In our recent members-only huddle, CEOs explored what triggers they are looking at and what their “break glass” plans are with the possibility of recession on the horizon.
To get the conversation started, the group looked at a presentation by Live Oak Bank who surveyed mid-market companies (10 million to 500 million in revenue) about their expectations. The results were a mix -- 36% believing the economy will mostly stay the same over the next 12 months and 21% believing it will get worse.
1. The job market hasn’t softened (yet)
The unemployment numbers and the reality of the current job market came up in the discussion multiple times. One CEO questioned how we can go into a recession when everyone has a job and when there are more jobs than workers.
A CEO who had just returned from Silicon Valley, mentioned he was told by a top executive that, as of right now, tech layoffs are in excess of the lay offs from the .com bubble.
This was an interesting data point, but not what the CEOs on the call are experiencing. Although there was a feeling that the labor market is starting to shift, it was still seen by most to be in a place where new hires and current key players can make demands and get what they are asking for.
Experiences of a few CEOs:
2. It’s important to be clear on the main triggers for your business
One member shared a comprehensive document that tracked both external and internal metrics to help him and his board have a real understanding of what’s happening in order to make informed decisions in the face of a downturn.
External metrics they track:
Another CEO made the point that it can be overwhelming to have too many external metrics you are tracking and that for his team he focuses them on the 2-3 that have the biggest impact on the business.
3. Now is the time to have a “break glass” plan in place
Several CEOs shared that they have a plan in the works or already in place. One has the plan written out with all levers layed out and is ready to discuss this at his next board meeting and another said they are using the plan they built at the beginning of COVID. He said, “We are clear on what’s nice to have and what’s essential. We know which expenses are more discretionary.”
4. The CEO’s most important job in a downturn is managing their people
One of the members said, “As a CEO, managing the team, spirit and attitude is the most important job you have.”
He shared that in difficult times like this, it’s so important to show this kind of leadership. How do you work with the employees to help them stay calm in the storm? The two “mantras” he shares often with his team if there is a crisis are, “As a private company, we have the luxury to think in decades not quarters” and also, “Our history is that we win the disruptions.” Which leads to the next big takeaway…
5. Disruptions provide some of the best opportunities
“You can win the disruptions, even when the overall news is negative.”
The group agreed that in a down market there are many opportunities, with two of the biggest being:
The encouragement from one long-time CEO was that even if a company is small, acquisitions can be a huge opportunity in tough times. One example he shared was, “If a business owner is 55 or 60 and they are looking to get their money out soon, and don't know how a downturn is going to impact that, they might want to protect their downside. I can come to them and say, ‘Let me buy you out and I’ll write the check to grow the business. I’m going to fund your growth and you’ll get a check at the end’.”
David Cohen, a Strategic Facilitator of Katahdin Group and former CEO in finance and banking closed out with these thoughts:
“The confluence of data and the fact that we have more jobs than people will continue to be a factor here. After we see the end of the fourth quarter, I don’t think there will be a huge spike, but I think the unemployment rate will start to shift in the first quarter.
And a reminder that this all happens in real time. The big companies don't see it coming any better than you do. And it’s industry dependent. Stay very close to your customers and pay attention to your competitors. Understand your customers’ mindsets. If you do, you are one step closer to what’s going on.”
ABOUT THE CEO HUDDLE: Our quarterly CEO Huddles are member-only events for those in the Katahdin Group’s CEO Collective peer network. This is a forum for discussion and peer feedback on topics that are timely and important for those in the CEO seat. To learn more about the CEO Collective, contact us.