Belt Tightening Leslie Witt

How the recession might make for better business

In our personal lives, the current recession could prove to be an agent of positive change, if it prompts us to prioritize, consume less, save more, get back to basics, and figure out what really matters. Even for those far from bankruptcy, a bit of enforced belt tightening might be just what we need to correct some unhealthy habits and point toward a more sustainable future.

What’s harder to see is how this retreat from irrational exuberance to rational sobriety could be good for business. The thought of people consuming less, living in a more prudent and conservative way, and prioritizing their needs sends shivers down the collective corporate spine.

But are these really two opposing forces of the recession? Could it be actions that promote long-term physical and financial health, recalibrate the life cycle of employment, and account for self-worth might tally up far more than the bottom dollar? The recession and the new norms that seem to be emerging spontaneously from it present us with a unique opportunity to reexamine, redefine, and rewrite the employer/employee relationship.

The Evidence — Stories from around the globe

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Proceed with caution

Losing a job and the health insurance that comes with it has the potential to make staying healthy a “need to do” instead of a “nice to do.”

Recently, at a dinner party in San Francisco, a group of young professionals talked about how unemployment was changing their everyday habits. Dave has stopped skiing the double-black-diamond runs—he’s seen people taken down the mountain on stretchers and knows he couldn’t afford to have that happen to him.

Jamie is eating better and exercising more since losing her job and health insurance. She sees these activities as substitutes for insurance and figures she can afford to spend a little more on organic fruit and her membership to Crunch Gym.

How might employers promote an attitude of conscious responsibility for health? Could we rework benefits, especially healthcare, to prompt and reward engaged behaviors?

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Released from the golden handcuffs

After a decade in corporate lockdown, an entire class of New Yorkers is back out on the street. Finding themselves freed from their jobs, many have taken advantage of their early release.

Shanti had been a good student and when the banks came calling after graduation, she answered. Wall Street gave her little satisfaction, but once inside, it was hard to consider leaving behind her choice apartment and closet full of high-end clothes.

Post-layoff, Shanti is studying to be a chef and savoring the joy of doing something she wants to do. She’s bringing the flair of haute cuisine to a foundation of vegetarian Indian. She’s even considering starting a catering business. With her drive and passion, the combination is sure to be potent.

Can we help financially savvy refugees from the banking industry reconnect to their passions?

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In it for the long haul

Terry was a midlevel manager at a large company. Several years ago, he was offered a farewell package and shown the door, undoing his plans to retire at 60.

Undaunted, he became a realtor and hit the ground running. He worked every weekend and rarely took a break, still hoping to retire by 62.

Then his 401K tanked and his investments went south, and now he’s back where he started.

This time he has a different plan. He doesn’t know when, or even if, he’s going to retire. What he does know is that he has to find a way to balance his work and his personal life, because waiting for the eventual retirement payout is a strategy that no longer makes sense.

Could cash-strapped corporations retain the knowledge, talent, and wisdom of their employees while creating more opportunities for sabbaticals, parenthood, and lifelong learning?

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Save now, safe later

With paltry savings and mounds of debt, a majority of the US population would quickly become insolvent were they to lose their job today. Most of us simply have no safety net.

But that’s beginning to change. The savings rate is up from a low of -1 percent in mid-2005, to almost 5 percent today. Whether out of fear or necessity, people are beginning to build up a reserve that will enable them to be secure.

Mirror, mirror

The banking community—a group of savvy, money-focused folks—directly reflects how incentives and compensation structure inform behavior.

The populist outrage around their current compensation, bonus structure, and behavior is evident. The challenge now is to continue to incentivize profit and growth while promoting good civic behavior. Discounting profit relative to risk is one idea that makes a lot of sense. So, too, might the adaptation of accounting practices from successful teams outside the corporate structure.

Opportunity cost, or opportunity lost?

From the business school at University of California at Berkeley to the law school at Washington and Lee, grad-school applications are up by 30 percent. It’s a different sort of personal accounting that’s happening.

For many, the “opportunity cost” of further education has suddenly become less costly. Perhaps applicants have lost their jobs, or have seen their growth on permanent hold. Perhaps they see themselves in a dead-end industry and desire a change. Regardless of the reason, they will be reentering the workforce with more skills in hand.

Discussion

Moses Ting

August 7, 2009

What a powerful opening statement.  Our current situation helps to remind and reinforce the fact that we’re all in this together.  Ultimately, getting back to basics and figuring out what really matters is something that will benefit us for the long haul.

We so often loose sight of the bigger picture when things are going smoothly.  An attitude of wastefulness takes over and we ignore our responsbility to be frugal.

Thank you for your inspirational words.

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Matt Jones

August 23, 2009

The recession has provided the opportunity for both businesses and employees to reflect on what is truly important.  For business owners and companies, the tightening of financial resources (income and credit) has caused them to find more cost effective ways to produce goods and services. It has also forced them to eliminate things that were bloating the budget unnecessarily.  That produces not only short term savings, but better long term financial stability.  That stability is going to benefit consumers and employees alike in the future.
Employees are taking the opportunity to renegotiate working hours and responsibilities. For example,  a significant number of workplace moms are willing to take a cut in hours and pay in order to get a better work - life balance.  More time at home can also lead to few outsourced services for the home, and reduce the amount of money needed from that job. In the end, everyone benefits from the change.

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