Page 8 - MS Year in Review 2020

A core problem was that the magnitude of the crisis was initially underestimated,

and when fissures finally appeared in the foundation the financial system, it was
difficult to react quickly. Nevertheless, most companies survived. What did they do
to survive?

One of the key things to do was to protect the core of their business. The core

consists of the key assets (both tangible and intangible) that are either
irreplaceable or difficult to replace. There was downsizing or so-called “right sizing”

but it was done with a scalpel rather than a meat clever, meaning that it was not
across the board cuts in wages and expenditures. It was more reminiscent to
pruning a tree rather than chopping off its limbs indiscriminately.

The perspective taken to these cuts included a long-term view, and did not only
focus on what was deemed “essential” for the immediate or short term.
Accordingly, certain projects and personnel were protected even though in the short

terms that might have been discontinues as currently “not essential.”

This process of planning allowed these companies to develop competitive
advantages vis a vis competition even during a turbulent period of economic stress.

The CEOs of two of our clients (both savvy and very astute leaders) confided to me

that they actually welcomed periods of great economic stress because it led their
competition to make hasty decisions and take actions with a short run perspective
that actually weakened themselves.

In the strategic plans of both of these companies, “organizational development” had
been identified as a “priority objective” for the next three to five years. The CEOs
of both organizations continued their organizational development work with us. As

one said: “It would have been easy to make the case that this initiative was ‘not
essential’; but that would have been a ‘fool’s gold savings.” We will be stronger
when the economy recovers and not have lost the momentum of our continuing

development.” The other said: “We could have cut back the OD initiative, but that
would have sent the wrong message to our people that this was not essential to our
long-term success. What’s the point of results looking slightly better in the short

term if we sacrifice the longer-term?” Both of these companies recovered, are
among market leaders in their respective fields and are highly profitable, though

both incurred losses during the first year of the financial crisis.

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