How to Survive a Recession and Thrive Afterward

A research roundup

by

Walter Frick

by

Walter Frick

From the Magazine (May–June 2019) · Long read

Matthew Donaldson/Trunk Archive

Summary.

According to an analysis led by Ranjay Gulati, during the recessions of 1980, 1990, and 2000, 17% of the 4,700 public companies studied fared very badly: They went bankrupt, went private, or were acquired. But just as striking, 9% of the companies flourished, outperforming competitors by at least 10% in sales and profits growth.

A more recent analysis by Bain using data from the Great Recession reinforced that finding, showing that the top 10% of companies studied didn’t merely survive; their earnings climbed steadily throughout the downturn and continued to rise afterward.

Among the companies that stagnated in the aftermath of the Great Recession, few had made contingency plans, according to the Bain report. “When the downturn hit, they switched to survival mode, making deep cuts and reacting defensively.”

How should firms prepare for a recession, and what should they do when one hits? This research roundup examines advice in four areas: debt, decision making, workforce management, and digital transformation.

In early 2000, a five-year-old online bookseller called Amazon.com sold $672 million in convertible bonds to shore up its financial position. One month later, the dot-com bubble burst. More than half of all digital start-ups went out of business over the next few years—including lots of Amazon’s then-rivals in e-commerce. Had the bubble burst just a few weeks earlier, one of the most successful companies ever might have fallen victim to that recession.

A version of this article appeared in the May–June 2019 issue (pp.98–105) of Harvard Business Review.

Walter Frick is a contributing editor at Harvard Business Review, where he was formerly a senior editor and deputy editor of HBR.org. He is the founder of Nonrival, a newsletter where readers make crowdsourced predictions about economics and business. He has been an executive editor at Quartz as well as a Knight Visiting Fellow at Harvard’s Nieman Foundation for Journalism and an Assembly Fellow at Harvard’s Berkman Klein Center for Internet & Society. He has also written for The Atlantic, MIT Technology Review, The Boston Globe, and the BBC, among other publications.

How to Survive a Recession and Thrive Afterward

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