Last Word

Chanakya

With the current economic slowdown in the country, many people keep on asking about the issues that the companies should look at while managing crisis. The impact of the economic slowdown may not be the same for all sectors. However, the worst affected  seem to be tourism and manufacturing. One ought to remember also that the slowdown of the economy began nearly five years back and the current insurgency problems have only added to the woes.

Managers are definitely in a fix as bottom line is dipping and even going red. There is a tremendous challenge for the managers to ensure that at least the labour costs are financed somehow. However, one can also notice instances in many companies, especially in the tourism sector, where the managers have used the current situation to their advantage.

It is very important to note that  in a growing concern it is relatively easy to   judge the performance of the managers as their targets of revenue or profit growth are fixed, but in a period of a downturn, the board and shareholders are given to believe that the enterprise has dipped into the red due to the prevailing macro situation. Many managers, be it in the SOEs or the private sector, are getting away with this, and it has encouraged people to paint a very dim picture of the present and the future  of the economy so that their jobs are protected.

The mettle of the manager is tested not at times of growth but at these times when the externalities are not favorable. The easier way to maintain profits or cut losses is by cutting costs but the world over it has been seen that cutting costs is not the best of options. There is always a risk of cutting muscles when trying to cut the  fat.

The most difficult part at these times is to push the revenues up. Since each company in the industry is facing the same problems, perhaps, they should come together and pool their ideas. For instance, the hike in fares by the domestic airlines can be taken as a good example of getting together to boost revenues rather than cut costs. This could be replicated even in case of hotels and services where a decision can be taken to determine the minimum rates.

Academicians and management practitioners may propose different prescription for crisis management, but the Nepali Niti ought to be slightly different from the conventional wisdom. We do not have large corporations to look at layoffs and the social implications of retrenchment are difficult to handle. The only way out seems to be for Managers to take the challenge of building efficiency and enhancing productivity. They should not  lay back and just keep on reporting losses. The failures of SOEs can be attributed entirely to this complacency, wherein the people who head the companies are only concerned to ensure the continuity of their job, whether  the organization will ever make profit or not. The spillover of this theory to the private sector has to be stemmed.

Such a crisis prevailing over such a long period of time is not a normal phenomenon and hopefully there would be some change of events soon. The managers need to recognize this and demonstrate their adaptability for the turn around. There are companies in Nepal that are growing at a good pace even during these trying times. It is for the others to emulate such successes.

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