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The sky isn’t falling

Noel W. Wheeler

When you’re as long in the tooth as I am, you know that down economic cycles are always followed by up cycles and that’s when we’ll all be complaining about having too much business to handle. You also know that the upswing tends to happen very dramatically and very positively.

I’ve been in the staffing business for more than 40 years, working throughout the United States, Canada, Australia, Asia and Europe. During that time, I’ve seen plenty of recessions, just as I’ve seen plenty of booms. The staffing business tends to be a pretty good indicator of the economic swings it allows customers to add and delete personnel more easily when the economy starts going south. It also leads the recovery as it gives employers flexibility to make sure the recovery is for real, before adding fulltime employees.

Though I wasn’t given a crystal ball at CEO School, I can say with complete certainty that this recession will end. Just as every other recession has. In the last hundred years, there have been 19 recessions as defined by the National Bureau of Economic Research. None have lasted more than four years, with the average length being only 14 months. On the flip side, there have also been 19 booms, with the average length being 45 months each. So not a bad cycle overall.

This recession cuts deeper than most and it’s obviously not “average,” considering that we’re already 13 months in. and relief is not on the immediate horizon. But, other than length, there’s no reason to think this recovery will be any different than any other.

In the meantime, it’s pretty easy to see what we need to do within our own companies to make it a little less painful. As responsible stewards for our companies, it’s critical that we control costs, just as we do in our personal lives, in line with less buoyant revenue streams. But you can’t cost-cut your way out of a recession. You have to sell your way out. If you cut your sales and marketing budgets too much, you’ll die on the vine while you’re waiting for the economy to turn around. At CLP, we’ve made a conscious decision to cut fat and not muscle, as we still need to be a strong partner to our customers. And we need to be ready to take advantage of a strong economy when it comes back.

We also have to realistically understand where our revenues are going to be and adjust accordingly if they’re better than we conservatively estimate, then good for us. Better that than the other way around.

The other key is to look for opportunities everywhere we can. Rather than waiting and seeing what’s going to happen, we need to be aware of the trends and get in front of them without accidentally falling into a big hole. While I think this recession will last longer than others, that doesn’t have to be all bad news. There are always pockets of opportunity; the key is to find them. In our company, we’re focusing on areas we haven’t explored before, areas that we know will grow as we move into 2010 and 2011. We’re also watching

President Obama’s stimulus plan carefully, as we believe there could be opportunity there.

Unfortunately, as always in a recession, there are businesses that will not survive this. Those that rely heavily on credit will certainly have a tough time, as will those that don’t have a solid strategy in place.

Most importantly, when times are tough, quality of service becomes paramount. If our service is no better than our competitors, then price becomes king and we will lose business.

The bottom line is that recessions are a normal part of the economic cycle. We have high times and low times. We’re just experiencing a particularly low time right now. Though history is not a perfect predictor of the future, it’s about the best indicator we have. Looking at the data from the last 100 years, I can say with almost absolute certainty that everything is going to be okay in the long run. In fact, I’d be willing to bet that after this recession ends, there will be a tremendous influx of spending and we’ll have a huge economic boom. Are we ready for it?

Noel S. Wheeler has served as chief executive officer of Reno-based CLP Resources Inc. since 1999. Contact him at 321-8010 or nwheeler@clp.com.