ArticlePDF Available

Six courses of action to survive and thrive in a crisis

Authors:
  • HPO Center, the Netherlands

Abstract and Figures

Purpose Many organizations emerge from a crisis in a weak position because they focused too much on cost reductions. However, a review of past crises reveals that there are always organizations that seize the opportunities offered by crises. During difficult times these organizations tailor their strategy to their specific circumstances to achieve an optimum balance between what they have do and what they can do. These organizations do not automatically choose for a cost reduction strategy but consider a wide range of courses of action. As a result, they strengthen their position and, after recovery of the economy, they emerge as a frontrunner in their industry. This article reviews the possible courses of action during a recession, illustrated by companies that took these actions in practice, and explains how you can determine the course you need to take to help your organization to not only survive but thrive in a crisis. Design/methodology/approach On the basis of a previous meta analysis into high performance which identified five factors characteristics of a HPO, and a review of the financial strength of an organization, six courses of action are identified and illustrated with practical examples. Findings The examples of the courses of action as taken by the organizations described in this article reveal that “one size does not fit all”: each organization needs to examine its position carefully to identify the status of its financial situation and internal organization. Research implications/limitations Organizations can use the matrix of courses of action to determine the most appropriate course for the coming time. Originality/value This is the first time that the courses of action that an organization can take have been underpinned by scientific research, and as such managers can be more confident that they will take the right course of action.
Content may be subject to copyright.
Six courses of action to survive and thrive
in a crisis
Andre
´
de Waal and Esther Mollema
Context, context, context
Organizations generally respond to times of crisis as though they all suffer to the same
extent. The woes and worries are supposedly the same for every sector, every size of
company and every circumstance. Consequently, most organizations respond to a crisis in
the same manner (Banerij et al., 2009). However, why is then that there are always
companies that not only survive the crisis but also benefit from it (Rigby, 2009)? Next to all the
doom and gloom reports in the media on failing companies there are also stories on
organizations that appear to be relatively unaffected by the crisis. It turns out that these
companies differ from the majority in that they approach the crisis situation from their own
context: What are our specific circumstances? What is the nature of our market? What are
our threats and opportunities? What are our condition and striking power? These companies
have an excellent insight into their situation on which to base their decision for a specific
course of action, and this does not always need to be the Pavlov reaction of reducing costs
(Faas, 2009; Wileman, 2009). For example, KLM Royal Dutch Airlines is now making
anticyclic investments in new aircrafts. Because currently many orders for Boeing and
Airbus aircrafts are cancelled the company can negotiate substantial discounts.
A company’s condition can be determined by reviewing its financial status and the strength
of its internal organization. The company’s financial status determines whether it has the
financial capacity needed to adopt and execute a specific course of action. For example, the
investments needed to begin new operations are higher than those involved in the
divestment of a non-profitable business unit. The financial status of an organization can be
characterized as strong, when the company has sufficient funds to undertake new
operations; reasonable, when the company needs to adopt a cautious financial approach
but nevertheless has some scope for new investments; and weak, a situation in which the
company has to be financially extremely cautious.
A company’s internal strength can be determined by carrying out the so-called HPO
diagnosis. Studies of high-performance organizations (HPOs) organizations with better
financial and non-financial results than their competitors during a period of at least five to ten
years reveal that five factors determine an organization’s ability to achieve sustainable
better results based on a superior internal organization. These factors are: a high quality
management, a high quality workforce, a long-term orientation, an open and action-oriented
culture, and a focus on continuous improvement and renewal (see Box 1) (de Waal, 2008).
An insight into the company’s HPO status is obtained by distributing HPO questionnaires to
the company’s management and staff. The individual scores as given by the respondents
are totaled and averaged to obtain a score for each of the five HPO factors, on a scale from 1
(a great deal of improvement is required) to 10 (excellent). These scores can be compared
with the average HPO scores in the industry to obtain an insight into the relative performance
of the organization being assessed. The results from the HPO diagnosis form the basis for
discussions with management on potential improvemen ts within the company. An
DOI 10.1108/17515631011080740 VOL. 11 NO. 5 2010, pp. 333-339, Q Emerald Group Publishing Limited, ISSN 1751-5637
j
BUSINESS STRATEGY SERIES
j
PAGE 333
Andre
´
de Waal and
Esther Mollema are both
based at the Center for
Organizational
Performance, Hilversum,
The Netherlands.
The authors would like to thank
the management of the
aforementioned companies for
their cooperation in the
preparation of this article,
Kasper Klaarenbeek (Talenten
en Teams) and Jan Roording
(GTI) for their provision of
examples, and the participants
in the HPO Leaders Network for
their comments on the matrix.
A previous version of this article
was published in the Dutch
journal Holland Management
Review (2009, No. 125).
organization with a score of more than eight for all factors is regarded as having a strong
HPO status. A score or five or less means the organization has a weak HPO status. An
organization with a score of between five and eight has an average HPO status. The
combination of the organization’s financial status and HPO status determines the striking
power it has for the adoption of a specific course of action (Reingold, 2009; Collins, 2009).
Six courses of action
In general organizations have to always, in both good times and bad times, monitor their
costs and profitability and manage their cash flow. Therefore excellent organizations watch
their financials since this is basic sound business strategy. Companies that have no cost
awareness will lose sight of their costs that inevitably weakens their financial position. At the
same time organizations have to continually monitor their profitability to avoid the real threat
of non-profitable growth. In recent years there have been numerous examples of
structurally-healthy companies that grew themselves to death. So the key question is: what
courses of actions are there, besides cost control and profit monitoring, for an organization
during difficult times? A review of the activities organizations have undertaken during past
crises reveals that there are six courses of action that companies can adopt in times of crisis
(Charan, 2009; Colvin, 2009a, b; Mainardi et al., 2008; Thornton, 2009). The first three
courses of action are defensive, where the primary objective of the organization is to survive.
The other three courses of action are offensive, where the intention of the company is to
benefit from a crisis by growing profitably and becoming market leader. The courses of
action are:
B
Focus on cost reduction. When the financial situation of the organization is in a dire state,
reducing the company’s complexity, streamlining processes, postponing investments,
Box 1. The high performance organization study
A five-year research study, based on an extensive study of 290 literature sources and a world-wide
survey among more than 1,400 organizations, reveals that there are five factors that ensure that an
organization becomes and stays a HPO. These five factors have a direct, positive correlation with
competitive results. The higher the organization scores on the HPO factors, the better it performs
competitively; the lower the scores for the HPO factors, the worse the organization performs relative
to its competitors in the industry.
The first and most important HPO factor is the quality of the management. The managers of an
excellen t organiz ation are cha racteri zed by int egrity, dec isiven ess, acti on-ori entati on,
performance-orientation, effectiveness, self-assuredness and a strong leadership style. They are
what is referred to as ‘high performance individuals’ ’ (HPIs): they are guided by
customer-orientation, quality-focus and continual improvement principles in all their actions and
their work, as a result of which they inspire others to work together in achieving excellent results.
The second HPO factor is the presence of an open and action-oriented organizational culture. An
excellent organization promotes interactive internal communications (‘‘an open dialogue’’) between
members of the organization to ensure that open and continual exchanges of information take
place, both vertically and horizontally throughout the organization.
The third factor is the organization’s long-term orientation. HPOs always assign a higher priority to
long-term continuity than to short-term gains. The excellent organization will do it utmost best to
serve all stakeholders of the company as best as possible, as long as possible. In this way the
organization deserves it place in society.
The four th HPO factor is continual improvement and renewal. Excellent organizations have a
strategy that clearly distinguishes them from the competition. In addition, the organization is
continuously improving its processes, products and services and strengthening its core
competencies, to be able to fulfill its unique strategy.
The fifth and last HPO factor is the quality of the staff. Staff of an excellent organization want to be
held responsible for their results and at the same time want to be inspired to achieve exceptional
results. At the same time, staff is resilient and flexible, always focusing on achieving better
performance.
PAGE 334
j
BUSINESS STRATEGY SERIES
j
VOL. 11 NO. 5 2010
reducing stock levels, cutting back on travel and accommodation expenses and
refraining from extensions of temporary employment contracts can achieve a significant
decrease in the costs and increase the financial capacity of the organization fast.
B
Focus on core operations. By investing solely in the company’s core operations whilst at
the same time divesting the non-core operations that distract management, the
organization can exclusively focus on improving and strengthening these operations,
thus increase its capacity to serve specific clients well.
B
Downsize. Divesting the organization’s marginally profitable and loss-making operations
increases financial capacity and creates more scope for investments in the core
operations and more promising ventures.
B
Strengthen the internal organization. Improving the quality of management and staff,
improving the primary and supporting processes, and devoting more attention to
innovation and renewal enhances th e inter nal organizati on and improves the
organization’s ability to deal with changed circumstances and profit from them.
B
Focus on increasing turnover and margin. Streamlining the sales process, paying more
attention to pricing, focusing on a smaller and higher-quality product range, and
strengthening relations with customers, increases turnover and the margin.
B
Exploit opportunities. The period in which many competitors are occupied with defensive
measures offers an ideal opportunity to undertake activities that will enhance the
organization’s position in the market, such as launching new products and services,
taking over companies, entering into partnerships that enhance core operations, and
recruiting excellent staff currently employed by the competition.
Aligning the course of action to the organization’s context
By combining the financial status with the HPO status of an organization a matrix with eight
squares originates. This matrix can be used to plot the six courses of action (Figure 1). The
matrix contains eight rather than nine squares because, pursuant to the definition of a HPO,
an organization with a strong HPO status and a long-term weak financial position is not really
feasible.
An organization with both a strong financial and HPO status has sufficient financial scope
and internal strength to make maximum use of the chances that arise during a crisis such as
a recession. It can therefore exploit opportunities to the fullest by for instance starting new
operations that enhance its market position during a period in which the competition is
struggling to survive. Witteveen þ Bos, a Dutch consultancy and engineering company that
ranks ninth in terms of turnover but first in terms of profitability, is in a strong financial position
due to its continuous profitable growth since 2002. At the same time the company, owned by
its 500 þ staff/shareholders and characterized by a powerful family culture, has a strong
internal organization as manifested by a high score in the HPO diagnosis. Witteveen þ Bos
always monitors the cost and profitability of its operations, but does not place extra
emphasis on these in the current difficult times. Instead, the organization manages its
operations primarily on the basis of authenticity and passion: increasing quality, enjoying
carrying out high-profile projects, acting as the partner of ambitious clients, and creating
scope for the development and entrepreneurship of staff. In the midst of the recession
Witteveen þ Bos started new operations in Belgium by setting up an office in Antwerp and
entered in a new partnership in the railway consultancy industry with Royal Haskoning, DB
International and Verebus. In so doing, Witteveen þ Bos is considerably enhancing its
leading position in the sector (matrix position 1).
When an organization has a strong financial position but an average HPO status it still is able
to exploit opportunities, although the scope of the new operations and the pace at which
these opportunities can be utilized depends on how much the internal organization can
handle. Therefore the company has to devote explicit attention to strengthening the internal
organization so it can make effective use of the opportunities. GTI, the Dutch market leader
in the provision of technical services, has a strong financial position. The company balance
VOL. 11 NO. 5 2010
j
BUSINESS STRATEGY SERIES
j
PAGE 335
sheet does not show any (bank) debts and, as a subsidiary of the financially strong GDF
SUEZ parent company, GTI is par t of a powerful international player in the energy market.
GTI’s customers require solutions that have a direct relation with sustainability, corporate
social responsibility and cost efficiency. For this reason the company anticipates on social
trends by distinguishing itself with the themes of increased efficiency of energy supply,
increased comfort in the living and working environment, and lower overall consumption of
energy. The current crisis offers GTI the opportunity to fulfill its ambition. Several business
propositions have been developed at an accelerated pace that will achieve an immediate
desired effect: a permanent increase in turnover and margin at the expense of competitors.
GTI has improved its services to customers by increased cross-selling of its solutions, and
approaches new customers with sophisticated solutions at lower financial and social costs.
At the same time, as GTI has an average HPO status, the company focuses on the
enhancement of the internal organization. GTI has always been cost conscious, the
company began to focus on its core operations several years ago by divesting unprofitable
units. A process has been initiated to amalgamate GTI’s 40 þ individual units into one group
that will be able the company to operate more powerfully in the market. A great deal of effort
is being devoted to the merger, simplification and harmonization of processes, and the
implementation of an unified SAP system for the entire company that will make performance
information better measurable and more transparent. In addition, GTI is also working on
improving the quality of management as in the new constellation new management skills are
required. As a result some managers of the formerly independent units who were unable to
adapt to the change have left the company, whilst other managers are still receiving
coaching (matrix position 2).
Until recently a Dutch temporary employment agency had a strong financial position which
was used to initiate a range of new niche-market operations. However, as the agency had an
average HPO status the company could not handle this extension and started slipping
financially. Therefore the agency now has to divest many of the recently acquired operations
and has to make additional time and resource investments to accelerate an increase of
profitability in the remaining niche operations. While doing so the organization, in spite of the
Figure 1 Matrix of courses of action that can be undertaken, based on an organization’s
striking power
PAGE 336
j
BUSINESS STRATEGY SERIES
j
VOL. 11 NO. 5 2010
financial pressures, will need to expressly devote attention to strengthening the internal
organization otherwise the risk exist that the company will slip even further (from matrix
position 2 to position 5).
A Dutch multinational positions itself as an organization with a strong financial position and
an average HPO status. According to the Chief Financial Officer, the current crisis is not a
normal economic crisis but a credit crisis, not a cost crisis, but rather a liquidity crisis. For
this reason he states:
Cash is king. The real problem is the difficulty in obtaining credit so there is not enough oil to
lubricate the trade. The banks are no longer functioning adequately and it seems that the
business sector has to take over their role. However, that is not what companies are for. For
example, they cannot extend their credit periods to customers indefinitely because they don’t
have the financial capacity to do so. Moreover, their suppliers also want to receive their payments.
Consequently, at present solvency is much less important than liquidity. A company can have a
very high solvency ratio but if it cannot meet its payment obligations it can go bankrupt overnight.
Another element characterizing this crisis is the changed nature of refinancing, which is no longer
an ordinary business process. Companies with a high leverage find it very difficult to secure
refinancing, and when they are offered refinancing the costs are substantially higher and,
consequently, profits are lower. Obviously, at the moment issuing shares is out of the question.
This is an additional reason for dealing carefully with liquidity: pay off debts quickly and refrain
from unnecessary investments. As such, acquisitions currently do not have priority. A competitor
that goes under is one competitor less anyway! Obviously, you mustn’t miss a golden opportunity
but any takeover will need to generate added value and cash flow straight away.
For these reasons the multinational attaches great importance to managing its operating
capital well so that it can meet its obligations and make use of opportunities. Consequently,
the net debt/EBITDA is now the most important ratio, and the organization is implementing
measures such as lowering stock levels, reducing assets on the balance sheet, cutting
costs, and focusing on the management of cash flow. The board of management has
intensive discussions on these topics with managers in all divisions to coach them in
executing these processes efficiently and flawless. The multinational accepts that during the
crisis some of its clients will go bankrupt as the organization will not be able to lend a helping
hand without placing itself in jeopardy. In the CFO’s words: ‘This crisis is not about survival of
the fittest but survival of the fattest’ (matrix position 2).
When an organization has a strong financial position but a weak HPO status it needs to focus
on strengthening the internal organization. This is the case for many healthcare
organizations that built up a very strong financial position during the past decades of their
monopoly. They however have, as a result of a series of failed mega mergers and due to poor
management, a weak internal organization and are increasingly confronted with financial
pressures as the free market enters the sector. The same goes for housing corporations who,
because of their unique position as state-funded organizations, did not have any interest in
the HPO idea as they could set their own financial agenda by for instance dictating rents. As
this situation is changing quickly because of free marker principles, these organizations
need to make use of their strong financial position to strengthen their internal operations
rapidly (matrix position 3).
An organization in a reasonable financial state needs to focus on strengthening its financial
position. When the company has a strong HPO status it has to reduce costs and increase
turnover and margin in order to create the financial striking power to make use of
opportunities and ensure that the company is elevated to the top-right field in the matrix
(matrix position 4).
An organization with an average HPO status needs to follow the same courses of action,
supplemented with strengthening the internal organization so that the company is able to
effectively carry out the requisite actions. Bagels & Beans, a franchise company with 38
outlets throughout The Netherlands, has a reasonable financial position. Franchise
organizations grow by attracting new franchisees who invest in the franchise formula by
paying a franchise fee, so Bagels & Beans needs to continually monitor organizational costs
in order to keep this fee low. Bagels & Beans can increase the chain’s profitability by opening
VOL. 11 NO. 5 2010
j
BUSINESS STRATEGY SERIES
j
PAGE 337
new franchise outlets. As the franchise formula and franchise organization is already in place
every new franchisee makes an immediate contribution to the profit. Bagels & Beans opened
four new outlets in the second half of 2008 when the recession was in full swing and has
plans for opening at least a further four outlets this year. Bagels & Beans has an average
HPO status. This is due to the nature of a franchise organization which has a diversity of
franchisees such that it is difficult to create a uniform culture. Bagels & Beans appreciates
this problem, and for this reason during the coming year the company will determine the
profile of a successful Bagels & Beans franchisee (including the profile of a successful
Bagels & Beans manager) and then design a training program for the franchisees
accordingly (matrix position 5).
The Dutch subsidiary of Grohe, a global supplier of sanitary fittings, recently carried out a
HPO diagnosis which revealed that the company has an average HPO status. In addition, it
has a reasonable financial position. The company has decided to focus primarily on
reduction of costs that do not have an immediate bearing on the manufacture, distribution
and marketing of products (such as travel and accommodation expenses, office supplies,
give-aways, and visits to trade fairs), and increase of turnover by placing the emphasis on
supplying the more expensive-home segment of the market. The HPO diagnosis also
initiated project groups that will work on further strengthening the internal organization
(matrix position 5).
An organization with a weak HPO status has no other option but to reduce costs, since the
company lacks the strength and innovative capacity required to increase turnover and
margin. A good means of cutting costs rapidly is to divest all non-core operations and
exclusively focus on core operations. Of course companies in this middle-left field also need
to strengthen the internal organization (matrix position 6).
In a period of crisis organizations with a weak financial position have no choice but to opt for
one of the survival courses of action. This automatically implies a focus on reduction of costs,
since there is little or no financial scope for initiation of new operations, improvement of
turnover and margin, or even strengthening the internal organization. The effects of cost
reduction can be enhanced by withdrawing to the core operations, thereby avoiding the
spending of funds on operations in areas in which the company lacks the strength to reap the
benefits (matrix position 7). In addition, when the financially weak organization also has a
weak HPO status, it needs to downsize to rapidly generate financial resources. After many
years of growth an international fashion company entered a difficult phase because it was
unable to manage the rapidly increasing scale of operations adequately. Management
started to waver in its strategy and quality and performance of the operations began to
decline at an alarming pace. Parts of the company had to be sold and ultimately ownership
of the entire company passed into other hands. What once was a world-famous, well-oiled
and profitable company had become a shadow of its former self. The new management is
currently endeavoring to break the impasse by drastically reducing the size of the head
office. All ‘fat’ in the staffing is being cut out and the processes are being simplified and
reduced to the essence. The company’s focus is now on ‘back to the core business’ and
therefore it is in the process of divesting all secondary operations. The entire HRM cycle is
being redesigned in line with the new focus and the remuneration structure is amended.
Pursuant to this operation staff will exchange part of their fixed salary for a variable reward
system. In addition, management is devoting a great deal of effort to strengthen the internal
organization. In the words of a member of the management team: ‘During times in which you
have few funds available for investment it is essential to gain everyone’s support for the
investments you do make. We are making every effort to promote open dialogue in which
everyone is free to contribute what he or she can. This ensures that good people keep
confidence in the future of the company and dedicate themselves with heart and soul to its
success’ (matrix position 8).
Conclusion
The examples of the courses of action as taken by the organizations described in this article
clearly reveal that ‘one size does not fit all’’. Each organization needs to examine its position
PAGE 338
j
BUSINESS STRATEGY SERIES
j
VOL. 11 NO. 5 2010
carefully to identify the status of its financial situation and internal organization.
Organizations can then use the matrix of courses of action, to determine the most
appropriate course for the coming time. This requires management to be brutally honest
when identifying not only the company’s strengths and weaknesses but also its own
strengths and weaknesses. ‘Improve the world, start with yourself’ is an approach that is
certainly appropriate here. Management needs to take the lead in enhancing the five HPO
factors, including strengthening the quality of management itself, so that the company can
not only survive a crisis but even thrive. And the real HPO always keeps the long-term goal in
its visor: to become the best in its industry!
References
Banerij, S., McArthur, N., Mainardi, C. and Ammann, C. (2009), ‘Recession response, why companies
are making the wrong moves’’, white paper, Booz & Company, New York, NY.
Charan, R. (2009), Leadership in the Era of Economic Uncertainty, McGraw-Hill, New York, NY.
Collins, J. (2009), How the Mighty Fall, and Why Some Companies Never Give In, Random House
Business Books, London.
Colvin, G. (2009a), The Upside of the Downturn, 10 Management Strategies to Prevail in the Recession
and Thrive in the Aftermath, Nicholas Brealey Publishing, London.
Colvin, G. (2009b), ‘How to manage your business in a recession’’, Fortune, January 19.
de Waal, A.A. (2008), ‘The secret of high performance organisztions’’, Management Online Review,
April, available at: www.morexpertise.com/download.php?id ¼ 88
Faas, R. (2009), ‘Navigating the downturn’’, white paper, Deloitte Consulting, New York, NY.
Mainardi, C., Leinwand, P. and Lauster, S. (2008), ‘How to win by changing the game’’, Strategy þ
Business, Vol. 53, Winter.
Reingold, J. (2009), ‘Jim Collins: how great companies turn crisis into opportunity’’, CNNMoney.com,
January 22.
Rigby, D. (2009), ‘Winning in turbulence, pull the right levers for your situation’’, white paper, Bain &
Company, Boston, MA.
Thornton, E. (2009), ‘The new rules, managing through a crisis’’, Business Week, January 19.
Wileman, A. (2 009), ‘The six million dollar cost manager’’, The Conference Board Review,
January/February.
About the authors
Andre
´
de Waal is Associate Professor of Strategic Management at the Maastricht School of
Management and Academic Director of the Center for Organizational Performance. His
latest book is called Strategic Performance Management: A Managerial And Behavioural
Approach (Palgrave MacMillan, 2007). Andre
´
de Waal is the corresponding author and can
be contacted at: andredewaal@planet.nl
Esther Mollema is Managing Director of the Center for Organizational Performance.
VOL. 11 NO. 5 2010
j
BUSINESS STRATEGY SERIES
j
PAGE 339
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
... In response, these sub-contractors adopted a strategy of reducing staff, employing staff through fixed-term contracts and seeking projects overseas. de Waal and Mollema (2010) described three defensive strategies -cost reduction, focus on core activities and downsizing; and three offensive strategies -strengthen internal organisation, increase turnover and margins and exploit opportunities, to survive and thrive in a crisis. The only case study on a property developer was reported by Tansey et al. (2014) who confirmed the adoption of the following defensive strategies: reduce costs and salaries, employ staff on a project basis, renegotiate loan agreements and acquire overdraft facilities to improve cash flow. ...
... Their study found that 70 per cent of the credit-constrained firms sold assets during the Global financial crisis crisis to raise funds. Similarly, de Waal and Mollema (2010) found that financially weaker companies put more emphasis on cost reductions, downsizing and refocusing on core operations. ...
... Each company needs to examine its position carefully to identify the status of its financial situation and determine the most appropriate course of action. The finding that distressed companies would have to adopt survival strategies to withstand the poor macro-economic conditions, whereas the non-distressed companies can grow profitability by exploiting opportunities is consistent with the conclusions of de Waal and Mollema (2010). ...
Article
Full-text available
Purpose The purpose of this paper is to characterise the financial performance and to identify the operating strategies of property development companies in Malaysia during the 2008 global financial crisis (GFC). Design/methodology/approach The research approach includes a comprehensive analysis of the financial statements and annual reports of 35 property development companies listed on the Kuala Lumpur stock exchange. The financial statements were analysed to evaluate the financial performance of these companies and to assess the severity of the impact of the GFC on revenues and profits. The operating strategies were determined from a content analysis of the statement to shareholders. Findings An aggregated analysis of the financial performance indicates a 23 per cent decline in net profit in 2008. Classifying these companies into two separate sets of distressed and non-distressed companies showed that poor financial performance and a high debt-to-equity ratio pre-GFC led to continuing poor performance during the GFC period and beyond. Survival strategies adopted by distressed companies include the disposal of assets to improve cash flow, refinancing loans, delaying the launch of new projects and reducing their workforce. Non-distressed companies adopted growth strategies such as purchasing land for development, focusing their offerings towards high-end products, vertically integrating and diversification. Practical implications The increased understanding of the financial performance and operational strategies will allow managers of property development companies to improve financial management and adopt appropriate strategies in response to the impact of future financial distress. Originality/value The study presented in this paper is the first to analyse the financial performance of Malaysian public-listed property development companies during the period of the 2008 GFC and to link their financial performance to operational strategies.
... In response, these sub-contractors adopted a strategy of reducing staff, employing staff through fixed-term contracts and seeking projects overseas. de Waal and Mollema (2010) described three defensive strategies -cost reduction, focus on core activities and downsizing; and three offensive strategies -strengthen internal organisation, increase turnover and margins and exploit opportunities, to survive and thrive in a crisis. The only case study on a property developer was reported by Tansey et al. (2014) who confirmed the adoption of the following defensive strategies: reduce costs and salaries, employ staff on a project basis, renegotiate loan agreements and acquire overdraft facilities to improve cash flow. ...
... Their study found that 70 per cent of the credit-constrained firms sold assets during the Global financial crisis crisis to raise funds. Similarly, de Waal and Mollema (2010) found that financially weaker companies put more emphasis on cost reductions, downsizing and refocusing on core operations. ...
... Each company needs to examine its position carefully to identify the status of its financial situation and determine the most appropriate course of action. The finding that distressed companies would have to adopt survival strategies to withstand the poor macro-economic conditions, whereas the non-distressed companies can grow profitability by exploiting opportunities is consistent with the conclusions of de Waal and Mollema (2010). ...
Article
Full-text available
Purpose – The aim of this case study is to characterize the impact of the 2008 global financial crisis on the financial performance of public listed construction companies. Design/methodology/approach – Financial analysis was conducted on 32 public listed construction companies in Malaysia. Twelve financial ratios were examined to determine the profitability, liquidity, activity, leverage and solvency of these companies over the period between 2005 and 2010. This was complemented by a distress analysis using Altman’s Z-index. The study also used a content analysis of the Chairman’s or Managing Director’s statement to shareholders to uncover the responses and strategic initiatives undertaken by the management in response to the financial crisis. Findings – The only direct impact of the financial crisis was a reduction in profitability. Total revenues and total assets of these companies continue to grow due to increased demand for construction from year 2007 following two large capital investment programs initiated by the Malaysian Government to mitigate the potential effects of the financial crisis. Net profits rebounded back to 5 per cent by year 2010. These companies immediately responded to the crisis with more prudent financial management; curtailing expenses, cutting dividends, reducing bank borrowings, increasing equity; and to the extent of disposing of assets to mitigate losses. Research limitations/implications – The sample of only 32 public listed companies out of a total of more than 60,000 construction companies may be considered small, but these 32 companies represent nearly 20 per cent of the total construction volume for 2010. Practical implications – The study documents the effects of increased capital spending by the government to mitigate the loss of investor confidence followed by a slowdown in economic growth during a period of global financial distress. Key findings will inform on prudent financial management to withstand future financial crises. Originality/value – The responses and strategies adopted by the management to mitigate the effects and to enhance future performance of these companies have been uncovered. These are important considerations in managing construction companies; the analysis and observations will be invaluable to researchers intending to study how the construction industry responds to a future slump in demand.
... . Focus on core operations. By investing solely in the company's core operations while at the same time divesting the non-core operations that distract management, the organization can focus on improving and strengthening these operations, thus increase its capacity to serve specific clients well (De Waal and Mollema, 2010;Colvin, 2009). ...
... . Exploit opportunities. During crisis times when competitors are occupied with their own survival, well prepared organizations can undertake activities that will enhance its position in the market, such as launching new products and services, taking over companies, entering into partnerships that enhance core operations, and recruiting excellent staff laid-off by the competition (De Waal and Mollema, 2010;Thornton, 2009). ...
Article
Full-text available
Purpose The purpose of this paper is to provide a comprehensive review of organizational crisis and organizational change management and to provide a guide to crisis prevention, management and recovery by highlighting critical actions to be taken during each stage of an organizational crisis. A second aim is to compare the crisis management of two financial firms during the 2007 financial crisis: Lehman Brothers and Paulson & Company. Design/methodology/approach The methodology involved a review of the literature and a case analysis related to organizational crisis and organizational change management. The synthesis of these two approaches is a conceptual paper. Furthermore, the article is supplemented by comparing the management of the 2007 financial crisis by both Lehman Brothers and Paulson & Company in an attempt to compare the literature findings to a global organizational crisis. Findings The literature suggests that organizations with early crisis detection methods and crisis management plans already in place before the onset of a crisis are significantly better prepared to manage and survive a crisis event. In addition, these better prepared organizations have the opportunity to reposition themselves and turn a crisis event into a strategic opportunity. This is evident in the authors' comparisons of both Lehman Brothers' and Paulson & Company's different management of the 2007 financial crisis. Practical implications The demand for crisis management is on the rise as the 2007 financial crisis exposed the lack of preparedness among financial institutions, challenged the assumptions crisis management plans were based on and required a regulatory transformation of financial markets. Surviving firms are recovering and learning from the crisis as their crisis management proved to be ineffective. Originality/value The scope of this paper offers readers a guide to organizational crisis management, supplemented with examples from a financial crisis that affected almost every organization in the world and from which many organizations are still recovering. Any organization, regardless of industry, can benefit from the guide presented in this research. Moreover, the framework of this paper can enable practitioners to formulate and improve their organization's crisis management plans and capabilities.
... Previously conducted studies found that responses were split into subsections, although they were categorised slightly differently. Sections included contracting, financial, risk management, strategy, investment, human resources and cost control, which were among the subsections presented by previous authors [27,30,31,35]. These have been analysed, and based on the answers of participants, were classified into four response categories in the present study: cost control, contracting, risk management, and financial. ...
Article
Full-text available
COVID-19 presented a catastrophic event, creating a unique environment and resulting in lasting repercussions globally. The construction industry has been one of the worst affected sectors relating to the public health pandemic. Challenges such as workplace closures and site cessations led to untold uncertainty, developing into contractual grievances and supply-chain disruption, amongst others. The focus of this study is to determine the response strategies of UK construction companies in the face of the COVID-19 global pandemic and the subsequent recession the UK fell into as a direct result. A literature review of previous recession responses was examined and four areas for further consideration were identified, which included contracting, risk management, cost control and finance. The study compared the previous response strategies to identify whether lessons had been learned from prior experience, or if new strategies had emerged due to the different economic and political circumstances. A qualitative methodology was adopted to provide the required depth of analysis for the research. Thirty-two participants from different size construction organisations were interviewed, which provided evidence of strategies across the four categories analysed. The results indicated that in the early stages, uncertainty around all aspects of the pandemic caused organisations to anticipate the worst financial consequences, as the scale or scope of government intervention was initially unknown. As a result, companies reacted by downsizing, halting expansion, introducing competitive pricing to ensure there were projects in the pipeline and diversification to ensure stability and survival of the company. Organisations used the pandemic as an opportunity to restructure and invested in new technology to remain competitive. Client relationships and supply-chain partnerships were deemed to be of upmost importance in resolving contracting challenges that the pandemic brought about.
... The main concern should be to secure an investment plan for marketing, advertisements and R&D, areas which contribute to added value for the enterprise. While a part of the competition is focussed on defensive policies, a chance arises for others to consolidate their position in the market, introduce new products, carry out mergers and acquisitions and recruit excellent personnel from the competition (De Waal and Mollema, 2010). As shown in a survey by Kambil (2008) in a sample of the Fortune 500 companies, the most profitable companies were those which retained or accelerated their investment plans, verifying the assumption that the best policy during recessions is to seek growth. ...
Article
Full-text available
Purpose – The purpose of this paper is to reveal the appropriate course of actions of any executive toward attaining business excellence, under the limitations and particular conditions that arise in an economic crisis environment. Design/methodology/approach – This paper takes the approach of an extended literature review. Findings – Business excellence is an ideal path for any enterprise which seeks the attainment of a strong competitive advantage in times of economic crisis. This path, through the implementation of the principles of Total Quality Management, leads to a strategic plan that helps the enterprise not only to survive but also to strengthen its position while exploiting opportunities that arise during the recession. The basic elements of such a plan are the satisfaction of all customers and stakeholders, the quest for innovation and the implementation of an aggressive policy in marketing and investments. Toward this target, the most crucial elements are the involvement of the management and, second, the commitment and efforts of all human resources. Practical implications – The business community and specifically the higher management of any company could reformulate its strategic plan according to the findings of this survey, in order to gain a sustainable competitive advantage over competition. Originality/value – On the basis of extended literature review, there has been no research work to connect the strategic thinking of enterprises and their management with business excellence in times of economic crisis, which is attempted in this paper. The added value of attaining this goal during harsh times should be a beacon for the higher management in its quest for sustainable competitiveness.
... D r a f t v e r s i o n f o r A u t h o r o n l y survive and thrive in a crisis but can benefit from it and they have propounded views of how companies should respond and develop an appropriate strategy to deal with recessionary conditions. A study of the activities that organizations had undertaken during past crises by De Waal and Mollema (2010) provided a succinct summary view that there are basically six courses of action that companies can adopt in times of crisis, three of which are defensive based on a policy of survival (i.e. focusing on cost reduction, focusing on core operations and downsizing) and three of which are offensive with the company benefitting by growing profitably (i.e. ...
Article
Full-text available
Firms in the construction industry have always had to deal with the challenges of the economic cycle and develop strategies to deal with the resulting fluctuations in their business environment. In the context of the 2008–2011 double-dip recession in the UK, the results of a survey targeting the top one hundred construction companies in the UK are reported here. This research is particularly intended to assess whether the strategies of large companies in the construction sector, when faced with the issues associated with the variation in the economic cycle, have changed since the previous business cycle (i.e. the 1986–1990 boom followed by the 1990–1991 recession). The survey reveals the challenges that companies have faced, reports on company behaviour and on the policies adopted. While there are many similarities between policies adopted during the recessionary periods of the two cycles, the research found notable changes in attitudes towards diversification, human resource management and price bidding.
Article
This study explores the strategies utilized by small-scale sport event organizations to respond to the effects of the COVID-19 pandemic. In doing so, it helps inform future crisis management preparedness in small-scale sport event organizations. Using semi-structured interviews, the crisis management experiences of eight participants from six small-scale UK-based sport event organizations were scrutinized. The interviews focused on a holistic understanding of their pre-, during, and post-pandemic experiences. Three key themes emerged from the data. They were (i) the diversification of revenue streams and reduction of costs; (ii) ensuring a customer centric approach; and (iii) the importance of fostering entrepreneurial and innovative characteristics. The study proposes a framework of effective crisis response strategies to help inform small-scale sport event organizations to better plan, prepare, and prevent future crises. Through the theoretical lens of resilience studies, it advances knowledge on the COVID-19 experiences of small-scale organizations in the events industry.
Article
Full-text available
O estudo objetivou avaliar a relação de incertezas, em um ambiente de crise econômica, e variáveis endógenas com o uso do orçamento em indústrias catarinenses. Para tal, tem a teoria contingencial como arcabouço teórico. A pesquisa caracteriza-se como descritiva, survey e quantitativa, abrangendo 258 indústrias catarinenses que fazem o uso do orçamento como ferramenta gerencial. Constatou-se que a percepção de incerteza em um ambiente de crise econômica se relaciona com o uso do orçamento, modificando o uso das funções orçamentárias. Para as funções de planejamento e alocação de recursos apontou-se uma relação positiva, ou seja, tais funções orçamentárias têm sua relevância ampliada em momentos de crise econômica. De modo contrário, a avaliação de desempenho obteve uma relação negativa, sendo menos utilizada no período de oscilações causadas pela crise econômica. Por fim, conclui-se que no contexto das indústrias catarinenses, as incertezas geradas pelo ambiente de crise econômica, analisadas conjuntamente com variáveis endógenas (estratégia, tamanho e ciclo de vida), modificam as funções orçamentárias. o estudo contribuiu com a pesquisa em contabilidade gerencial ao ampliar o entendimento sobre o uso das funções orçamentárias em períodos de crise econômica.
Article
Full-text available
Business excellence or BE is a path to success for any enterprise that has started its new journey in this era of highly competitive market for almost any industry. It is a way to achieve a certain level of competitive advantage over other organisations. But what could be done in times of economic crisis. Some of the industry experts believe that if the organisation stopped considering a time of recession as a crisis and instead as an exploiting opportunity , it not only helps the organisation to survive but also strengthen their position in the industry. The crux of the matter would be to somehow come up with an effective improvement in the strategic plan that would not only help in satisfying the customer and stakeholders but will also help the organisation in overcoming the economic crisis factor. And to work towards this target there should be high involvement of the management and optimum level of use of all the human resources. The business community or the top management can use the results of this research to achieve business excellence through strategic planning improvements and can withhold their stand in the industry. There has been not much research before connecting the strategic operational planning during the time of economic crisis. The main takeaway of the study is to somehow save on the extra costs, improve business processes, sustain quality, and improve the level of performance of the staff and management. All of these could be easily achieved if the enterprise can effectively implement these operational business concepts in their own business: Total Quality Management (TQM), Six Sigma and Lean manufacturing system.
Article
Full-text available
In the past few decades organizations all over the world have been searching for the elements that constitute continuous organizational success. Fuelled by bestsellers such as 'In Search Of Excellence' and 'Good to Great', managers have been trying out many different improvement concepts, often with mixed results. The aim of this study was to identify factors that determine the continuous success of a high performance organization (HPO). A meta analysis of 280 research studies into high performance initially identified 35 characteristics of a HPO. These were subsequently used in a case study of a large financial service provider, to identify its HPO status and the improvements needed to become a really excellent organization. The results of the study show that it is possible to identify factors that determine continuous organizational success, and that managers can be offered a framework that adds focus to improvement.
Article
Preface: Decline Can Be Avoided. Decline Can Be Detected. Decline Can Be Reversed. Amidst the desolate landscape of fallen great companies, Jim Collins began to wonder: How do the mighty fall? Can decline be detected early and avoided? How far can a company fall before the path toward doom becomes inevitable and unshakeable? How can companies reverse course? In How the Mighty Fall, Collins confronts these questions, offering leaders the well-founded hope that they can learn how to stave off decline and, if they find themselves falling, reverse their course. Collins' research project – more than four years in duration – uncovered five step-wise stages of decline: By understanding these stages of decline, leaders can substantially reduce their chances of falling all the way to the bottom. Great Companies Can Stumble, Badly, and Recover. Every institution, no matter how great, is vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do. But, as Collins' research emphasizes, some companies do indeed recover – in some cases, coming back even stronger – even after having crashed into the depths of Stage 4. Decline, it turns out, is largely self-inflicted, and the path to recovery lies largely within our own hands. We are not imprisoned by our circumstance, our history, or even our staggering defeats along the way. As long as we never get entirely knocked out of the game, hope always remains. The mighty can fall, but they can often rise again.
Article
Description: After 10 years of prosperity, inflation has reared its ugly head once again. But this time it's different. Inflationary trends are sweeping across national borders, fueled by strong demand and tight supplies of such critical commodities as oil, metals and food. Efforts to fight rising inflation are almost certain to trigger slow growth or even recessions in many developed economies and in some of the fastest-growing developing nations. But there will be no quick fix. The inflation threat confronting the globe today is in its earliest stages. The companies that understand this reality and make bold moves to adapt to it will be the ones that survive and even thrive in a difficult environment. Internationally renowned business consultant and bestselling business book author Ram Charan presents a road map for what everyone in the company – from senior executive to middle manager – needs to be thinking about and doing to meet the challenge. Ram Charan is a highly acclaimed speaker and advisor. He is the coauthor of Execution and the author of What the CEO Wants You to Know and many other books. A noted expert on business strategy, Ram has coached some of the world's most successful CEOs, and for more than thirty-five years has worked behind the scenes at companies like GE, KLM, Bank of America, DuPont, Novartis, EMC, Home Depot and Verizon, helping them to develop, shape and implement their strategic direction.
Recession response, why companies are making the wrong moves”, white paper
  • S Banerij
  • N Mcarthur
  • C Mainardi
  • C Ammann
Banerij, S., McArthur, N., Mainardi, C. and Ammann, C. (2009), ''Recession response, why companies are making the wrong moves'', white paper, Booz & Company, New York, NY.
The Upside of the Downturn, 10 Management Strategies to Prevail in the Recession and Thrive in the AftermathHow to manage your business in a recessionThe secret of high performance organisztions
  • R Charan
  • Ny
  • J Collins
  • G Colvin
  • G Colvin
Charan, R. (2009), Leadership in the Era of Economic Uncertainty, McGraw-Hill, New York, NY. Collins, J. (2009), How the Mighty Fall, and Why Some Companies Never Give In, Random House Business Books, London. Colvin, G. (2009a), The Upside of the Downturn, 10 Management Strategies to Prevail in the Recession and Thrive in the Aftermath, Nicholas Brealey Publishing, London. Colvin, G. (2009b), ''How to manage your business in a recession'', Fortune, January 19. de Waal, A.A. (2008), ''The secret of high performance organisztions'', Management Online Review, April, available at: www.morexpertise.com/download.php?id ¼ 88
Navigating the downturn'', white paper, Deloitte ConsultingHow to win by changing the game
  • R Faas
  • Ny
  • C Mainardi
  • P Leinwand
  • S Lauster
Faas, R. (2009), ''Navigating the downturn'', white paper, Deloitte Consulting, New York, NY. Mainardi, C., Leinwand, P. and Lauster, S. (2008), ''How to win by changing the game'', Strategy þ Business, Vol. 53, Winter.
Jim Collins: how great companies turn crisis into opportunity
  • J Reingold
Reingold, J. (2009), ''Jim Collins: how great companies turn crisis into opportunity'', CNNMoney.com, January 22.
Winning in turbulence, pull the right levers for your situation”, white paper
  • D Rigby
Rigby, D. (2009), ''Winning in turbulence, pull the right levers for your situation'', white paper, Bain & Company, Boston, MA.
The new rules, managing through a crisis”
  • E Thornton
Thornton, E. (2009), ''The new rules, managing through a crisis'', Business Week, January 19.