Leading in Times of Economic Uncertainty... Shrinking Business
f you're like most leaders, you've never before experienced a downturn like this. Reports about the end of the recession mean little if your company continues to fight cash-flow problems.
You cannot allow yourself to be afraid. Others look to you for strength and guidance. You must give the best you have and move quickly, even when faced with incomplete information.
In his new book, Leadership in the Era of Economic Uncertainty, bestselling author Ram Charan identifies the key rules to follow if you want to get the right things done in difficult times. They include:
- Pay attention to salespeople's contributions.
- Accept guidance from your board of directors
- Understand how various business functions must be aligned and coordinated
- Communicate candidly and frequently
- Respond to external pressures in realistic, yet positive, ways.
Uncertain Data
Projections and estimates are little more than guesses these days. We won't know when we've turned the corner, and we cannot envision the future shape and scope of our businesses. What we can say is that change will present as both a danger and an opportunity.
Smart leaders are reshaping their businesses to carry on through whatever hard times lie ahead. They are making changes now so they can emerge in better shape than before, ready for new growth. They're pouncing on new opportunities, devising ways to move faster and trying to serve customers in different ways.
Shrinking Business
Barring acquisitions, your company will likely be smaller two years from now, according to Charan.
As bitter and painful as it may be, survival depends on cutting costs and raising cash. This is the time to narrow your focus and concentrate on your business' core: the invaluable assets you can't afford to lose.
- Choose the market segments and customers you will continue to serve, the products you will continue to make and the suppliers from whom you will continue to buy. Eliminate the rest.
- Seize opportunities to simplify your processes and reduce layers of management. You'll have fewer customers, products, facilities, people and suppliers, but you'll set the stage for a stronger company.
Management Intensity
Day-to-day management practices may have to change. Now is the time to use management intensity: a deep immersion in your business' operational details, as well as the outside world. More hands-on involvement and follow-through are required.
Ground-Level Intelligence
Get out in the field and observe. Salespeople are often closer to customers than other company representatives. Find out what they know or suspect trends will be.
The need for unfiltered information extends to suppliers and partners. Probe carefully to learn what's going on throughout the value chain.
All of this information needs to be shared and examined to extract key facts and patterns as they begin to emerge. Conversations must cut across silos so you know what management, peers and subordinates are picking up on, as well as what's happening in your area.
Controlling in Real Time
Increase your frequency of control, setting targets on a quarterly, monthly or even weekly basis. Revisit goals and key performance indicators, track progress toward them, and take corrective actions more often. Your company may have to change its approach more than once before things return to normal.
Staying in close touch with your people and digging into the numbers more often will help you pick up early warning signals that your strategy, business model, tactics and/or execution aren't working.
Build Confidence
Aggressive measures and decisive actions build optimism and confidence. Spotting opportunities and pursuing them aggressively will inspire people and change their psychology from fear to realistic optimism. Your actions and words will align people's minds, physical energy, hearts and souls.
Authenticity Is Critical
Your presence on the front line is important to energizing people and transforming their fear into confidence-but it must be authentic. Instill courage and optimism by putting reality on the table and addressing it decisively. Show people a credible, concrete path, and enroll other change agents who have the courage to make tough calls, without sacrificing values.
Six Essential Leadership Traits for Challenging Times
The following behaviors characterize a good leader in a downturn:
- Honesty and credibility. Nobody can be certain about the business environment and its direction. The only viable options are intellectual honesty and humility. Your authority depends on your ability to facilitate understanding and solutions-not from omniscience.
- Ability to inspire. Many people are extremely anxious. The recession descended as suddenly as a tsunami, destroying hard-earned savings and putting jobs at risk. You and your team must inspire employees by toughening their resolve and developing realistically optimistic pictures of what can lie ahead.
- Real-time connection to reality. Reality is a moving target. You have to keep updating your picture of it, continuously monitoring change with ground-level intelligence. The same applies to your team, whose members must put all concrete information on the table, however bad it may be.
- Realism tempered with optimism. Understand and accept a problem's magnitude. Then, focus your people on a vision of what's possible.
- Managing with intensity. Dig into the right details more frequently than before. Hands-on participation is essential.
- Boldness in building for the future. The need to conserve cash and survive may pressure you to shortchange the future. You must resist. It takes imagination and guts to place strategic bets with no guaranteed payoffs when there's little money and great uncertainly; however, it's critical to aim for long-term payoffs.
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