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MANAGEMENT ACCOUNTING

‘With any kind of shaken the construction industry and its suppliers,
including lumber manufacturers. Patrick Lumber
— based in Oregon — had survived the earlier
downturn, you need recession in large part by liquidating large amounts
of inventory, among other cost-cutting measures.
In 2020, some of the company’s leaders wanted
to acknowledge your to move quickly to replicate those defensive strate-
gies.
The Great Recession had been “such a big mo-
team might be feeling ment, especially for construction and lumber, that
we were all a little nervous,” Heacock said.
But Heacock urged a slower approach, because
anxious and stressed.’ she saw a fundamentally different economic chal-
lenge this time. The earlier crisis had grown over
many months as structural problems in the real
Pamela Oberski, Dow Inc.’s finance director for North America estate and banking systems revealed themselves. In
contrast, the pandemic swept across the nation as
an enormous external shock.
“I remember saying, ‘Hold on. Let’s not lay
anybody off. Let’s take a little breather,’” Heacock
LESSONS LEARNED — recalled. Then, she facilitated long conversations
AND ADJUSTMENTS MADE with all of the company’s leaders, trying to recon-
Natalie Heacock, CPA, was beginning to transi- cile their differing perspectives.
tion into the role of CFO of Patrick Lumber Co. Instead of replicating its more drastic 2008 ap-
as the pandemic took hold in the United States in proach, the company retained all of its roughly 100
early 2020. employees and sold off only a limited amount of
“It was March when the world decided to go its inventory — a decision that would prove profit-
home — and we didn’t know how it was going to able as lumber prices soon skyrocketed.
affect us,” she said. “We were very, very busy,” Heacock said, add-
As the economy slowed, the leadership team ing: “What we learned in 2008 was definitely
knew one thing for certain: They wanted to main- helpful, but everything changes.”
tain a strong cash position, as they had in previous The key lesson, she said, is that a defensive,
disruptions. cost-cutting strategy isn’t always the best response
“For us, cash is king,” Heacock said. “During to economic turbulence.
downturns and during periods where other people She and other leaders say that rings true in 2023,
are struggling, we’ve been able to really capitalize.” too. Warning signals are flaring — including sus-
But other decisions weren’t so obvious. Just over tained high inflation, a manufacturing contraction,
a decade earlier, the Great Recession had badly rising interest rates, and an unsteady stock market.

IN BRIEF slowdown. Patrick Lumber Co. decided businesses. Chris Kite, global director of
not to replicate its 2008 approach field technical operations for Amazon
■ Finance leaders look to wisdom from of minimizing costs and liquidating Web Services, believes continuous
past experiences — with an emphasis inventory during the recent pandemic scenario planning is vital to prepare for
on cash flow management and keeping after realizing COVID-19 was a the best response.
teams focused on priorities — as signs fundamentally different threat. ■ Finance leaders need to address
point to an economic downturn ■ In 2023, supply chain problems, employee anxiety during downturns
in 2023. geopolitical shifts, environmental through regular check-ins and clear
■ Cost-cutting strategies aren’t always crises, and evolving competition communication on their company’s
the best response to an economic for talent can pose systemic risks to strategy to survive.
To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com.

14 | Journal of Accountancy March 2023