Three Things Middle Market Organizations Need to Focus on Prior to a Recession


With recessionary storm clouds lurking, it’s time to consider what the two most recent challenges to financial success (The Great Recession of 2009 and the COVID-19 Pandemic of 2020) taught business leaders about facing economic challenges.  

A pre-pandemic article in Harvard Business Review looked at how companies fared during and after the Great Recession.  The article focused on larger public companies, but the same could be said of smaller private companies and organizations. From the article: “Among the companies that stagnated in the aftermath of the Great Recession, few made contingency plans or thought through alternative scenarios. When the downturn hit, they switched to survival mode, making deep cuts and reacting defensively.” 

For small and mid-market companies, the key to success in changing times is adaptability.  Those companies that were able to pivot quickly in 2008 and 2009 not only survived but thrived. 

Much of the same can be said for companies during the COVID-19 pandemic.  Companies that pivoted quickly with new products or services, or new ways to maintain a productive workforce (via remote access and services, for instance) thrived, while companies that couldn’t pivot suffered. Faced with the crisis, business leaders who thought strategically about how to turn the seemingly dire situation into an opportunity set their companies up for future success.  

People Investing during a recession

Here are the three things that organizations should focus on prior to a recession to maintain operations, hold on to quality employees, and thrive in the future.  

  1. Invest in People 

Organizations that invested in their people and their corporate culture fared much better and came through both the recession and the pandemic stronger than those who buried their heads in the proverbial sand with layoffs and cutbacks. In 2020, Fortune’s “100 Best Companies to Work For” outperformed the broader market by 16.5 percent, with returns of 37.4 percent compared to 20.9 percent for the Russell 3000 Index. Similar numbers were seen during the financial crisis of 2008 and 2009.  Some layoffs are inevitable, but it shouldn’t be a first or even primary option. 

One way to help employees feel supported is to make sure they have resources available to help them do their jobs. When it’s not possible to maintain all full-time hires, organizations can leverage outside C-level experts who serve in fractional capacities to provide support. When cuts are necessary, fractional leaders or advisors can also provide a critical insurance policy against unnecessary risk. 

Mid Market Recession
  1. Tackle Process Improvement and System Upgrades 

During strong economic times, companies are often too busy and too “heads down” to devote themselves to the tedious tasks of process improvement and systems upgrades. We all need to invest carefully and wisely, but when business slows, it is the perfect time to get your people involved in the future of your firm.  Not only does it send the message to your employees that you are committed to them and their success, but it also sends the message that you are willing to invest in the future of your company. An investment in process improvement, systems integration and better data, for example, may also lower operating costs. Technology improvements often represent great opportunities in tough times.  In strong economic times, companies need to maximize production, but when sales slow, the opportunity cost of dedicating employees to systems enhancements is lower.   

Digital Transformation Recession
  1. Focus on Digital Transformation 

Investing in digital transformation, the process of using technology to create or update business processes, can have significant payoff for organizations in all industries. Digital tools can improve data tracking and analytics, which can help business leaders understand how a downturn is impacting their finances, as well as opportunities for improvement. With this knowledge, executives can make data-based decisions rather than guessing at the next steps. Digital investment also creates nimbleness, allowing companies to more quickly pivot resources or programs as needed. 

It’s true that layoffs and cutbacks might be inevitable during tough economic times. However, experience and research tell us that many companies that invested in both their people and corporate culture came out of our two most recent financial challenges with success stories. Now is the time to focus on building a strong team, incorporating both internal and external resources, and making sure they have the tools they need to properly do their jobs and deliver for the organization.  


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