Are we headed for recession?
Insights from the Tribe 2023 Economic Headwinds Panel
In this article I want to explore what advice Chief Executives and elected councils can take on board as the country moves toward a potential recession. The insights here come from the 2023 Economic Headwinds Panel that Tribe Leadership Executive Search hosted at TradeMe in Auckland on 4 May 2023. On the Panel I facilitated were NZIER Senior Economist, Ting Huang, well known Board Director Mark Cross, and Chief Executive of Yellow, Tracey Taylor.
The media seems gloomy on the economy. What is the mood of business?
Tracey spoke to Yellow’s 2023 Small Business Nation Survey. This is an annual survey of the temperature across some 1,200 small and medium sized businesses. From that survey 48% said that they thought the New Zealand economy was going badly. There is a sense of pessimism amongst businesses who are often the first to experience downturn and least able to show resilience. Out of the survey the issue of mental health of those in business was a key concern.
Is New Zealand heading for recession?
Ting Huang of NZIER said that we are not facing recession, irrespective of what doom is projected in the media. A technical recession sees a country with negative GDP growth for two consecutive quarters. The NZIER projection is small growth. So, we are in an economic slowdown and we are flat, but that is not an emerging recession. Ting said that as the cost of living has been rising the Reserve Bank is making adjustments. This then flows onto banks lending less to homeowners and as a result, house prices dropping. There are also food scarcity issues from Cyclone Gabriel. Reconstruction after the Cyclone will also be a positive factor on the economy. Ting says, “We will likely see a prolonged period of subdued growth over the coming years, with inflation gradually returning to the inflation target band, but likely remaining above 3% over 2023.”
Kiwis are a resilient bunch – how is business adapting?
Mark Cross who has directorships on large companies and organisations, as well as smaller technology start-ups, was asked what organisations can do to prepare for economic headwinds. Mark stated that the learnings from times of Covid lockdowns applies to economic headwinds. Companies need to build their customer service responsiveness and put R&D into their products and services to prepare for when conditions improve. The learnings from Covid are to build capability when there is time in the company or organisation to do so.
What can CEOs do to support jumpy governance boards?
Doom and gloom accounts are amplified through media, and there are enough examples throughout New Zealand of businesses that may not survive the next downturn to support that view. However, this simply is not an accurate view over the whole economy. Mark and Tracey were both of one mind that it is the role of the Chief Executive and experienced Board Members to bring a balanced view of economic conditions to their Boards and to counter the narrative of recession. This is done through facts. Boards should not be making knee-jerk reactions on the basis of poor facts.
What is the responsibility toward employees?
This question picked up on the theme from the 2023 Yellow Small Business Nation Survey. An audience participant also spoke to the disproportionate impact on Māori who often lose their jobs first. The Panel spoke to the trust needed to be built in workplaces to retain staff. This is one of the key learnings of Covid. A workplace that sheds staff at the sniff of hardship becomes a sick culture without loyalty and will develop high turnover. Workplaces need to build trust with staff that they are not about earning money but are about their people who earn the money. When they do this well, the benefits flow through to culture, profit, and performance. The Panel advice to employers is to not see their staff as costs but assets in the organisation. If productivity in revenue generation has declined, this is an opportunity to direct their time into building the products, systems, business development, and the things that a business struggles to get onto when there is time pressure. These things are not wasted time-fillers. They are the developments necessary to improve the future financial position of a company.
I asked my colleague in the audience, Russell Spratt, who has founded Tau Mai Recruitment under the Tribe Group and an experience Board Director, to comment on the observation about Māori being first to be shed from their jobs. Russell reinforced the view of the Panel and said that to be a place where Māori are valued and where their loyalty is built, there needs to be a culture around whanaungatanga (relationship) and manaakitanga (care). In other words, the people-centric approach to leadership of an organisation, and actions consistent to values, will have the lasting benefits to organisation culture, loyalty and profitability.