TFI Blog: Overreacting to Economic Downturn?


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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?.

For an analysis of recent cost-cutting measures in the electronics industry, read The Restructuring Supply Chain and Reuters analysis, Cost Cuts Help Tech Giants Ride Out Weak Economy.

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