In the Last One Decade (2015-2025), Global Economy has Experienced Compound Annual Growth Rate of 3%. Asian and Emerging Markets have Experienced more than 5% to 7% annual growth rate of GDP (Gross Domestic Product). That means, more than 50% of World Countries are in Economic Growth path in their Countries. That means to Accommodate this specific Growth in their Countries, Organizations in Respective Country Industries Need to take Certain Actions. This specific Management Insight describes What actions the Organizations Need to Take in Order to Accommodate this Specific Economic Growth Trajectory.
What Do We Mean by Economic Growth: First, We Should Know What is the Meaning of Economic Growth. Economic Growth Means, Organizations in Country will be using Resources and Converting them into a Profitable way. And the Country will be distributing the Natural Resources of the Country to the Households, Organizations and Industries in an Efficient, Effective and Judicious way. For example, Take the Distribution of Power/Electricity in a Country. Observe the Distribution and the Billing to Households, Organizations and Industries. Different Stakeholders get different Slab Rates, Different Allocations and Different Benefits and Facilities. All these kinds of Aspects will grow as the Economy Grows. Now, in layman terms, What do we mean by Economic Growth. Basically, the Economic Growth Outcomes will be Quantitative in Nature. That is, Economic Growth Leads to GDP($) Growth, Per Capita Income Growth($), Growth in Human Competency, Healthy Workforce, Better Incomes to Households and Increased Organizational Revenues. Now, Let’s us Proceed to What Organizations Need to Do in this Kind of Economic Context.
What Organizations Need to Do?: As we LearnedEconomic Growth Means, Organizations Receiving Increased Revenues. In this kind of Situations Organizations Need to Do Several Things:
- Save Profits for Future: in future, because of Community Obligations, or Stakeholder Pressures Unexpected Expenditures keep coming to Organization. For That Organization Should Save as Buffer. Also, It is Best Practice to Save Sufficient for Operating Expenditure for Couple of Quarters.
- Invest: to Increase Organizational Valuation and For Recurring Income Generation, Invest in Projects, Products, Processes, Startups, Equity, and External Destinations. In future, it adds to Organizational Valuation and Market Capitalization.
- Also Invest in People: Provide Needed Training and Mentoring for Workforce; make them ready to Grab Future Opportunities.
- Risk Projection: Project Organizational Risks, Challenges of Economic Recession Times; and Make Ready Risk Response Strategies and Plans.
- Adopt to Changing Technology: This takes Organization to Further Growth in Productivity. In Turn Resulting Higher Revenues, Better Work Products, Satisfied Workers and Satisfied Customers. Customer will get Value addition with the Organizational Usage of Technical Upgradations.
- Invest in Research and Innovation: this creates Product and Services Pipeline for Organization. It makes Organization Ready for coming 5 to 10 years of Operations.
- Streamline Organizational Structure and Processes: When Getting Better Organizational Revenues, it is to Streamline Organizational Structure, have Clear Roles and Responsibilities (Otherwise Additional Money Received gets Wasted). If Needed Restructure Organizational Hierarchy, Create New Roles, Add Additional Responsibilities, etc Actions need to be Taken. Make Product Development Processes Robust, with clear demarcations, handshakes where ever needed.
- Streamline Machinery and Tools: When Organization has Additional Money, Try to Procure New Machinery which is affordable; Do Needed Servicing, Pending Servicing to Machinery and Tools.
- Get Rid of Inventory: Because Economy is Growing, Households and Organizations Spending is Higher. That means, There are More Potential Customers in Market who can Procure Our Products. Hence, Get Rid of Inventory; if needed give Discounts, or Make combo Offers, or give discount and also have additional Service contracts; money multiplies. That way, One needs to Innovate.
- Hire New Talent for New Products: In line with Organizational Research and Innovation Strategy, as Soon as Patent Approval is Received, hire the new talent for Production. Also Hire New Talent to Develop New Patents.
- Scaleup with Stability and Consistency: Scale up the Operations and Perform Consistently day to day in Organization. Resolve Customer Issues, Keep Moving Sales, Keep Track of Projects, Keep Track of Employees, Keep Track of Vendor Performance, Continue Monitoring Contracts, Keep Costs Under Control despite Higher Revenues. Never Commit Pricing/Amounts without assessing or Understanding the Task Involved. Grow Consistently Month by Month. Remember Organic Growth Never Sustain in Long Run. Several Organizations Went Organic, either they ended up in Internal Frauds or They were forced to merge into a large entity or ended up in serious financial losses. On One End revenues getting Added to Organization and On the another End Experiencing Dents won’t work out. Before Trying for New/Addition Revenues, One should Correct the Internal Dents, Costs, and Losses. This is Very Much Important.
Negative Effects of Economic Growth: Because Economic Growth is a Double-Edged Sward. It has both Positive Effects and also Negative Effects. Research has Proved it. So far, What We have seen above are the Positive Effects of Economic Growth. The Negative Effects of Economic Growth include Increase in Financial Frauds, Increase in Organizational Debt (because Credit is Available Easily in Market), Increase in Negligence and Over Confidence in Spending, Pre-matured Financial Commitments and Pre-matured Advance Payments, and Spending More Than Required or Unwanted/Hurried Spending, Hurried Hiring, Recruitment Mistakes, Compensation Mistakes etc. Sometimes, After Purchase, Stakeholders won’t Accept or Approve. All these things are Negative Effects of Economic Growth.
Thus, Despite Economic Growth, Because of Both Positive and Negative Effects of Economic Growth, Organization have to Make Calculated Steps keeping Long Run Survival in Mind. So, Organizations Need to Take Above Mentioned Steps.
So, I am happy. I enjoyed it. Writing…………
Best wishes,
Dr.Goparaju Purna Sudhakar
Hyderabad, India