With U.S. Federal Reserve Chairman Ben Bernanke now acknowledging the possibility that the U.S. economy may be heading for a recession, it is clear that we have hit an economic rough patch - one that is likely to continue for some time. 

Leaders in these difficult times would be wise to consider findings from the fields of economics, psychology, and sociology that people (and hence, organizations) consistently (a) over-react to short-run economic fluctuations, and (b) under-invest in the future.  Wealth, therefore, disproportionately accrues to those who do not make either of these mistakes.

There are at least three key implications to these findings:

1. Many firms will panic and will make excessive use of layoffs as a way of managing through tough times.
2. In so doing, these firms will destroy productive capacity that will be needed, but difficult to create, when the economy turns around (as it always does).
3. Those firms that do not succumb to mistakes #1 or #2 will be much better positioned to benefit from the forthcoming economic upturn.

So how should an organization react as it faces choppy economic waters ahead?

1. Do not panic.
2. Use layoffs only as a last resort in response to an economic downturn - not as a first resort.
3. Focus relentlessly on open and honest communication with employees.
4. Open your books to employees so that they can understand, and help you respond to, shortfalls in revenues.
5. Tap the wisdom of your workforce - they can help you devise and implement creative alternatives to layoffs.
6. Invest in the future by increasing training; the true cost of training is at its lowest during a downturn because the opportunity cost of employees' time declines during downturns.

In short, your organization should use the downturn as an opportunity to become an organization that is worthy of the loyalty of your employees when the good times return.