Listen to the environment and show the guts to shape things

Management Review
Business Day
22 June 2008
Jonathan Yudelowitz

THE DEPRESSION, confusion and anxiety induced by downturns are realistic reactions to bad news. These feelings sharpen perceptions, signal need for change and, if properly processed, facilitate specific, appropriate ways of doing business in particular markets, and industries — in the context of specific products cultures, competencies and organisations.

For most businesses, defining a downturn strategy is complicated. Leadership must guide how people are measured and rewarded; simultaneously, leaders must continually and intelligently review and refine how this is done. Management and measurement systems drive organisational values and behaviours, thus shaping careers and reputations.

Some companies are too proud of their strategies and systems to adapt. Like the European technical executives of a local, consumer appliance manufacturer, who regard production-line turnaround time as dogma. Instead of heeding local management’s warning of lower demand, they stigmatised this feedback as undisciplined, resistant and an insular approach to business. The unintended consequence of the Europeans’ stance that efficient production is key to success, is a stack of unsold, efficiently produced appliances losing value in a warehouse.

During a downturn it is vital that leadership ensures that costs are minimised, but that opportunities are created and seized and that morale and competence is ready for the next upturn. The CEO must ensure a sense of mission germane to the business to give meaning and purpose to the downturn phase and to avoid the hype, panic and insecurity typical of an economic slowdown. In order for this to happen, the CEO must both listen to his environment and show the guts to shape things, provide boundaries to mitigate uncertainty, inspire others and give hope.

During a downturn too many large businesses confuse purpose with grandeur. They avoid the iterative, uncertain and often frustrating process of creating a shared intention; they respond instead by buying off-the-peg solutions from flash consultants armed with ambitious grand plans and big promises. These armies of experts make assumptions and judgments, emphasise analysis and particular strategies, such as Customer Relations Management or Business Process Engineering, which have much more to do with their own ideology and their firm’s expertise than with their clients’ problems. They conveniently categorise the insights that don’t fit their models as resistance, explaining them away with clever, often pre-packaged rationalisation.

An eminent physicist recently said that the light-bulb was not invented because somebody was trying to perfect the candle; rather, it came about because a scientist felt free and safe to follow his curiosity and imagination. Expert-led interventions discount curiosity, conviction and imagination in favour of too many meetings and “action for action’s sake”. Such strategies divert resources and people’s energy away from where it should be channelled, into vain illusions of control, thereby thwarting vital learning, readjustment and experimenting; all of which can only derive from real marketing, listening to, building relationships and doing business with clients.

A retired CEO who had successfully led his organisation through many downturns remarked that when one’s staff defer to the CEO for direction, he must involve them and elicit their opinions. But when they demand a say, however, he said one needs to show a “firm hand” and a clear sense of direction. This illustrates the leader’s crucial yet paradoxical role in times of change. On the one hand he is just a person whose view is likely to hold as much value as anyone else’s. On the other hand he is the “superstar” to whom the people look for guidance and hope. His authority, impact and presence enables people to trust and feel safe enough to experiment and change. If he panics so will the workers. But if he egotistically ignores others’ views, he will probably miss essential information. A leader needs safe time and space to deal with this paradox and confront the importance of an issue and its potential consequences, without feeling stressed, in order to work through his doubts to ultimately clarify “resolve”: the conviction and aspiration that will both guide the choices he makes and the messages he sends.

Self-awareness and courage is essential to leadership: both enable optimism. Optimists accept that the future cannot be controlled but are confident of finding answers when facing a challenge.

A downturn provides an opportunity for a clean-up, for young and old people to relearn the fundamentals of society, economics and business, to make the tough call that if something is not adding value it must go; or, if it’s adding value one must fight to hang on to it. It’s all about keeping the fine balance between self-interest and the greater good, building the leader’s own as well as others’ confidence to decide and act in the process.

In good times one tends to credit one’s own actions and inherent capabilities. In bad times you have to realise it is your relationships with customers and staff and the shared experiences that count.

Anyway, for those entertaining notions of leaving this country for supposed greener pasture elsewhere just remember in the era of globalisation there is no place to run. Skills shortages, fuel prices and inflation are universal woes.