Post crisis era forces business model rethink

Business is heading into a new era in which the shock of the recession prompts changes in attitudes to finance and corporate leadership that could last for a generation, according to the CBI.

The employers’ group says companies will rethink their commercial models and supply chains, achieve even greater workforce flexibility and seek new forms of finance.

The recession and credit crunch will be catalysts for changes that reshape business behaviour well into the next decade, the CBI argues in a report published to mark its annual conference in London on Monday.

Businesses do not see credit terms falling back to pre-crunch levels, it says. Having become wary of high debt levels, they will seek alternatives to debt-driven growth to protect investment and innovation.

More financing options will be created, the CBI forecasts, including new regional banking and investment institutions and new types of institution to fund the growth of small companies.

Financial engineering was “yesterday’s story”, said Richard Lambert, director-general. “We may be at the start of a new era for business, in which attitudes to finance and corporate leadership are changed for a generation by the shock of the past two years.”

What was needed was “a more balanced, less risky pathway to growth,” he said – “one in which the short-term returns may be lower but the long-term rewards for management success will be a lot more sustainable and secure”.

It would be “a more collaborative, less transactional world” in which closer relationships with customers, suppliers, employees and shareholders became the norm.

The CBI says anxiety about the domino effect of supply chain failures – and the shortcomings of the “just in time” philosophy of recent years – will compel companies to forge more collaborative relationships with their suppliers.

It forecasts that companies will be more open to working with partners, including universities and even competitors, and that environmental sustainability and ethics will become more integrated into the business model.

It says more flexible workforces will evolve. For some companies this would mean a smaller core workforce and a larger “flexiforce” of freelances, raising serious questions about who pays for their pensions and training.

Ipsos Mori surveyed 66 business leaders with a UK workforce of almost 1m for the CBI and Deloitte, the professional services firm. Most said they were concerned about supply chain fragility.

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