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By Kathleen Geraghty, TFI Quarterly ForumHere is a priority topic for almost everyone (even optimists). Following TFI's recent webinar, "Managing through the Downturn," we had an exchange with participants about signs indicating that a company is overreacting in a downturn-economic environment. We also talked about best practices that can be leveraged to overcome these adverse overreactions.
A common overreaction, which can have negative long-term effects on companies, is making across-the-board decisions to reduce investments, compensation, and head count by the same percentage in all divisions and functions. Our interviews last quarter revealed a number of corporate-wide directives to reduce expenses or headcount without consideration for the performance of a business unit. There is no denying that cost reductions are necessary and this broad-brush tactic may be an expedient way to achieve a corporate target, but they can be damaging to technology roadmaps and employee commitment?both critical to innovation. Overreactions are also evident when companies take steps that contradict their own long-term strategy. For example, if the strategy is differentiation, then price discounting in the short term could be dangerous.
To finish reading the blog, click to Overreacting to economic downturn?.