In the current climate of uncertainty, you might expect to see less of a focus on growth and fewer programmes of change. In truth, I have seen some positivity in the market around growth, despite the uncertainty, but I have also seen a lot of nervousness around the business cycle.
There are certainly organisations out there doing well despite a challenging economic environment. They're investing, they're hiring, they're spending money on capital projects. But there are others in varying states of distress, who are at a different stage of the business cycle.
It may not be feasible for many of these firms to commit a large chunk of capital to projects that will only have an impact in, say 5 years’ time, when they need to see a result in as little as one to two years’ time.
Changing business cycle
It’s my feeling that the business cycle has changed for many companies. There is a real divergence from the typical three to five year cycle, which may be either sector-specific or company-specific or a factor of both.
And while there are firms posting great results despite operating in a challenging market, the reality is that while some may have got there by design or strategy, others just got lucky - with the right product at the right time.
One reason why the traditional business cycle has changed is that there is an aggregate of pressure, macro, and micro facing businesses compared with cycles 10 years ago.
Firms are now more than ever constantly at risk of cyber-attack. There are also multiple macroeconomic pressures – high inflation, increased energy costs, supply chain issues, and war.
And the increased ‘noise’ of information coming at speed from every angle makes communicating strategy across organisations ever more challenging.
All of this points to a growing disconnect, sometimes by design, between the leadership and the workforce. With current economic uncertainty driving fears of a possible fiscal cliff edge, it can be pretty difficult for the troops to know what's going on.
Certainly, when you look at the commercial real estate space, that cliff edge seems even closer. In the City of London, developers are still building and refurbishing offices, but there is often nobody in them. With the uncertainty in the business cycle, they may well remain empty for longer than anticipated.
Meanwhile, you read about big firms such as banks announcing that they want staff back in the office full-time when, in reality, many of their people don't want to give up hybrid working – and would rather walk than be forced to do so. The great resignation has pivoted to the great retention, and let's face it – commuting to an office to sit on a video call isn’t always acceptable anymore.
Of course, boards of every large company face a different level of problems for employees – both political and macro-economic. There is pressure from investors and shareholders, regulatory considerations, and potential disruption from industrial action, war, and terrorism.
All of these naturally create a divide between the thinking at the top and what’s happening throughout the rest of the organisation - but I can’t help feeling that divide has got wider due to the volume of risk we now face in the business world.
On one hand, you have executives engaging strategy houses and consulting firms to establish a new direction for the company. On the other, you have the troops on the ground running at 1,000 miles per hour just to get stuff done while keeping their heads down. Perhaps we need to be better at timing these things.
The right change for the right reasons
That growing divide between boardroom and grassroots could be a result of those external pressures – or it could be cultural.
Part of the issue is that some leadership teams may well be spending money on the wrong things in pursuit of staying relevant in a market that is moving faster than they can. The strategy houses are really good at advising how to move forward or even pivot, but for many executives, there isn't a clear path forward, and doing nothing isn’t an option.
For those organisations with the cash to invest in multi-year, capital projects - whether it’s better to access to tech, CRM systems, or modernising through data - there are lots of tools that can accelerate decision-making and enable employees to be more efficient in their work. We are seeing increasing action to adopt some of these tools, which is a positive.
But depending on what stage of the business cycle a company is at, prioritisation is key. Understanding external and internal risks is particularly key in making those strategic decisions but they still need to be made to grow and mature a business regardless of size.