By now, the operating plan and budget you opened the year with have been scrapped. Unexpected, but appropriate. The top of this business cycle, the longest expansion in U.S. history, vanished over a weekend in early March. Ninety days on, the global economy is in steep decline and dragging the Built Environment down with it. But while the broader economy seeks its bottom, industry leaders and managers must find their footing now and lead forward.
The standard playbook of well-managed industry firms calls for maximizing revenue and profit at the top of the business cycle and then deftly pulling back ahead of the inevitable industry downturn that lags a general recession by 12 to 18 months. It’s time to throw out the standard playbook; the industry recession arrived with COVID-19. Despite being an “essential service,” schedule and site access delays, supply chain disruptions and increased operating costs are having immediate adverse impacts on construction put in place and margins.
The damage to the U.S. economy is severe. Forty million new jobless claims in 10 weeks pushed April unemployment to 14.7%. GDP (annualized) declined 5% in the first quarter and is forecast to decline 40% in the second quarter. Private and public sector balance sheets have been impaired at all levels globally. While the broader economy may begin to recover by the fourth quarter, the Built Environment will be searching for its bottom well into 2021.
The COVID-19 pandemic is a rare and largely unanticipated “black swan” event. The abruptness, breadth and depth of the resulting economic downturn present tremendous challenges for leaders at all levels of the Built Environment. In fact, today’s business landscape forces us to stress-test more than just our corporate and personal balance sheets.
Key aspects of our businesses are being put to the test from our purpose, values and culture to our strategies, business development and operating practices. This edition of the FMI Quarterly includes articles addressing project restarts, liquidity management, business strategy, technology and lessons learned from the Great Recession. We also spotlight two companies that are putting key elements of their values and cultures to test with excellent results. We highlight how Faith Technologies leveraged its core value of “Redefining what’s possible” with astonishing results to deliver mobile and transferable modular hospital rooms. In another, we feature how Interstates of Sioux Center, Iowa, is using its agile business model to remain resilient throughout this crisis.
While COVID-19 pulled the rug out from under the economy and accelerated the timing of our industry downturn, it is both possible and necessary to develop new playbooks to lead well and manage effectively through and beyond this crisis. Near-term and midterm goals will need to be revised. Business strategies and operating plans will need to be redeveloped. But as each previous downturn has revealed, it is possible to respond effectively, manage well and eventually prosper even in hard times. On behalf of my FMI colleagues, we are thankful for the opportunities we have to partner with you and your team to ensure your continued success.