How will business swings impact your job?

Roles and resources will be impacted differently by swings in business outlook depending on what activity they are deployed for

Are you in a job which is

1. Delivering the current order book

2.Expected to win or deliver the forecasted order book

3.Creating new near term revenue streams

4.Building competencies or platforms for future business growth

5.Ensuring compliance with statutory & legal mandates.

Some of these are more sensitive to near term swings – up or down – in business conditions, while others are more aligned with the longer term outlook of the business.

1. Resources delivering the current order book

These are essential resources. They are required to fulfil orders taken and commitments made and convert the current order book into revenue & profit.

These will include those working in manufacturing production lines, service delivery, supply chain, and support functions enabling the current delivery of products and services.

Servicing orders already booked and to be delivered soon, these resources are most secure in the near term.

What will impact this resource pool are any changes in delivery schedules (preponements or deferrals) of orders being serviced.

2. Resources expected to create & deliver business in the near term

There are three groups of resources which are required to harvest near term business

a. Product/service development teams to ensure that there are goods or services available to sell

b. Sales & business development teams to take these goods and services to market and book new business.

c. Resources to deliver the forecasted service / product orders

These are resources most impacted by the near term outlook of the business. Any change in it will trigger assessments of the sufficiency of resources and increments or reductions needed to be made.

If only a short term uptick in the business expected, resource increments will tilt towards contracted or short term rental of resources which can be acquired and released with ease. The leisure, retail, and farming sectors recruit hundreds of thousands of contractors in their peak season to fulfil the short term peaking of demand

Likewise, if a business disruption or decline is anticipated only for a short period, the likely actions taken will be to retain resources while reducing their short term costs. These can include mandated PTO, furloughs, short term rent reductions, and interest payment deferrals.

On the other hand, if the near term business outlook change is expected to continue over a longer period, acquisition or reduction of full time employees and other resources will be done to align with the sustainable requirements of the future.

3. Resources to build new competencies and future revenue streams

Investments in research and product development, people competencies, and new market development build revenue streams for the future.

Investments in these is closely linked to the current health of the business and its ability to invest for the future, often as a % of the overall revenue or profits of a company – i.e. x% of revenue for R&D, and y% for training.

When business is growing and doing well, expect these investments, and resources devoted to them, to grow, and reciprocally, shrink when the business is faring poorly.

Since these are investments for the future, they can be altered without impacting near term revenue outlook and business operations.

Hence, expect quick changes in these investments when the short term business outlook changes – especially if it deteriorates.

4. Resources devoted to ensure compliance with statutory & legal mandates.

All businesses need to comply with and report on regulatory and financial guidelines.

Compliance, compilation, and reporting of quarterly financial performance, environmental and workplace safety regulations are examples of these.

These are essential activities which a business needs to perform as a going concern, and often referred to as the “cost of being in business”.

Derivatively, these, and the resources deployed in these activities, tend to be less impacted by short term changes in business conditions.

A short term downturn will put pressure to reduce costs of these resources too while still ensuring all required activities are performed. This could be by stretching a reduced existing workforce or moving work to lower cost options.

More permanent adjustments in these resources will be made if there is an expectation of a sustained increase or shrinkage of business.

In closing

Resources get impacted differently by changes in business conditions.

Those servicing orders in hand are most secure.

So are those which are expected to be deployed soon to book or service expected orders. These resources however are sensitive to short term swings in business outlook.

Resources engaged in building future competencies & revenue streams will be impacted by changes in the health of a company and its ability to invest in its future. The effect in the short term is more pronounced by negative events.

Finally, there are resources which are required to keep the lights on and ensure that the business is a “going concern”. These include positions in regulatory, compliance, accounting and infrastructure. These are less impacted by near term swings and more so by the sustainable outlook for the business.