“The Upside of the Downturn,” by Geoff Colvin

Reviewed by Michael DeLuca

In the book The Upside of the Downturn Geoff Colvin delves into a variety of different management strategies for companies to survive the recession and thrive coming out of it. It was just published in 2009 so it is relevant to the issues that are happening in the economy and consumer marketplace right now. He offers up numerous examples of companies and how they have reacted to the recession. Using these examples he portrays which companies are making wise decisions by relating them to his managerial suggestions. Colvin also shows examples of companies whose behavior during the recession has hurt them in the short-term and will continue to in the long-term after the downturn has ended.

The first thing Colvin suggests a company should do during the recession is to reset priorities. Assess your financial strength and competitive advantage. Think of how government intervention changes how you will run your company. Recognize the state of your customers and how it may have changed since the recession started. Acquire an accurate account of your current reputation as seen by the public. Exactly how does the public perceive you and why? Prepare for the risk in every decision you make and when doing so consider scenarios which may even be outside of your control.

Colvin thinks it is imperative to protect your most valuable asset. To him that is human capital. In today’s world economy, that is ever more focused on information and knowledge, the human being has become more important than any physical capital. He says that now is a great time to develop and train your human capital. Once the recession ends, your employees will be better equipped to be productive workers for your company.  Colvin says one of the worst things you could do at this point is have huge layoffs. There are so many short and long term costs of layoffs that money saved is negligible in comparison.

A company should ask itself “What is our core?” to determine what one thing they do best or are known for, then improve upon it. Management needs to realize how the recession is changing their customers and their behavior. They also need to ask themselves if the recession will cause a large-scale restructuring in their industry. Examining all of these things will be helpful in moving your company forward in a positive direction.

Managing for value is important for a company. Try to determine the best way to maximize value in the most efficient ways. There are ways to increase the actual net worth of a company that are superficial and do not necessarily mean it is being run well. For instance, Apple and AOL-Time Warner are both worth around $100 billion. The difference is that Apple only put in $5 billion to acquire that wealth while AOL-Time Warner put in $142 billion. Companies must find the means which best suit their company to efficiently produce value.

Colvin advises companies to not mark their prices down during the recession. Price cuts rarely pay for themselves. Cutting prices is a lot riskier than companies usually think. You can destroy your brand equity which took years to build and may take years to restore. After hard times are over and the price goes back up, people may not want to buy your product anymore with the increased price. Consumers have a “reference price” which is the lowest price they remember paying for a product. Customers hate price increases more than they like price cuts. 

Geoff Colvin’s insights on managing a company in a recession are thoughtful ways for a company to become more efficient and more productive. Another positive is that these steps taken now to help stabilize a company in a time of trouble can be applied to help sustain success in the future. They can help in becoming more prepared and immune to the effects of bad economic times in the future.

His logic coincides with a lot of the same fundamentals of TQM. Anticipating the needs of the consumer. Translating those needs into a useful and dependable product. After that finding a means to create and maintain a system that can produce this commodity at the lowest possible price. The result should be a good value to the consumer and profits for the company. TQM also relies on statistics to eliminate variations in production by anticipating when these variations will occur. Colvin talks about the same thing in predicting and creating scenarios so your company is prepared to adapt to issues accordingly. Doing this puts a company at a huge advantage compared to its competitors who may not be thinking ahead. 

TQM is also similar to Colvin in their acknowledgement of the importance of human capital. Deming urged managers to harness the know-how of employees, to focus on raising standards of excellence. Colvin talks about investing in your employees, developing and training them, thus making them more valuable to the company. This premium on human capital is imperative in a business world which is continually relying more on the knowledge and creativity of its employees.

I would most likely recommend this book to fellow PR students. The author is very reputable and works for Fortune magazine and appears very well informed.  His analysis is thorough and relates all his topics to recent events in business. His suggestions seem credible because he backs them up with concrete examples. The book is relevant because it is so current. He discusses issues that businesses are dealing with right now in this damaged economy. One major reason I would recommend this book to my fellow PR students is because we are all getting ready to enter into the workforce during this uncertain economy. Learning about these concepts and ideas could give you a head start on evolving with the new business landscape. Even though many will likely not start off in a managerial position, one day you might find yourself in that position. A problem with many companies who find themselves struggling now is they got stuck in conventional thinking and were unwilling to take risks and change. Reading a book such as this one could help prepare a recently graduated college student to be effective in management when the time comes.