Three Scenarios for Economic Recovery

65Insight into what’s come and why, so you can be prepared to manage your preferred future

By Dr. Alice Waagen, President & Founder

The scope and magnitude of the economic downturn of 2008-2009 exceeds anything most of us have experienced, with the exception of a few seniors who lived through the Great Depression.

This reality became abundantly clear last spring when I participated in a network meeting attended by about 40 business professionals. The speaker began the program by asking who in the audience was in transition (out of work and seeking employment). About a third of the group raised a hand. He then asked how many had family members out of work — and another third raised their hands. How about close friends, neighbors, colleagues? Not a hand in the room was down.

I asked myself then what would be the impact on the collective consciousness? If we all were experiencing a heightened level of financial anxiety and fear for future employment, how would that affect decisions in the workplace? Even now, we can’t truly know the impact, nor can we determine the long-term financial, psychological, and emotional fall-out of the recent recession.

Given that, here are three scenarios to consider:

SCENARIO 1: Stress levels and their impact on work will continue to plague organizations for years to come — even as employees rebuild their financial portfolios.

Here’s why: In extreme cases, businesses ceased to function, and in others furloughs or pay cuts were required. Even those who are relatively recession proof instituted hiring freezes and budget cuts for fear of future negative conditions. Most people I’ve talked with understand the need for financial caution and even accepted mandatory furloughs if it meant saving jobs. But how these cutbacks were communicated and the quality of leadership exhibited in the tough times will be crucial for survival once we are back in growth mode. Those employees who felt the organizations did not handle these bad times well or who saw indications of faulty leadership or bad decisions will be out the door as soon as recovery stabilizes.

My crystal ball says: Look out for massive employee movement and job shift of the best talent, as we get further on in the recovery.

SCENARIO 2: Questionable compensation practices in the business world will have an impact on compensation market data.

Here’s why: Like the residential housing industry, traditional compensation practices rely on comparative market pricing. Anyone who’s tried to buy or sell a house in the last six months knows that home prices are down due to foreclosures and short sales. Likewise, organizations that have hired individuals below their market value, who have combined positions due to hiring freezes or who have instituted mandatory across-the-board salary decreases, have their work cut out for them when it comes to getting their compensation structure back in order. (Those of us who remember the dot-com crash of the early 2000s will have bad flashbacks of what happens when talent shortages cause companies to pay way over market to fill key positions.)

My crystal ball says: It may take some time to normalize compensation data and practices, but by late 2010 we will again see labor shortages, especially for key talent, just as we did before the recession.

SCENARIO 3: As the recovery progresses, business leaders will continue to clean house by holding poor performers accountable by instituting best practice standards for performance and requiring more from the management team.

Here’s why: With all the doom and gloom in the press, this is the real silver lining to the recession clouds. I believe that this window of financial distress has caused many business leaders to question wasteful or inefficient practices. That’s good news, for now organizations will be leaner and meaner, and managers will be not only expected but also required to do their jobs well.

My crystal ball says: If businesses, in general, are managed better we will see a net gain from these last few years of distress and chaos.

What do you think? Send me an email at