by Rob Bernshteyn
The recession may not be real to all economists, but it is all too real for businesses around the world. Organizations are looking for ways to safeguard themselves, with many cutting costs, including the jobs of thousands of people who helped these companies through a global pandemic.
The recession pack mentality is clear: reduce costs, reduce costs, and reduce costs. In the technology sector, this mentality has taken hold at established brands and startups alike—this year, nearly 300 U.S. tech companies laid off 45,000 employees by October.
Tech isn’t alone. Cuts stretch across industries, segments, and markets. Tens of thousands of jobs are disappearing from manufacturing, health care, real estate, financial services, and retail.
The truth is that recession doesn’t need to mean retreat. Smart decisions in tough times can be the foundation for years of success. But organizations must be willing to make intelligent market choices, invest in their digital core, and get closer to their customers. This isn’t a time to pull back and hope things turn out right; it’s a time to gain control of spending, invest smartly in your business, and fuel long-term growth.
Resilient Companies Invest and Grow
I understand that every company will make its own choices. But I assure you there are better ways to prepare for and survive a recession than only cutting jobs. Resilient companies don’t slash and burn; they control, invest, and grow.
This isn’t a matter of opinion. We hosted business leaders together with McKinsey & Co. to discuss the lessons from the 2008 downturn. McKinsey revealed data from 1,500 American and European companies between 2007 and 2011, using total return to shareholders (TRS) as a common metric to gauge resilience.
The real-world insights reinforce the truth that cutting jobs and operating costs alone make it harder for a company to survive a recession and accelerate after it. Resilient companies often increase their advantage through a recession.
The surveyed companies found ways to continue to grow their TRS and market leadership. In 2009, when the 2008 recession reached its lowest point, resilient companies had increased EBITDA by an average of 10%, while their industry peers had lost nearly 15%.
A decade later, nearly 70% of these resilient organizations remained top-quintile performers in their sectors. They relied on greater spend visibility and control, better choices, and a smarter business to build a competitive advantage that proves difficult to overcome for those that retreat from recession instead of leaning in.
Key to these leading organizations’ success is their ability to use real-time data for every aspect of the resilient business, from suppliers to customers. They gain new insights on risks. They have visibility into every dollar of spend. They have the tools and insights to maximize value at each stage of their operation. Instead of investing less, resilient companies see an opportunity to invest smarter.
Sustained Growth and Success
This path runs directly through the back office—the brain center of every business process. Digital transformation has long focused on the end customer, but that trend is shifting. Digital transformation initiatives across such operations as treasury, procurement, supply chain, and finance lead to sustained growth and success.
That growth is fuel to counter recession pressures. An intelligent, connected back office supports greater efficiency and agility. With unparalleled spend visibility, businesses benefit from real-time insights, along with continuous innovation and risk monitoring. Back-office transformation widens the gap in capabilities and performance between those companies that make the investment and those that are slow to embrace change—a gap that’s likely to get bigger during a recession.
One multinational pharmaceutical company working across 100 countries faced significant growth obstacles, as it relied on more than 20 unique systems and 40 subprocesses to manage procurement and payments. The silos resulted in major inefficiencies and significantly hampered business success. Leadership needed global visibility and better control of spend while staying compliant with local regulations.
By embracing digital business spend management for their traditional back-office operations, the pharma giant gained visibility and control over more than $10 billion in global spend, increased compliance, and broadened user adoption. Its commitment to an intelligent, agile, and highly collaborative digital organization empowers the organization to focus more attention on revolutionizing health care and science to improve people’s lives.
Invest in Your Business, Don’t Just Cut Jobs and Costs
Transformations like these show cutting jobs and costs alone won’t position a company to manage a recession; investing in the business will. Embrace discipline. Use digital tools and analytics to gain control and make smarter decisions. Build flexibility and intelligence into planning and operations.
Each recession has different catalysts, but every recession has one thing in common: it ends. And when the economy makes it to the other side, companies that used the time to become more agile and resilient will find themselves better positioned to accelerate than the competition is.
In a recession, don’t cut and hope. Invest and grow.
Top companies fuel financial success with intelligent choices, precise spend controls, and smart investments. Find out how to stay profitable today so you can help your company grow tomorrow at coupa.com.
Rob Bernshteyn is chairman and chief executive officer at Coupa and has over two decades’ experience in the business software industry.
