Nigeria and the global economic meltdown

By Adetokunbo Obayan, Chief Executive Officer, Adetokunbo Obayan & Associates

Adetokunbo ObayanYEAR 2008 has etched itself firmly in the history of the modern world as the year the bubble burst and what we now call the economic meltdown exploded unto the scene and the indications for the immediate future are not very bright idea.

The rapidity and fearsomeness of the situation is such that it has become the major topic of discourse at major world fora. This is made even more frightening by the apparent suddenness of the development.

Barely a year and a half ago, former American president, George Bush, was proclaiming that the fundamentals of the economy remained strong until Meryl Lynch declared bankruptcy and very shortly the Insurance Giant AIG and the mortgage giants Fannie Mae and Freddy Mac all threatened to go and under requiring the American Government to wade in to avoid systemic collapse.

By December, the French and German governments were announcing with delight the ‘limited impact’ until the fourth quarter figures confirmed the whole of Europe as in depression. Indeed, it has been a crisis of unusual dimensions like nothing the world has ever seen. How then do Nigerian companies respond to avoid being swept away by what some commentators have described as the economic equivalent of a Tsunami? In this article I list five key things.

I believe that the first thing to be done is to develop an awareness that the situation will affect everyone. This is because one of the reasons for the contagious nature of the economic crisis has been the acceleration of globalisation that has turned the whole world into a complex interconnected web with events in one place translating rapidly in effect in distance places. This is why the entire world recession that is even affecting nations like China which has had to downgrade its growth forecast from a lordly 12 per cent to a much reduced seven per cent for 2009 a figure actually based on optimistic projections.

All of these have implications for Nigeria and Nigerian companies. We are not exempted from its effect as evidenced by the questions involving our primary national foreign exchange source – petroleum with prices dropping from $143 in September 2008 to about $40 per barrel by the end of the year.

The second thing that organisations must do is to recognise that this is one situation in which ignorance is definitely not bliss. When a crisis of this dimension hits the world, businesses must first of all recognise that its impact and its implications will be global and widespread. This does not have to translate to paralysis but rather, an awareness of the existence of the situation provides the relevant platform and information base for organisations to be able to position themselves for the ramifications of the changing environment.

It may seem counter intuitive but times like these are when organisations should actually invest money in things that would expand their knowledge and information baseline.

Preparing for the possibilities starts from an awareness of the implications of the changing scenario. I have observed that the typical response of organisations in such times is to trim down on what they term non-productive assets such as staff whose assignments do not translate directly on the bottom line and yet that is often a mistake. This is not to say that some downsizing may not be necessary indeed sometimes it is unavoidable for survival. However, it must be based on information for it to be effective and worthwhile.

Experience shows that the biggest danger in drastic cutting is when we cut the meat with the fat. This implies that an organisation must be careful to ensure that its cuts do not remove either their ability to compete or even the capacity to seize the advantages that the crisis would bring. To do this, it has to be properly articulated with a well worn contextual awareness based on knowledge. There are many ways to ensure this sound knowledge foundation for decision making. The company may, for instance, institute round tables/retreats with external experts or consultants or send carefully chosen personnel to be part of major forums discussing the situation, their industry and the future. In other words, the company must make a commitment to drive its information base because as Benjamin Disraeli puts it “ He who has the greatest information inevitably has the greatest success” This is non-negotiable in times such as this even if the organisation has to get an external expert or even consultant to facilitate the growth of the information/knowledge baseline.

Third, the organisation must be willing to have a root and branch philosophical discourse on the direction of the organisation and what to do. In moments of crisis, the temptation is, indeed, very real for an assumption that the top management must come up with the solution that solves the situation. Indeed, this top down approach to problem solving is highly prevalent in Nigeria. The problem is that in normal times it can be detrimental but in times of crisis it is downright dangerous. In moments of crisis, solutions must be sought without preconditions, arrogance and with a minimum of hierarchical classifications. Sometimes, the best answer is with someone seemingly very unqualified to be at the table. This is why for greater effectiveness the root and branch discourse needs to be willing and indeed inspired to think out of the box and it is often best led by top management in conjunction with consultants whose job will be to facilitate and make sense of the discourse Fourth, and closely related to the discourse is that whatever actions to be taken must look beyond mere survival to growth and expansion. The temptation in crisis is to want to create the business equivalent of a cyst. This is a setting just prepared for survival.

The danger is that it is predominantly a defensive mindset and sets a tone that soon transfers survival implications to the environment. Crisis not only destroys but also presents new opportunities. The difference between organisations often hinge on their readiness to exploit opportunities. This is as often attitudinal as it is capability.

Finally, there is the key of the leadership. If ever there was a time when leadership is critical it is in a crisis. From the styles of the leaders to their understanding of the leadership paradigm to their modeling of the requirements and keys engaged leaders are critical to the process of handling crisis of this dimension.

The leadership and human capacity in the organisation are non negotiable and yet it is ironic that this is one of the first areas to be taken out. This indeed is a time to build decision making awareness and even capacity. Organisations should actually invest in training and capacity building at a time like this. Possibly invite consultants to review your internal status and find out if your people have the requisite skills to both survive the coming crisis as well as creatively think, act and lead their way out of it. Where gaps are identified now is the time to address them for there is a crisis in town but you don’t have to go down with the ship if you do the right thing and set yourself up to ride the storm. I believe Eric Hoffer is right on target when he said “In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists. Crisis is indeed the biggest most drastic imperative for change.