Preparing for the Worst

Headlines announced “the latest sign of bloodletting on Wall Street,” as many financial companies started slashing their headcount. Citigroup, Goldman Sachs and Morgan Stanley are among the largest firms mentioned in the press, but in this environment, no employee should feel safe. Given the slowdown in the US economy, there are steps you should take right now to prepare for the worst, while hoping for the best.

Step 1: Accumulate a healthy cash account: I always recommended that people keep an emergency reserve fund that is invested in cash or cash equivalents. The amounts that are quoted in the industry are anywhere between 3-6 months of living expenses, but when the economy hits the skids, it would be preferable to keep a little extra money set aside, because if you were to lose your job, it may take longer to find a new one in a tight labor market.

Step 2: Always be networking: This may seem onerous to shy people, but the ability for you to create a network of professionals to whom you could turn is helpful if you were to suddenly find yourself jobless. Even if you do not need a job today, maintaining your connections may prove invaluable in the future. If you have created and nurtured these relationships when times were good, chances are that your calls will be returned when the economic tide turns.

Step 3: Work Hard: I was with a big mucky-muck from a large investment bank and here is a direct quote: “When I have to cut 20 people from my department, I start with those who don’t work so hard. You know -- the ones that think that working 9-5 is acceptable and that doing the job is the same thing as getting the job done.” He said that the best thing about a “RIF” (reduction in force) is that it allows employers to clean house. My takeaway is that now might not be the best time to skate along. When times are tough and managers have to make difficult decisions, they are apt to keep those employees who they value as good worker-bees.

Step 4: Loyalty is important…to a point: “John” was asked to interview for a new job a few years ago and felt guilty about doing so, noting that he did not want to seem disloyal. My friend and I convinced him to go on the interview, if only to understand his worth in the marketplace. After four meetings with the prospective employer, he said, “Here I was worried about loyalty to ABC firm, when XYZ is willing to pay me 40% more!” Not only did he take the new job, but a year after he left, his old company shut down his entire unit. How’s that for loyalty?