Dubai's companies urged to go on a lean diet in times of crisis

Dubai: As the economic situation continues to run stiff and dry, companies need to go on a lean diet to weather the storm, officials and advisors say.

The current economic crisis is forcing private sector companies to drastically cut costs as their orderbook is shrinking due to a decline in sales, impacted by the current meltdown.

The financial meltdown has hit Dubai's real estate market badly, forcing companies to reduce marketing and advertisement budgets, while some had to lay off employees as part of the cost-cutting measures.

Nearly 1,800 people have already been made redundant in the real estate and construction sector in Dubai in two months.

Many large companies in the real estate sector have already seen layoffs and the banking sector is also currently tightening its belt.

The impact is spreading to small and medium-sized enterprises (SMEs), which has every one on their toes, worrying about job security. About 80 per cent of the businesses in the UAE are SMEs.

Should companies jump to cut costs by ridding themselves of redundancies or is there another solution?

Abdul Baset Al Janahi, chief executive of Mohammed Bin Rashid Establishment for Young Business Leaders, spoke to Gulf News about the possible course of action businesses need to take during this time of turmoil and uncertainty.

"Most SMEs will be the second on the wave to be hit after the main contractors, because most of them are sub-contractors. To overcome this, they need to build a stronger relationship with contractors and with banks in terms of payments," Al Janahi said.

While dealing with their external public is key, internal matters are also of the utmost importance. Al Janahi says before the point of mass layoff is reached, renegotiating of pricing should be undertaken with staff.

"Employees should be put in perspective about the turmoil, and what's happening. Get them to understand, so they can get through this, collectively," he added.

Companies should not be looking for a way through the current situation alone, but also preparing for the upturn, according to Debabrat Mishra, principal and consulting business leader, Middle East, Hewitt Associates.

"The economic downturn will be for a certain amount of time. It is prudent organisational strategy to prepare for business beyond the downturn. Those who focus on the same are likely to be in much better shape to take on the opportunities, which will arise when the economy revives," he said.

In the meantime, he said, companies need to follow the three steps of focussing on being lean, staying connected with the workforce, and building for the future.

Mishra said the downturn would provide a great opportunity for SMEs to gain competitive advantage by gearing up for the future with strategic investments in capabilities and assets. "These would be relatively cheaper to acquire during such crisis," he said.

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