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Recession alert: Precautionary tactics

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By BOB WEINSTEIN, Special Sections correspondent

Published: February 24, 2008

No one knows for sure what lies ahead. Are we likely to head full tilt into an all-out recession, or will it just be an inconsequential business slowdown? Whatever the scenario, this is the time to think smart and make good career decisions.

If you've got a job, hold on to it. Recessionary economies are bad times to change jobs. While even the best of companies suddenly can hit rough water and sink faster than the Titanic, generally speaking, if your organization makes staple products that are purchased regardless of the economic tides, your job is relatively safe.

Remember Enron. But as we've said repeatedly before, job security no longer exists and everyone — even presidents and CEOs — is expendable. If you want proof, go back to 2001 and read what happened to Enron and a few other well-known companies.

Who could have imagined that Houston-based Enron, the sixth largest company in the United States at the time, would go bankrupt? Prior to its demise, its 22,000 employees felt that when they retired, they'd have a comfortable nest egg, a good pension and benefits so that they could live the rest of their lives in comfort.

Suddenly their world was shattered when they lost not only their jobs, but their futures as well.
How can you spot trouble on the horizon? Sometimes you can see the layoffs coming, but often it can be very difficult — especially if the company is burying bad news because it's worried about panicking stockholders and employees' jumping ship. Here are five questions to help you spot trouble:

1. What's happening inside your company? Plug in to the rumor and gossip mills, but edit information for accuracy. Listen to the company gossip (within reason) and watch for changes in company procedures with a focus on saving money, company budgets being squeezed too tightly, travel and/or hiring freezes, abrupt senior management departures, management seeking a buyer for the company or parts of it, outplacement firms being asked to submit proposals, etc. Tighter finances may only mean a temporary cash-flow problem, or it could indicate bigger problems, depending on what else is going on.

2. What are people writing and saying? Pay attention to the news about your employer. Is there speculation about dropping sales, management misbehavior or serious problems with products or services?

It's also important to stay on top of industry developments. Layoffs at competing companies could be meaningful.

3. What do the company's financials look like? In the United States, the Securities and Exchange Commission requires reporting from a publicly held company (one with shares of stock sold on one of the public stock exchanges). Quarterly financial reports ("10-Q reports" in SEC-speak) and an annual report ("10-K report") are published on a regular schedule. Get access at your public library, the SEC Web site (www.sec.gov) or commercial Web sites such as AnnualReports.com. Look at the profits and read the footnotes. See what the executives are being paid and how much of their personally held company stock they're now selling. Low profits and the executives (more than one or two) dumping stock are bad signs.

4. What is happening to the stock price of your publicly held company? If the stock price keeps dropping over several months or years, your company could be in serious trouble.

5. Is the company on the market or being acquired by another company? Often, even with prosperous companies, layoffs may be triggered when a company (or division of a company) is purchased by another.

What will you do if you're laid off? If you're suddenly laid off and told you have two weeks to clear your desk and get out, what will you do? Do you have an alternative source of income, a skill you can instantly harness that can bring in immediate income?

If these questions never occurred to you, you're living in an unrealistic world that can suddenly collapse if you lose your job.

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