VIEWPOINT: Is Indiana prepared for recession?

May 5, 2008

Each day, the headlines are filled with r e c e s s i o n - r e l a t e d news. Some predict a pending recession, while others outline pre-emptive actions of the Federal Reserve, Congress and the president.

During the 2000-2002 recession, Indiana did not perform well. Indiana lost more jobs than the national average, and its recovery lagged behind the nation's. In fact, Indiana's jobs still have not recovered to the pre-recession level. If the predictions come true and another recession is in our immediate future, is Indiana better prepared today?

A recent report by Purdue University economist Larry DeBoor concludes the state government is in better shape than in years, yet it is not fit enough to remain sound with the decreased revenue associated with a recession.

If the government is not ready to withstand a decrease in revenue, are businesses prepared to remain strong and minimize a revenue decrease?

On the positive business front, the Indiana Economic Development Corp.'s jobcreation efforts have set records. According to a Dec. 28 press release, since 2005, 500 companies have committed to create more than 60,000 jobs by 2012.

Since many of these jobs are future commitments, the next recession is coming too quickly. While future commitments will do little to avoid the impact of the downturn, Indiana will be better positioned to take advantage of the next recovery.

While an important part of the economic puzzle, a strong Indiana economy is more complex than a zero-sum job creation/loss calculation to its 3 million job base. The strength of this base holds the key to the impact of a recession.

According to the book, "The New American Workplace," the No. 1 problem in corporate America is attempting to implement tomorrow's competitive strategies with yesterday's managerial ideas.

Indiana businesses have been slow to change their managerial ideas and methods. Even though study after study reveals that high performance is generated by focused diligence and reaction to market changes, creating a change-adaptive/high-trust culture, and having employee buy-in, most Indiana businesses remain focused on internal processes, cost reduction, with decisions made at the top and employees micromanaged. Our practices are completely out of step with economic requirements.

Couple research findings with experiences, observations and discussions, and it is not difficult to conclude that 80 percent of Indiana businesses can double their results. If more businesses were performing at these higher levels, the Indiana economy would be better prepared for a recession. Yet businesses continue to ignore the reality and defend their current methods as "right."

How can Indiana businesses be persuaded to step it up a notch? How can we get businesses to focus on a new way to compete vs. just improving their current processes/methods?

First, it will take a passionate effort by concerned influential organizations and leaders working together to increase the awareness that businesses truly need to change. The frequency of this message must increase dramatically. Second, working in concert, these same organizations and leaders need to identify programs to expand the new leadership skills required to compete differently in the changing global market.

These actions are overdue and cannot continue to be delayed. Swings in the economy will never go away, and in the globalized economy, competition will only increase. Only when Indiana leaders truly embrace the reality of high performance and innovation with a managerial perspective that evolves with the market will Indiana realize its full competitive potential.

Kanning is a faculty member in the Department of Management at the Indiana University Kelley School of Business. He can be reached at mgkannin@indiana.edu.
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