Recession coming!

Oh, No! I wondered recently at the effect that the dreaded ‘R’ word has on me even now in my Retirement.

My parents lived through the Great Depression. My father saved, reconditioned,  and reused electric motors from discarded refrigerators and washing machines and had eight in-waiting when he died. My mother saved aluminum foil for reuse, and used the water left over from discarded cut flowers to water houseplants. I was told that they really didn’t have hard times.

“Of course, nobody had any Money, but the printshop still had customers. We printed the posters for the movie theatre and took ticket scrip in trade, which we traded for milk scrip. Then we traded milk scrip at the butcher, or grocery.”`

I came out of school in the 1969 Vietnam War contraction, and we joked that “a recession was when a lot of people were outa work. A depression was when you were outta work.” I did a lot of day labor. My wife and I swept out a butcher shop on Saturdays in Boston’s Haymarket and ate steaks like royalty.

I felt poor during the oil-shock stagflation of the 1970s, and that caused me to go back to school, and then I came out in the recession of 1981. I moved to Pittsburgh in time for the death of the steel industry, but I always survived.

In the 1991 recession, I was a self-employed independent consultant and had three clients, one in advertising, one in training, and one in consulting. Consulting is discretionary spending, so is training, so is advertising. My clients’ clients cut discretionary spending. My comfortable living revenue went to zero in one week.

Recession lessons for consultants.

In 1991 I wrote the first version of Recession Leadership, which I rewrote in 2022,  to convince potential clients to look for the opportunity in the recession. That article convinced one of my existing clients to be less drastic in cutting my project work, and brought in a new client.

The first recession lesson for consultants is to prepare for one when times are good. That includes:

Maintain enough retained earnings to survive.

Consulting is often a boom and bust industry. After the Covid pandemic, there was some pent-up demand and firms “hired ahead of the curve” in 2022 and 2023 and then scaled back in 2024 even rescinding offers to some interns.

Continually monitor your client list for recession risk.

Consultants are not the only ones who do this. In one of my early projects I interviewed distribution truck fleet owners. I kept hearing the phrase “FBO 50.” I was young so it took three times before I asked what that meant.

“Distribution has razor thin margins. We don’t survive downturns easily. We’ve all learned to keep fifty percent of our business in Food, Booze and Oil.”

Necessities like food and energy, and small money luxuries like alcohol, candy, and cheap Entertainment aren’t completely recession proof, but they have an easier time than spending you can pause for a while.

Rethink where you develop business.

If this recession happens it may be because of the change in US trade policy – tariffs. Now tariffs usually don’t apply to consulting services. However, many larger consulting firms have gotten used to a global staffing model. The “trade war”  has sparked some nationalistic emotions, and most especially in customs and immigration professionals around the globe. It might be the time to “think local” as much as you can.

The Covid pandemic drove a lot of business developers to Chat GPT written emails and texts, and zoom calls. It might be time to get personal – actually go see people again.

Rethink your service offerings.

Tariffs, and other restrictions on trade will put pressure on supply chains. Clients may need help finding local alternatives to imported materials. They may want to look at joint-ventures that can be exempted. They may need special financing for bulk purchase or inventory warehousing to smooth out volatility in supply prices.

Process improvement projects that reduce real cost will be more popular than wholesale process mapping and black belt certification projects.

Rationalizing unprofitable products and customers can also help with costs. What is or isn’t profitable has changed with new trade restrictions, but getting back to the core products and customers will build a base for Growth.

Break big projects into bite-sized pieces. Sure, I know the large systems integrators, doing huge digital transformation projects, may not be affected, (except maybe the hardware and software pieces – oops). Still everyone will benefit if you can say, “OK, let’s put the big project on ice, but let’s do this piece, which is on the critical path and will speed things up when we restart.”

Resist doing work you know is wrong or destructive.

Don’t be a hatchet man. In recessions some clients panic and hire consultants for the wrong reason or to do work that will destroy value in the medium or long term. Don’t restructure through redlining (going into a room with an organization chart and drawing red lines through people’s names and putting organizations together with no research or rational reason). Don’t encourage clients to offer payouts to people who’ll leave voluntarily. It seems painless, but the best people are the ones who leave.

Don’t join the cabal. Don’t secretly help plan to close down businesses or offices. Don’t make everyone justify their budget with no guidance. Don’t say “Oh nothing is changing.” Transparency and compassion, even during necessary reductions in force, will maintain trust and stop people from leaving when times improve again.

But what if you are now unemployed or about to be?

All of these ideas are if you have a firm, and/or a job. Some candidates will get left out in the cold this spring. Some consultants will find themselves closer to out in the “up or out” or go in the “grow or go,” as promotions may be rarer this year.

If you are a candidate left out in the cold, try a stepping stone job in someplace where the new service offerings, digital transformation, sociotechnical research, or AI enabled anything are likely to come from. Maybe stay on with the university consulting group, or work with a well thought of faculty member and wait it out.

If you are expecting to be counseled to leave, look at learning the “UP” skills of client acquisition or service offering development.

Recessions have been going on for a long time.

Probably the only real advice is Don’t Panic. Recessions don’t affect every industry or every job equally. Smart, positive, adaptable people survive, and their scars, though painful at the time, have a lot of future value.

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