring and training a new one, particularly during a talent drought.
- Managing cash is more important than ever!
As with the pandemic, recessionary times are hard for businesses and consumers. Customers face their own financial challenges, and not all of them will survive, potentially creating uncollectable balances in Accounts Receivable (AR).
Businesses must move faster to process payments and ensure customers are creditworthy to avoid financial risk. To accomplish this, RPA technologies applied to AR can help assess customers’ creditworthiness. Meanwhile, OCR and workflow technologies can handle check processing and speed up the cash application process.
On the Accounts Payable (AP) side, similar technology can be leveraged to rationalize, accelerate, and drive costs out of Accounts Payable (AP) processes. For example, processing payables through a workflow system will help you better understand and estimate your cash position before the payables make it to your financial system of record. Further, controls can be strengthened by formalized invoice approval processes, automated matching with POs and receivers, and end-to-end process transparency.
Closing advice from my decades in business operations management
During the pandemic, businesses faced a crisis for which few had prepared and even fewer had prepared adequately. The most successful organizations chose to empower their teams to make decisions quickly, try new approaches, fail fast, and course correct until a goal was achieved. These teams realized that process and technology improvements don’t have to be perfect from day one. 80%, 60%, or even 25% operational improvement now is better than 100% 12-months from now.
Establish a Center of Excellence (CoE). An effective CoE combines business professionals with powerful data analysis software like process mining to spot bottlenecks and inefficiencies. Further equipped with low code/no code rapid app development tools, your CoE can quickly bring about high-impact solutions that effectively improve business operations.
Lastly, don’t go it alone. Successful businesses become successful by doing one thing really well. But as companies grow, many find themselves doing other things not core to their business. During times of uncertainty and risk, the ability to focus on your core business is critical.
Evaluate what you do well and what could be done better by thinking outside the building. Partners that provide services that are necessary to business but not necessarily in your core area of business can yield improved levels of services at reduced costs over internal options. A quality partnership is a mutual partnership. With a well-chosen service partner, your success becomes theirs — and theirs yours.