The only thing more solid than the boom is the fact that it will end. CEOs should take steps now to make sure they’re well positioned for the next downturn.
“We’ll have a recession in the next five years,” predicts Jeff Vinik, owner of the NHL’s Tampa Bay Lightning and a major investor in central Florida real estate. But, he says, “I absolutely don’t see a 2007, 2008 type of recession for a long time to come.”
And notes investment banker James Cassel, “We’re one day closer to the next recession than yesterday. Unfortunately, we’ll know that pivotal day probably in hindsight rather than with foresight.”
One way CEOs can buttress against that day is to plot where the company should be before the next downturn and move deliberately on a path to get there. “Invest more in the future in this up market than you did the last cycles,” advises Clarke Murphy, CEO of Russell Reynolds Associates. “The pace of change is so fast that you can’t just book revenues, you have to consistently look at how you’re operating and innovate so that your company is here five years from now, or whenever the music stops.”
“We’ll have a recession in the next five years.”
Many legendary companies failed to make sure they were doing this before the Great Recession, including General Motors, Bank of America and even GE, and they and their CEOs paid the price for their failures. Industrial stalwart Barry-Wehmiller stayed ahead of the game, and that’s what CEO Robert Chapman is intending to do this time, too. “Our business model is designed around a balance of markets, products and technologies and financial strength,” he says. “And I would never compromise our financial strength.”
Also, with the next economic swoon in mind, the boom could be a good time to overhaul personnel evaluation and even realign succession plans.
“You need to assess your executives on multiple levels to see how they can succeed in a world of rapid change, rather than just in a single dimension,” says Murphy. “Can they be both disruptive and pragmatic?”
It’s also a good time for CEOs to bring their boards more fully into the process of succession planning and long-term development of executives, he says.
And, of course, this is a great time to execute another strategy: selling out. “The market is great and is paying frothy prices right now,” says Cassel. “Private equity has so much money; it’s a good time to be selling. And you don’t want to be selling at the last minute, because you want people to buy your company with a view that there’s future runway.”