The economic 'cocktail of uncertainties' facing Irish business is a new brew for managers who learnt their trade during the boom. The transition will not be painless, writes Cliff Taylor
The car park in Killarney's Great Southern Hotel has its annual influx of executive motors this weekend. But for those arriving in their corporate chariots for the Irish Management Institute (IMI) conference, times have seldom been so uncertain.
How do you run a business when even the head of the US Federal Reserve Board, Alan Greenspan, puts his hands up and admits: "We do not know what the underlying state of the economy is"? He referred, appropriately, to the "cocktail of uncertainties". Start with an overhang from the economic boom, add in a slump in business investment, mix with a war in Iraq. No wonder business confidence is shaken and chief executives are a little stirred.
The big concern, says Barry Kenny, chief executive of the IMI, is that the international economy dips into recession, with inevitable consequences for Ireland. The duration and consequences of the war are key uncertainties, including its implication for investment and trade flows in the long term.
But there are concerns, too, about the fundamental health of the major economies. Put simply, all the indicators from the major economies are dire and suggest that growth has already stopped in the EU and US. But the stock markets are generally choosing to ignore these signals and are rising in the hope of a post-war pick-up, although the latest fall in US job figures did appear to give Wall Street pause for thought last night.
Prospects for Ireland rely, in large part, on whether this pick-up arrives. Right now the economy appears to be stalled, caught between expectations of a post-war international bounce and fears of a downturn. Yesterday's unemployment figures showed the fifth monthly rise in a row, although the March increase was a modest 500.
Meanwhile Taoiseach Bertie Ahern conceded at the conference yesterday that falling competitiveness was hitting growth. The continued rise in the euro is hammering exporters to countries outside the euro zone, while there are some worrying signals from our multinational base. Just this week, Dell, the State's biggest private sector employer, indicated that it was unlikely to create more call centre jobs here, given the lower level of costs in places such as India.
How do business leaders, used to the easy life brought by the Tiger years, adapt? The key theme of the conference, highlighted by the Taoiseach, is " back to basics": winning business, pleasing customers, controlling costs, making a profit. It all sounds obvious, but for much of the last decade many businesses were run more on expectations than results. Now the extravagances of the dot.com area are forgotten, and in their place is a new business austerity.
For many younger business leaders, it is their first experience of this kind of environment, Barry Kenny points out. "They have not been there before, they do not have the compass to guide them," he says.
A year or two ago the management focus was on buzz concepts such as charisma, empowerment and leadership style, he says. Now the emphasis is on "good decisions and a steady hand", managing for profit and, crucially, for cash flow.
One company that has demonstrated such virtues in recent months has been Aer Lingus, which has now turned around to profitability under chief executive Willie Walsh, who is one of the speakers in Killarney.
In a time of uncertainty, the onus is on businesses to act and not turn the downturn into a "self-fulfilling prophecy", Walsh believes. The threat of war earlier this year was a big factor for the company, he says, and it responded by cutting prices to try to get consumers travelling.
"When there is uncertainty, you have to give some incentive to people to get things going again," he says.
This formula worked for Aer Lingus after September 11th 2001, says Walsh, and it is again delivering results now. Traffic is growing, particularly from continental European markets such as Germany, and Walsh still believes it is "all to play for" in the tourism market for 2003.
The flip-side of the drive to give customers value, of course, is a reduction in business costs. Aer Lingus has already reduced costs sharply, and Walsh has made it clear that this will be an ongoing process. One element is the lowering of distribution costs by investing in online booking through www.aerlingus.com.
Travel and airlines are two of the industries most affected by the current global uncertainty. All businesses, however, are affected to some extent. And, looking beyond the current difficulties, business leaders are wondering what long-term competitive advantages our economy can now offer.
"The world-beating formula of the last decade is still relevant," the Taoiseach declared boldly in Killarney. But is it? Competitiveness is suffering, with inflation here now above that of our trading partners for a sustained period. Low-cost manufacturing will inevitably drift east, to the new EU states, India, China and other lower-cost locations. Our multinationals are worried about costs, Kenny concedes, but still see the Republic as a key location for highly skilled activities such as, for example, testing new drugs. We must increasingly build on our "technology and manufacturing edge", he argues.
It will not be a painless transition, at a time of slow and uncertain global growth. The words of management guru C.S. Prahald, a keynote speaker in Killarney, are worth some moments of reflection on the part of political and business leaders as they depart tonight.
"In great times, anyone can lead," Prahald has said. "Leadership is about what to do when the going gets tough."