economic downturn

When you have worked through tough economic times you know that some leaders simply won’t cope, while others will find the recession is pivotal in building a successful career. Great leadership is born out of adversity.

What separates the stars from the failures?

Leadership in a growing business is arguably easier than leadership during an economic downturn.  In fact, good times tend to test our management ability more than our leadership.  Sure, prosperity makes us busy; we work long hours prioritising, resourcing, coordinating, maintaining customer supply and service levels, hiring, inducting and integrating staff, and maximising the productivity of our people.

But are these the right capabilities for tougher times?

How Effective Leaders will Manage Complex Tensions in a Recession

In a recession, the nature of the work might not change, but the nature of leadership should.  In particular, leaders will be faced with a new set of tensions and only some will manage these effectively.

The recession will take customers away from relationship development at a time when you need to improve it. Customers are in the same recession as you! They will be negotiating more vigorously, be more demanding and price/quality focused. Invest in customer relations externally and internally. It is well recognised that strong relationships actually improve perceptions of product and service quality. These are valuable commodities in a recession. Implement joint problem solving with customers. Help them help you help them. Avoid cost cutting on customer service, price increases, or any action which builds an “us versus them” mentality with customers.
Maintaining optimism while speaking candidly about the impact of the recession on the business, not shying away from this. Knowing when to slow the pace of change to allow staff to adapt. Maintain a sense of optimism and urgency in the business, it inspires and energises people and softens the mood of desperation that often
accompanies a recession.
Avoid being too serious all the time i.e. wearing a permanent “black hat”. People get anxious and fear for their future, which is not a mind-set conducive to sustained productivity. Leaders don’t need to be constantly glum to convey a sense of urgency.
Managing the tension between being self reliant and trusting of others. Displaying confidence in your ability to cope successfully with the recession, to make tough decisions without hesitation at the same time as being open to others and allowing them to contribute. Being too open and inclusive can damage your credibility as a leader, make you appear “pleading” and desperate for help. Lift the profile of and the time and resources devoted to innovation. Open up debate on issues and how to deal with them. Take ideas from others – listen more intently and involve a broader range of people in analysis and problem solving. The more views expressed and ideas canvassed, the more likely a better outcome will be achieved. Avoid heroic leadership: “it is my role as a leader in a crisis to have all the good ideas – so listen to me carefully”. This is a hang-over from old-style leadership based on military principles from the 19th century – and before.
There is a real tension between strategic and operational thinking and behaviour. Optimising business unit performance at the same time as aligning and synchronising it with new, whole-of- business requirements necessitated by the recession. Practice strategic, systems thinking to reduce process / resource overlap, eliminate redundancies and ensure an integrated, whole-of-business
approach to operations.
Avoid a strictly focused approach to efficiency improvements – your “patch” may need to underperform to make the overall business perform better.
Driving change needs to be balanced with an understanding of the effects of that change on people and allowing them the time and space to address the personal and emotional impact. Act as a champion of change, constantly adopting new approaches to meet the new economic conditions. Make tough decisions. Avoid holding onto anything (processes, resources, people) that were only useful to support growth. Don’t avoid tough conversations and decisions.

Some leaders will inevitably define their role in the wrong way over the next year of the recession.  These leaders will become too negative, authoritarian, self-protecting, and cost focused. The will be less networked, less agile and less strategic.  They will make the people around them anxious, non-cooperative, patch protectors and resentful of (misapplied) leadership authority.  The true leaders will handle the new leadership tensions effectively and continue displaying transformational leadership attributes.

Survey Clusters

As a matter of interest, our 360° feedback and staff surveys tend to cluster at either end of the spectrum on transformational leadership – some businesses are outstanding and others lack leadership maturity.  As the recession bites, for those with immature leadership capability, we expect to see a relative decline in staff morale, employee engagement levels and, most important, reductions in the scores for “quality of teams”.  Team related questions consistently score at the top of our staff surveys – most teams are seen as skilled, supportive, helpful, caring and friendly – and losing this could result in a long term setback for any business.

By Dr John Viljoen, Associate Consultant

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