Studying Their Recession Playbook
Back in the summer of 2008, the brain trust of Pepco Holdings would gather at 8:30 each morning and talk about how the power company should respond to the rapidly deteriorating financial markets.
President Joseph M. Rigby directed the meetings from a windowless room on the 10th floor of the company's Ninth Street headquarters in Northwest D.C. Around the conference table sat the giant utility's financial chiefs, the heads of its crucial power subsidiaries, its general counsel, and the public relations group. The vice president for human resources was there too, just in case layoffs or other personnel issues arose. More bigwigs listened in by speakerphone.
How the group responded offers insight into why some companies have fared better than others during these unpredictable times. As I talked with local business leaders throughout the region, I found they had much to teach about adapting to economic uncertainties.
And we've certainly been through some changes. Two years ago, I was writing about how Washington had become a major regional center for finance companies such as CapitalSource, Allied Capital and others. It now appears I was thinking too small, because Washington has become the seat of not just regional but national finance, what with the federal government's bailout of the U.S. banking industry and its move to seize control of mortgage finance giants Fannie Mae and Freddie Mac.
So I sounded out some of the leaders of this new Financial Capital.
"When Bear Stearns happened earlier in the year, our ears went up," Pepco's Rigby recalled during an interview. "We thought: 'What's happening here?' "
As the summer dragged on, Wall Street icons collapsed one by one -- Lehman Brothers, Merrill Lynch, AIG. Though Pepco wasn't in danger, Rigby and his team began to assume a worldwide, crushing economic event was headed this way.
"We were trying to push ourselves as to how bad this could get. It was important to remain uncomfortable," said Rigby, who has since been named chief executive. "We looked at things we can do in near, middle and long term."
"First in the near term was to take action and conserve cash. We had an immediate hiring freeze and a wage freeze. We also sent out a note to all leaders to look at the operating budget and remove discretionary costs -- non-emergency overtime, travel, training. In the middle term, we started to look at what projects could we delay without impacting customer reliability or services. And that relieved pressure. Probably the key thing we did was we took action that turned out to be prudent: We found a window of opportunity in early November of 2008, where we set a goal to do enough financing to get through 2009 without going to the capital markets. We raised approximately $1 billion in financing during three weeks in November of 2008, and went into 2009 with $1.5 billion in cash and credit available."
I called Raymond Roberts, co-founder of Citizant, a Chantilly-based company that manages computer tasks for the federal government, fully expecting Roberts to discuss how the economic blowup has smacked his company. I wrote a column about Citizant co-founder Alba Aleman about a year ago.
Roberts's response surprised me.
Business couldn't be better, he said. And he hasn't lost a wink of sleep.