19 October 2009
New Zealand businesses blaming their financial woes on the global economic downturn should quit falsely attributing their failure to depressed financial times and accept they may have struggled anyway, a visiting expert says. Stanford Graduate School of Business Professor of Management George Foster - visiting The University of Auckland Business School to give a Dean’s Distinguished Speaker Series presentation – says blaming business closures, staff redundancies and lower market shares on the downturn is a convenient but poor excuse for some badly-managed companies. Using examples of ailing American-based companies, Australian-born Professor Foster says many Kiwi spreadsheets will show falling revenue and market share for companies and sectors well before the credit crunch shook the world last year. And he condemns the fact that businesses are only now rationalising and streamlining their operations by shedding surplus staff, cutting costs, and offering better value and service to customers, saying they should have been doing that within good management practices anyway. “These are the kinds of businesses that think ‘what goes down must come up’,” Professor Foster says. “They have a ‘business cycle’ world view that is built on a macro-economic perspective, which means these businesses are now seeking evidence of when – and not if – the economic recovery will occur, hence the rash of economists labelling our most recent period as a ‘recession’ and looking ahead for the ‘recovery’. “Unfortunately, at company level this view leads to much emphasis on ‘positioning for the upturn’, when in fact it is questionable that some sectors will recover at all. False attribution to non-company economic factors can lead to a failure to re-evaluate and execute company strategies. “Therefore, it is clear there will be instances of company revenues and market share continuing to decline even when macro-variables increase next year. Waiting for green shoots that may never appear will be a big mistake for some companies around the world, even in New Zealand.” Professor Foster says well-managed businesses recognise that major shifts in key areas can occur suddenly and unexpectedly – whether in a recession or not – and these shifts can provide both opportunities and threats. Changes in technology advances, competitor actions, industry events, macro-economic events, regulatory actions and Government decisions can all place businesses in a vulnerable state, but a ‘fluid business’ world view can offer adaptive behaviour, flexibility, opportunistic advantages and risk management to ride out downturns. “What I am saying is that businesses should be focusing on better customer relationships, new products and pro-activity all the time, not just in recession,” Professor Foster says.
“A more pro-active approach to seeking new growth in depressed economic times can often result in capturing what might have been missed opportunities.” Professor Foster is in New Zealand to tout for local entrepreneurial growth-oriented companies to join his extensive World Economic Forum project studying entrepreneurship in rocky economic times. Professor George Foster – a prolific researcher and writer – holds undergraduate and graduate degrees in economics from the University of Sydney and a doctorate from the Graduate School of Business at Stanford University in the United States. A multi-award-winning researcher and teacher, his interests centre around entrepreneurship and early-stage companies, financial analysis and sports business management. He is actively involved with sporting organisations around the world, including the National Basketball Players Association and the National Football League. |