Driving in times of uncertainty is always challenging, and the current inflation rate is no exception. Here are some suggestions on how to drive in an inflationary economic environment.
The economy has entered a bit of uncharted territory, with seemingly persistent inflation, which most of us have not experienced in our careers. This is coupled with a challenging job market, low unemployment, stock market turmoil and global conflict. Technology leaders may think they are immune to these external factors. However, inflation can affect our operational and strategic activities. Here are some suggestions on how to manage and mitigate these effects.
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Consider your origins
Technology organizations often manage huge pools of expensive assets, from employee technology such as laptops and smartphones to data centers and vast infrastructure. In the near term, and perhaps most obviously, inflation is likely to push up the purchase price of new assets and the aggregation of parts and replacements for existing assets. Perhaps more accurately, inflation will also increase the cost of financing these assets, amplifying their impact.
This inflationary double whammy can take weeks or even months to emerge. The hundreds of companies involved in the production of your servers or laptops are absorbing the increasing costs of components and financing and incorporating them into their economic models.
Smart tech leaders can use this time gap between rising inflation and its effect on prices to their advantage. Accelerating large asset acquisitions, locking in current prices, or moving expensive assets off the books through technologies such as cloud adoption are obvious ways to save money. Similarly, examining whether the life of current assets can be extended may avoid the effects of rapid inflation if it is transient.
Manage the costs of your employees
The main driver of inflation was higher salaries, and you likely faced increased costs for new employees and demands for a salary increase from the current team. Wage inflation, combined with a tight labor market, is one reason for the sudden and rapid rise in inflation and a major challenge for technology leaders.
Consider non-salary benefits or benefits that have a higher perceived value and lower costs than an additional salary. For example, flexible working hours and locations may cost little productivity but may provide an advantage against your competition. Likewise, emerging benefits such as “wellness weeks” or additional vacations can be effective. Employees often value a few extra days of vacation more than an equivalent increase in base compensation.
If you’re throwing your hands in the air and assuming you won’t be able to compete in your current talent environment, you’re doing the wrong thing. If nothing else, if you cannot argue rigorously and convincingly why someone should join your company and how you will help them grow and mature as professionals, you will lose the battle for talent in the short and long term.
Become the eyes and ears of the organization
You are not the only leader in your organization struggling to respond to turbulent and uncertain times. As a leader who deals in data and information, you are in a unique position to assist your colleagues and leadership in observing and understanding how the environment is changing.
Technology leaders have been talking about the power of technology in predictive reporting for decades; When is the best time to apply this toolkit when leaders are struggling to understand markets and how they affect their companies?
Take the time to review your technology portfolio and focus on current and aerial investments in reporting, analytics, and data management. What tools do you have that can help identify challenges in the supply chain or emerging sales trends that can help inform the organization? What mechanisms do you already have to identify emerging economic or market trends? What untapped analytics tools can provide valuable insight with targeted training and support for the right end users?
After several years of focusing on the technology side of IT, most leaders are hungry for information. Redouble your efforts to become the eyes and ears of your organization, while providing early alerts and insights into key metrics to help other leaders make informed decisions.
Unspecified times are always tough, especially when you’re leading a team or providing critical insights to colleagues. No one knows how the current economic environment will turn out, and this may just be a glimpse into the path to continued prosperity. Recognizing challenges and using your unique position as a technical leader to meet them will make you a better leader and help your team and organization weather the storm.