5 Tips to Build Resiliency in an Economic Downturn
If you’re lying awake at night thinking about your business, you’re far from alone. Economic downturns can cause even the most experienced leaders to lose sleep. And given the scope and severity of today's pandemic-related hardships, it makes sense that multifamily asset owners and managers are burning the midnight oil.
From delayed maintenance for in-unit work to shrinking market prices, there are good reasons for property stakeholders to be on guard. Even still, the forecast isn't all doom and gloom. Though the situation may appear dire, some strategies can help organizations weather the storm and come out strong.
Don’t get us wrong: we’re not saying the next few months will be easy, but you can use this time productively. If things feel overwhelming, here are five tips to help you recast the way you approach your business:
1. Control What You Can: This isn't your everyday market downturn. Economic activity has been stalled to an unprecedented degree, and the road to recovery isn't clear. Add in factors like historic unemployment, social trends, and uncertainties around COVID-19 risks, and no one really knows what's coming next. With so much uncertainty, it's important to control what is within our reach. That means focusing on resident renewals, taking steps to preserve the value of assets, and adapting forecasting models so they quickly take ever-changing factors into consideration.
2. (Re)Define Success: Today's benchmarks for success are very different from a few short months ago. For many leaders, the immediate goals are staying afloat and keeping your staff and residents safe. Therefore, consider temporarily shifting from a growth mindset to one that focuses on keeping your residents happy, staff employed, and everyone healthy.
3. Narrow Your Focus: Much like now is a good time to re-define "success," it is also a good time to re-think short-term property management strategies. Instead of expanding and extending operations as you would in a better market, consider narrowing your focus on "quick wins" you can achieve with your team, residents, and stakeholders right now. It will not only improve your business, but it will also keep everyone feeling positive—and that in itself is a “win” right now.
4. Utilize the Stockdale Paradox: If you aren’t familiar with this story, it centers around realistic optimism. Admiral Jim Stockdale was a high-ranking US military officer who was captured and tortured numerous times during the Vietnam War. Despite having no sense of when his ordeal would end, Stockdale persevered and became a true leader for his fellow prisoners, creating systems to help them deal with all the difficulties they encountered.
While a pandemic isn’t a war, it does bring a similar sense of uncertainty to all aspects of life, including day-to-day operations. Stockdale famously said that the true optimists in his prison camp died of broken hearts, as their expectations kept being dashed. His secret to making it through? In an interview after his release, he said, “You must never confuse faith that you will prevail in the end–-which you can never afford to lose–-with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
Jim Collins' 2001 business book, Good to Great, coined the term “the Stockdale Paradox” and defined it as "the ability to acknowledge your situation and balance optimism with realism." Businesses should acknowledge that, while these circumstances are unlike anything in modern times, they will end—and true leadership means examining all the difficulties and helping your staff and residents cope as well as possible in the meantime.
5. Continue to invest: It's tempting to cut costs and freeze projects during an economic downtown, but it pays to think long-term. Continue making strategic investments in your assets and team to ensure you're not playing catch-up when the market turns around, and that you aren't sacrificing long-term goals for short-term financial comfort. For example, if your staff is stretched thin, it’s smart to invest in ways to increase efficiency and ensure items won’t slip through the cracks.
These are days of great uncertainty and economic hurdles, but they won't last forever. With a fresh mindset – and a healthy dose of realistic optimism – multifamily real estate players can persevere against adversity and position themselves well for brighter days ahead.