Let’s get right to the point: if you live in the United States, unless you are at least 70 years of age and still working, you have never managed a business during a period of high inflation. The last such period the United States experienced, dubbed the Great Inflation, started to wind down in 1982.

To quote Michael Bryan at the Federal Reserve Bank of Atlanta, “Over the nearly two decades it lasted, the global monetary system established during World War II was abandoned, there were four economic recessions, two severe energy shortages, and the unprecedented peacetime implementation of wage and price controls. It was, according to one prominent economist, ‘the greatest failure of American macroeconomic policy in the postwar period’ (Jeremy Siegel 1994).”

I tell you this not to depress you, but to point out that virtually all leadership teams in this country lack first-hand experience operating in the type of environment we may now be entering.

It’s not my role to predict whether this inflationary period will be mild or severe, or whether it will be fleeting or span decades, as the previous period did. I’m simply suggesting that it would be prudent to study how inflation could change your decisions and actions.

You may need to rethink how you…

●      Negotiate contracts

●      Price your products and services

●      Manage your supply chain

●      Make decisions on hiring and major new projects

●      Manage inventory

●      Obtain and maintain credit

Recently I spoke with a client who confessed, “Eric, I’ve never operated in this environment.” But to their credit, they went on: “You know what I did? I sought out two people: a peer who’s older and a seasoned board member who’s a retired operator who has been through a couple of seasons of pretty significant inflation. I asked them to talk me through how I should think about inflation as an input into how I approach strategy, execution, financial management and leadership.”

That’s great advice for all of us.