Firms will be pay for poor decisions now a decade down the line
HOW companies act over the next two years will drive their performance for the next decade.
That’s the no nonsense message from Geoff Taylor, Deloitte’s senior partner for the North East following the preliminary findings of the business advisory firm’s latest report on winning companies.
Mr Taylor, who is based at Deloitte’s Leeds office said: “”Just as a recession can expose weak leadership, it creates real opportunities for those brave enough to take decisive action.
“It is about leadership and the leader’s ability to both conceive and deliver a vision – however transformative it might be – while managing the priorities of the here and now. Difficult though it is, with so many near term priorities, now is the time to think beyond today’s challenging markets.”
The report, which looks at which companies will be in a winning position to capitalise on the turbulence created by recent challenging markets, also considers what features those companies will need to establish an competitive advantage.
Initial findings show that annualised shareholder returns for FTSE 100 firms fell 27% following the early 90s recession while increasing 8% in the 10 years prior.
The trend was mirrored during the downturn in 2001 where standard deviation more than doubled from 14% in the 10 years before to 29% during the recession.
And it seems as if the same trend will be repeated for the current recession with standard deviation increasing from 12% in the growth period leading up to the downturn to 29% in the year up to the first quarter of 2009.
“Deloitte’s analysis shows that winners emerging from a recession are typically those who have not only built financial strength, but have also developed resilient, robust and flexible business models, to deliver ‘stickier’ and more compelling value propositions,” said Mr Taylor.
“Operational excellence, an intelligent focus on costs and proactive – rather than reactive – decision making are also trademarks of companies that are able to deliver long term sustainable growth.”
He added: “While being realistic about the continued near term challenge, we believe this environment is driving profound changes in our markets and creates conditions in which companies can distinguish themselves from competitors.
“Those who are confident, determined and prepared to take equally profound action will emerge as winners.”
