How TSG survived…and thrived…through the economic downturn

As we approach the two year mark of the economic downturn, we are proud to say that TSG has survived (and even profited) throughout the downturn. This post will share some of our thoughts as to how we survived as well as positioned us for growth in 2010.

As a company, there were two aspects that we felt were critical to preserve in order to not only weather the recession, but to come out of it ahead.

• Our People
  • No Layoffs or Salary Reductions – TSG experienced layoffs after 9/11 and we were very concerned about the cultural impacts.  Going into the recent downturn, we had been “saving for a rainy day” and forecasted that, while we might run a loss in some months, we had enough funds to avoid the sacrifice of our people, their salary compensation, and impact on our culture.  In getting creative in the short-term, we asked employees to take furlough days off to reduce our costs while giving the employees something they valued, additional time off.
  • Build our Staff – In 2008, we made commitments to our college recruits that they would have jobs in 2009. We not only felt strongly about honoring our commitment, but by bringing in our 2009 start class, we were also able to provide career growth to our existing staff as they took on more responsibility (supervision, analysis, etc.).
  • Recruit for 2010 – We were confident in our product and services and that things would pick up again in 2010, so didn’t want to miss the opportunity to find qualified college students looking for jobs in 2009.
  • Maintain TSG Culture – We didn’t want to cancel social traditions that help make TSG the company it is. With a few cost saving changes, we are happy to say we were still able to have our Colorado ski-trip, celebrate our 14^th anniversary, move into better and more cost effective offices and host a rooftop Cubs event. To us, preserving these types of activities shows a long-term investment in our people
• Our Work
  • Keep our Focus – We felt strongly that it was important for us not to get desperate and take any job that came our way.   Our strength and focus has always been to deliver quality content management solutions to our clients.  This type of work not only provides for interesting projects but also keeps us challenged and happy with our job. Taking on jobs outside of this focus (e.g., staff aug), would only jeopardize the type of firm we have spent the last 14 years building.
  • Help our Clients – Understanding that our clients were struggling as well, we looked for ways to bring value and help them deliver solutions cost-effectively.  Given layoffs in client’s IT departments, TSG looked for smaller jobs as well as part-time opportunities for us to help our clients adjust to budget pressures as well as resource constraints.  Also, given budget constraints, we continue to look for Open Source offerings to help our clients with their IT spend for software.

While we fully anticipated that our revenues wouldn’t meet our costs month to month during the initial stages of the downturn, Management as a team came up with creative ways to save money that we believe helped get us through the downturn and set us up for success coming out of it.

• Reduce Costs – We did look for ways to reduce our spending.  As mentioned above, one that was very successful was the entire company furloughed a half of a day on Friday. Since Chicago is a great city (especially in the summer), we actually didn’t receive any complaints. To protect our new hires start date in September, we had them start on our committed date but work only four days instead of five. Since the whole company pitched in, we were able to cut payroll costs 15% each month while giving something back (time off) to our employees.
• Long-term Vision –While we kept a close eye on our finances – we didn’t allow ourselves to get overly anxious about small losses. While we had down months, we didn’t react with drastic measures like layoffs or pay cuts.
• Low Overhead – This is a lesson we learned from the 2001 recession. Since then, we have very little overhead.  With the exception of one employee, all of TSG employees do project work as well as share the responsibility for non-billable tasks such as sales, marketing and recruiting. Not only does this help us keep our costs low, it keeps our consultants challenged as we are exposed to more than just our client work.
• Take advantage of the market – With our lease expiring at the end of 2009, it set us up in a great position to negotiate for a new space that is significantly better and is more cost effective than our old space.
• Open Source – With IT spending down and software costs rising, having proven open source products along with our consulting services was an advantage to us and our clients. We also were able to leverage any downtime we did have last year to add to our offerings. For example, we took feedback from one client and developed OpenScan.

Clearing up the “small company is more risky” myth

As we start our 2011 college recruiting season this fall, we couldn’t end this article without addressing the concern that some college hires have in regards to small companies being more risky than large companies.  Myths about small versus large companies include:

• Large companies are more stable – All companies involve risk.  As seen throughout the downturn, big companies often take big risks or can be too reliant on large contracts.  Small companies have flexibility given their size and focus to quickly adapt to changing economic conditions.
• Large company employment is more stable – Large companies have shareholder pressure to meet income targets.  One way to quickly cut costs as well as show the market that a company is “getting tough” are layoffs.  Small companies, like TSG, are typically employee owned and don’t have the same pressure to meet shareholder or market perception and can pursue long-term employment rather than short-term cuts.
• Better opportunities in large companies – Large companies generally have more overhead and layers of bureaucracy. Small companies tend to operate on less and have a more lean structure. This type of structure fosters rapid career growth and gives employees exposure to a wide variety of responsibilities.

While we realize the recession is not over yet, we are encouraged with how we’ve seen things pick up for TSG in 2010. We’d love to hear your thoughts on ways your company weathered the last two years.