Manager's Desk: The new normal

When your primary market tanks to its lowest level in 30 years, the impact to a machine shop can clearly be drastic. Hopefully, your shop is well managed and in a position to overcome such a hit.

While managing our shop in 2017, we’ve had to overcome this exact scenario. Our primary market, energy, started a drastic correction in 2015 that continued through 2016 with reckless abandon.

It negatively impacted our fabrication side more than our machining business, requiring us to release employees and take other cost-cutting measures.

When such an event occurs—and inevitably it will for all of us—difficult decisions and careful management are required. Hopefully, you’ll be able to retain your best employees for the recovery. After all, a “recovery” was imminent, according to many who were reaching for any good news.

The occasional order also provided hope, giving us a rationale to hang on a while longer. We postponed further cuts and difficult decisions for fear that a turnaround would leave us with not enough workers to handle it.

Unfortunately, that recovery has not materialized. The reality is, it’s not going to materialize. A new normal has become our reality, and we’ve had to adapt to this new scenario. Just a year ago, we still believed the next good old days were around the corner. Now, the markets and circumstances have solidified our need to adapt and be profitable with less business.

The reasons for the new-normal scenario vary, but the primary basis is simple: Our customers have adapted to differing economic circumstances and can operate more efficiently. They’ve improved their products and technology to such a degree that they can make a profit despite the market changes. As the saying goes, “Necessity is the mother of invention.”

The amazing thing is how this reset has occurred in such a short amount of time while wiping out a lot of jobs and companies. Eventually, and through lots of mergers and acquisitions, the stronger organizations have successfully regrouped and have started reordering some products, particularly machined components. It’s been good to finally see some kind of uptick, although the new normal indicates it will be a different set of conditions than what we had been used to.

From all of this regrouping effort, we learned several lessons that will help us—and maybe you—in the future. First, always realize a booming market will slow down. It didn’t seem possible to us several years ago, and plenty of “experts” said as much.

Second, don’t delay difficult decisions, assuming a turnaround is imminent. Most market corrections take more time to recover from than we want to believe.

Last, save some funds for this eventual scenario. If we hadn’t, riding out the storm would have been far more difficult.

Thankfully, we had some tools in the arsenal to get through it, but we—and I—still took too long to make certain adjustments. This period was the most dramatic in my career, and I wasn’t the only who didn’t see what was coming. The new normal has been challenging, but we’re better and smarter because of it.