Management Coming out of a Recession

How should companies look to adjust their management coming out of a recession?

Recessions cause companies to cut staff, freeze recruitment and freeze wages.  Presumably each company has kept their best, or most appropriate staff (in so far as these can be identified in an imperfect world).

On the other side there are few talented people in the pipeline internally, meaning that there may be a bottleneck internally at certain more junior levels within an organisation.

How should an organisation deal with the shortage of experienced practitioners? Can a company compensate by hiring more staff?  In some industries such as construction this would be a disaster – inexperienced workers, inadequately supervised can be a hazard to themselves and to other people.  In other industries such as law or engineering the limiting factor may be the knowledge that comes with experience and even recruiting heavily at more junior levels may not have a big impact on the output of the firm.  In essence, the recession has genuinely had an effect on on the capacity of the economy in the short-medium term.

In this environment I see two general strategies – reduced output and higher prices or capital investment.

Reduced output simply means accepting the bottleneck in the supply of skilled labour as there have been fewer young people working their way through the industry.  This shortage relative to demand will raise prices.  This will generate a slightly higher inflation recovery for a given level of unemployment.

The alternative is capital investment.  Can IT systems help the in-demand experienced workers be more productive in knowledge based industries?  Can better communications mean that knowledge can be shared among more projects?  In industries with a physical output, can new tools help skilled labour produce more?  Given historically low interest rates, investment may be a reasonable way for some industries to overcome their skills shortage.

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