Why R-word will send UK managers into a job-cutting panic

Mar 10 2008 by Nic Paton Print This Article

After more than a decade of near constant growth, British managers are woefully ill-equipped to manage their way out of a recession, latest research has warned.

With shares in the U.S. taking a hammering last week as unemployment figures gave their clearest indication yet that the country, despite the best assurances of President Bush, is already in recession, UK bosses are deeply worried that, apart from the blips of the bursting of the dotcom bubble and the economic fall-out after 9/11, few of their managers have any idea about how to cope with a serious, long-term downturn.

The poll of more than 200 senior business leaders by "virtual" business school Pentacle found nearly two thirds believed the economy had boomed for so long that UK managers now lacked experience of a less benign economic climate.

And with Chancellor Alistair Darling due to unveil his Budget later this week, a similar number believed the UK was now heading into a recession or, at best, a serious downturn, with just three per cent believing an economic recession was unlikely.

Just today housebuilder Bovis Homes became the latest firm to predict a gloomier outlook, warning that it would sell significantly fewer houses this year than last as the economic climate become more uncertain.

The personnel body the Chartered Institute of Personnel and Development and accountancy firm KPMG have also predicted a sharp rise in the number of employers expecting to make at least some staff redundant in the coming months, while research firm Incomes Data Services has suggested there will be 15 per cent fewer graduate jobs in financial services this year.

Worryingly, the Pentacle survey found that in more than six out of 10 of the organisations polled, fewer than a quarter of the senior staff had held key management positions at the time of the last UK recession in the early 1990s.

The vast majority of business leaders had been hired for their vision, positive culture and risk-taking, all worthy traits, but skills much in less demand in a downturn compared with a more tactical, cautious outlook, argued Pentacle.

Those right at the top – chief executives and those at board level – were the most worried, the poll found.

Half of these "C-suite" executives believed that just a tenth of their senior managers had held equivalent positions at the time of the last UK recession.

They were also more downbeat generally on the capabilities of UK management to survive a downturn.

Professor Eddie Obeng, director of Pentacle and a former executive director at Ashridge Management College, said: "After a long economic cycle with nearly 15 years of growth, most of those at the top of business today are used to vigorous expansion, ambitious projects and taking major risks, all with unwavering confidence. A strong economy has often protected them from the impact of bad decisions.

"For the Googles of this world, the closest they have been to a recession is post 9/11 – a much more contained economic crisis than the global tightening we are now witnessing.

"The question is whether these same bold leaders have the expertise to adapt to much more challenging conditions. With most British workers questioning the ability of bosses to be 'more tactical and exercise caution' on this side of the pond, you have to wonder about the effectiveness of management to deal with a downturn. A steep learning curve is coming," he added.

Further down the management scale, three quarters of junior managers polled said insecurity, distraction and a "fear of the chop" could damage struggling businesses further, as workers vied to impress those at the top.

And more than seven out of 10 more senior managers feared that, as soon as the downturn hit the bottom line, there would be a knee jerk reaction of "panic firing" from the top.

"The very nature of a downturn – from staff insecurity to effective financial control – means that priorities must change with business plans being reviewed, for the security of the business and its employees," pointed out Obeng.

"Management needs to identify the essential priorities for the business – those that are achievable, do not require unnecessary investment and will produce swift returns.

"Cost-benefit analysis has an important role to play here in the shaping of strategy as it forces companies to think much more critically about their condition and the needs of the market. Businesses need to focus solely on the things that will have the most robust financial impact," he added.