So we are now mid-way into the second month of 2010 which means we are into year four of this current downturn.  Yes, that’s right ~ year four!  It started with a decline in the residential market in 2007 and everything went downhill from there.  Foreclosures, out of control credit card debt, bankruptcies, unemployment, state deficits, a failed stimulus package and well known names on the high street going to the wall. 

Against this backdrop I still hear the statements around, “Yea, but it won’t affect me,” or, “It’s going to get better this year.”  I’ve even heard on a regular basis, “Well Texas isn’t as bad as the rest of the United States.”  Well so what?!?!  It’s time to get real guys.  It is like saying, “The U.S. has broken every bone in its body but we’re OK in Texas because we only have two broken legs.”  Let me tell you, two broken legs “ain’t” good.  It is called denial.

I started this off by pointing out that we are in year four of the downturn and these fallacies are the first of our major problems.  Too many people in all walks of life didn’t want to admit how bad things were and how bad they were going to get until we were in year two or even year three.  What that has done, has only served to prolong our current problems and exacerbate the country’s economic woes.

I say again guys, “Get real, this country is in trouble and we are all in trouble.”  Everyone wants to blame the government, the banks, the lenders and the companies.  There is the next problem.

Nobody is prepared to point the finger inwards and take some of the blame themselves as individuals.  For too long we have all been driven by greed, bettering ourselves by spending money we don’t have.  Credit card debt is out of control and needs bringing back into line.  As Warren Buffett said recently, “The hangover is sort of proportional to the binge.”  Never were more true words spoken. 

What a hangover we are now suffering and what a binge it was.  An upturn that lasted more than 10 years.  Bigger houses, sometimes two houses, bigger cars, fantastic vacations, the list goes on, and all with money we didn’t have.  It was the biggest upturn and the longest upturn ITHOE and even though we all stuck our heads in the sand, the bubble was eventually going to burst.  The economy has always been cyclical, we know that, but the peaks and the troughs have always been manageable.  We the older folk have known pleasure, we’ve known hardship and we all learned how to deal with it, sometimes by falling down a time or two. 

The biggest often unrecognized problem that we have in front of us is that we have fueled a binge that lasted so long that we have bred a generation of younger people that has never known anything different to spend, spend, spend.  They’ve never know how to tighten their belts, they’ve never faced hardship or frugality and the even bigger worry is that they ascend into the management decision making rungs of our businesses.  

Running a business in this environment is tough, it’s about survival and it calls for hard, fast decision making.  It’s about right-sizing the business at every level whilst keeping the fabric and integrity of the business together ready for an upturn.

This type of decision making is one of the toughest calls for managers in this sort of economy and no MBA course or Harvard institution will help in this regard.  It is experience and exposure to the cycles that provide the ability to handle this crisis and we need to recognize that during this binge we have bred that experience out of a whole generation of managers and therefore they need careful coaching and mentoring to get them through it. 

Right sizing is always a difficult task. It is ongoing and has to be a priority continuously through the length of the downturn.  It’s wearing, it’s miserable, it’s hard work and it takes guts and strength of character.  But it has to be done.  It’s about survival and it fits the old adage that says, “We have to sacrifice the few for the good of the many.”  In other words, it’s about protecting the company and the majority of its employees even though it is tough, sad and difficult to see friends and coworkers lose their jobs.  It is however the harsh reality of the current situation.  It’s a situation that we all played a part in causing.  We all participated in the binge.  We all are suffering the hangover.  I appeal to everyone who reads this to regard their selves as part of the solution, act accordingly.