NEW ORLEANS — Shortsightedness by companies in reaction to the falling economy will prevent them from taking advantage of an economic rebound, NCR Corp. president Mark Hurd said yesterday.
“I will argue to you that the winners, the people who will enjoy market capitalization when things turn around, will be based on the decisions made today,” Hurd said in his keynote address at the NCDM Winter 2001 conference. “It will not be the decisions that will be made after things turn around.”
Ridding business of non-critical costs is a good strategy, but cuts should not be made at the expense of the future, he said. For example, companies should avoid cutting valuable employees, who will be difficult to replace when labor markets tighten during better financial times.
Rather than cut back on development of new products, companies should continue to focus on innovation, Hurd said. Most companies will be cutting back, so the opportunity to assume leadership in the technology field is ripe.
But perhaps the most important move companies can make during tight economic conditions is to improve the efficiency of their customer contacts, he said. Often, ground-level customer service employees need to make decisions about customers in minutes, but they lack the critical customer information to act correctly. For example, when an airline overbooks a flight, it will be the agents at the airport — not the marketing department — who determine which customers get seats.
“What happens during this critical time will determine the customer's affinity for you when times are good,” he said.
Hurd said that most business leaders today, including himself, are products of 1980s business schools, which preached that companies should lay off work forces, hoard cash and cut investment in innovation during recessions. But companies that followed that philosophy failed to reap the rewards of the 1990s boom, he said.
Hurd quoted a Mercer Management Study of 700 companies showing that among those that followed the 1980s slash-and-hoard recession strategy, 60 percent failed to participate in the recent economic growth that took the Dow Jones index to 10,000. The study found that only 20 percent took full advantage of those gains, he said.