Facility Solutions: Is it wise to invest during economic uncertainty?

Lessons from the Great Recession

It is safe to say that for most of us, the COVID-19 global pandemic is unprecedented and was unexpected. However, while the pandemic itself may have been a new and different type of crisis, the resulting economic downturn is not uncharted territory, including for financial institutions.

Throughout history, times of economic uncertainty and contraction have spurred mass layoffs, cancellation of capital expenditures and organizational “tightening of the belt.” Though this has been the common response, is it the correct response for financial institutions? A thorough analysis of data from the Great Recession and other recessionary periods is clear: The best way to emerge from a recession stronger is not to solely enact cost cutting measures, but to wisely balance cost reduction efforts with strategic investments in the future.

How organizations cut costs also matters. Our research found that, generally, organizations that cut costs by maximizing operational efficiency, as opposed to cutting employees, weathered the recession and performed better coming out of it than those that significantly cut their workforce. Additionally, these organizations seized opportunities to invest in business growth through research and development, and property and equipment investments, as well as other capital expenditures.

 

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