3 Reasons Why Recessions Are Awesome For Great Companies

3 Reasons Why Recessions Are Awesome For Great Companies


It may be jarring to read the words “recession” and “awesome” in the same sentence. Recessions are bad for most people. I will not make light of how horrible recessions are for the vast majority of companies and their employees,

(as well as for not-for-profit organizations and governments).

For most companies, recessions mean increased stress at work, stalled career progression or even layoffs, uncertainty, increased board and shareholder pressure, increased financial strain and a feeling of looming danger in the pit of your stomach, which is no fun to wake up to every day!

But for great companies, recessions can be awesome.

What are great companies?

Great companies make great products or deliver great services to customers. They provide a wonderful work culture that attracts and retains talented people. And because they take great care of customers and employees, great companies don’t have a dangerous debt burden. They are profitable and able to pay their bills to suppliers while delivering an attractive return to investors in dividends and equity appreciation.

How are recessions awesome for great companies?

Recessions allow great companies an opportunity to do the following:

  1. Shake loose the cobwebs of complacency.
  2. “Success breeds complacency,” said Andy Grove, the legendary CEO of Intel. And while I’m not here to suggest everybody embrace full-on “paranoia” in the workplace (Only The Paranoid Survive), I am here to suggest that great companies have to keep hustling to stay great. A recession provides an opportunity for a wake-up call to great companies that may start to coast on past greatness and help them get back on track.

  3. Take customers and colleagues away from lesser companies that don’t deserve them.

    As lesser companies stumble during recession (e.g., shutting locations, letting service and quality drop, highlighting dysfunction in the culture, etc.), it’s the perfect time for great companies to pick up more customers and talented people. I remember when a successful business services company with 70 locations around North America entered the ’08 recession. Lesser competitors were closing branches and laying off people, and service was slipping. But the CEO of the successful company was not fearful about the recession. Instead, he sensed the opportunity to win more customers with better service and poach some top talent away from the struggling competitors. The recession allowed this great company to gain market share and build a stronger leadership talent pipeline.

  4. Increase the rate of learning of your leaders.
  5. Time seems to move more quickly for me during harder times than during easy times. This can improve the learning curve of your up-and-coming leaders. Just remember to not make too many decisions for them; that will stunt their growth. Allow your leaders to come to you with problems and solutions, and coach and support them. Let them test and learn various approaches to leading through uncertain times.


    About the Author: Geoff Smart is chairman and founder of ghSMART. Geoff is co-author, with his colleague Randy Street, of the New York Times best-selling book, Who: A Method For Hiring, and the author of the No. 1 Wall Street Journal best seller Leadocracy: Hiring More Great Leaders (Like You) Into Government. Geoff co-created the Topgrading brand of talent management. He is the founder of two 501(c)(3) not-for-profit organizations. SMARTKids Leadership Program™ provides 10 years of leadership tutoring, and the Leaders Initiative™ seeks to deploy society’s greatest leaders into government. Geoff earned a BA in Economics with honors from Northwestern University, and an MA and PhD in Psychology from Claremont Graduate University.