Leadership in turbulent times
Damien O'Brien - Egon Zehnder International
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Not for decades has the term 'crisis' been as prominent a headline-maker and talking point as we have seen recently. Few segments of industry have been spared. Few companies can look forward to long-term prosperity. So how should a business be managed in order to survive a crisis and perhaps even emerge fitter and stronger? Studies reveal that the best chances of successfully bringing current problems under control lie with self-assured, level-headed leaders who apply the cardinal virtues of good business management to resolve the immediate issues while keeping a firm grasp on longer-term strategy.
"…leaders face the task of restoring confidence…"

Executive leaders are facing the almost overwhelming task of restoring confidence and respect in leadership and business. They are being called upon to guide organisations through times of turbulence and uncertainty, to show the way forward and to set an example. And all this in the face of a recessionary global economy, under threat of war, and in a climate of cynicism and mistrust - tough economic and political circumstances by any standards.

Difficult times have an impact on all of us. They engulf companies and even entire industries without warning, and often with little time for evasive action. Even a good manager may not be able to prevent his company from being sucked into the crisis. But sometimes it is not just the problems raging in the world outside that hit the company, but homemade difficulties, too. Under the impact of a deteriorating operating climate, years of poor, or simply lax, management are suddenly transformed from latent problems into full-blown, life-threatening crises.

At times like these, 'more of the same' no longer seems good enough. People and organisations are looking for direction, and craving leadership. Following the scandals that have rocked the business community, people are also deeply suspicious of leaders. This is a vicious circle which needs to be broken - a vacuum of vanished norms, values, and business ethics that needs to be filled, not just with good intentions but with real substance and inspiration.

Leadership fundamentals are critical, especially in turbulent times. Those worth emphasising are:

- Vision. The most convincing managers can be gauged not just by the success of their initiatives, but also by their ability to implement preventive and far-sighted strategies. A strategically gifted entrepreneur or manager is able to look beyond the current situation and sense an impending recession. Only then can they start 'battening down the hatches' and preparing to weather the storm. Once the storm hits, the challenge is to find the right safe harbour as quickly as possible, then to refit and prepare for the onward voyage.

- Direction-setting. In times of uncertainty this becomes even more crucial. CEOs and senior executives, together with their top teams, as well as having the ability to establish a vision, must have a sense of how the organisation should get there. At the same time, effective leaders do not 'overplan'; they maintain a course without unnecessarily carving the details in stone. They retain a degree of freedom and keep their options open. They recognise which decisions have to be made by when and how to 'buy time' when uncertainty might be of benefit. All of this implies a tolerance of ambiguity, coupled with the ability to prevent this ambiguity from transferring into high levels of uncertainty for the organisation in which they work.

- Emotional Intelligence. There is a growing need for leaders with strong Emotional Intelligence. Low self-awareness is clearly counterproductive when it comes to effective leaders. In addition, no leader is good for all situations. Everybody has personal strengths and weaknesses. So when uncertainty is the only certainty, it is important to select a leader with a very good understanding of their own limitations so they know when to back their own judgement and when to seek counsel.

Decision-making in times of crisis and rapid change

What strategy should managers adopt when the competitive situation changes so dramatically and both growth and profitability are hit hard? What can be done when, as a result of internal shortcomings, the stability of the company is at risk and a question mark hangs over its future viability? A knee-jerk reaction is to look to a corporate leader for snap decisions. However, in crisis situations, simply making decisions is not enough; the corporate leader must first set the right direction and then maintain that course unremittingly. To be sure, the courage to make tough, unpleasant decisions and to make them quickly is indispensable. In a crisis, the last thing you can afford to waste is time. However, if that means deciding without a clear view of the bigger picture or the long-term impact, this will prove detrimental. So in times of crisis, the basis for any sustainable and successful management strategy lies in a sense of responsibility, built on self-assurance, inner calm and focus on execution.

As to identifying the correct course of action, the only meaningful approach is to analyse the situation critically, taking a hard, objective look at the market situation and the competition. There may be little time available for an exhaustive appraisal - sometimes only a matter of days is available. So the assessment will be incomplete, but it must cover the essentials. That calls for a leader who is objective and willing to accept hard truths.

After a rapid appraisal of the situation, there must be immediate action, often involving dramatic measures. At this point, the true crisis manager gets to prove their worth. Many corporate leaders are well capable of analysing a crisis - often with the support of advisors - and of prescribing the necessary remedy for the ailing patient. Where they fail is in the attempt to put in place - often in the face of strong resistance - the necessary grass roots changes. What is required is not the wanton destruction of traditional structures, but a rigorous commitment to purging the actual shortcomings revealed - even if this means substantial job losses, all the way up to the executive suite.

No place for the go-it-alone manager

"…a crisis manager should not be a 'go-it-alone hero."

The skilled crisis manager is no autocratic 'go-it-alone hero'; instead they are able to communicate effectively in order that all concerned grasp the full extent of the crisis, and accept the necessary and often extremely painful measures - even when they are directly affected. They will also have the ability to handle and resolve conflict, and the communicative skills and openness to gather at least a majority of the top management team around their banner. The power to win-over others takes on far greater significance in critical situations than in the day-to-day business operations, where the stakes are lower and people may be easier to convince.

One issue here lies in the simple fact that the higher up the hierarchy you get, the more critical are the people decisions you make. A classic and very human error - and one that we frequently encounter in our consultancy work - is that otherwise highly-capable leaders tend to compromise when it comes to staffing decisions.

A balanced personality

In effect, a crisis brings out the need for great personal judgement in balancing the tensions inherent in good leadership. In our experience there are five elements of leadership when balance must be shown, as indicated in the table below.

More specifically:

  • It takes a high degree of self-assurance to successfully introduce unpopular measures and drive them through. By the same token, there is no sense in pursuing change for its own sake. A sense of loyalty and responsibility for the corporate purpose must also be present.

  • In a crisis, specialist expertise plays a different role than in times of continuity and prosperity. More than ever, a top manager must be in a position to weigh up and make decisions based on a deep understanding of the issue, to evaluate details without losing sight of the bigger picture or becoming absorbed in the finer points. Many poor management decisions are due to the lack of expertise on the part of decision-makers in understanding the consequences of their actions in a long-term context. This is also the reason that we are experiencing a renaissance of specialist expertise, and experienced corporate leaders are being brought out of retirement to clear up problems created by their less-proven predecessors.

  • In difficult situations, a manager must be highly adept at striking a balance between a sense of direct personal responsibility and a pronounced team spirit. High personal identification with success or failure and a well-developed team culture can go hand-in-hand, for self-assured managers recognise that they are carried forward by their team and are able to guide team performance with precision.

  • In troubled times, managers must take an active approach to shaping and moulding, giving direction and meaning to entrepreneurial activities. They must also be quick to learn, and receptive to new ideas, must resist the temptation to fall back exclusively on tried-and-tested methods, and avoid the trap of overlooking or misreading the warning signs coming from their immediate environment.

  • Even when times are good, every manager should realise the importance of doing more than providing leadership and hitting targets in their own specific field. In times of crisis, the practice of looking 'outside the box' to make a contribution in the wider context is crucial. 'Upward management' - exerting influence to create the right conditions for your own success - is never more important than in crisis situations.

Leading a company through a crisis goes beyond enabling it to survive by the skin of its teeth, emerging with fewer products, fewer employees and fewer markets. A company that survives a crisis must square up to its revised environment and be given a new direction. Often this will imply a degree of restructuring. Employees will need to move to new positions and new markets must be opened up. In other words, a crisis has only been mastered in a sustainable and long-term sense when a company develops new drive, repositions itself, and begins to play an active and influential role in the marketplace again.

Leading through a crisis is a painful business. In tough times, managers cannot please everyone. But if, at the end of the day, decisive crisis management can rescue a company, many more jobs will be saved than by half-hearted leadership that may well ease the symptoms of the crisis in the short term but is powerless to prevent the ultimate collapse of the business.

The bittersweet taste of success

"…prosperity stunts the ability to lead in turbulent times."

The corporate leader's worst enemy when it comes to the necessary redirection of the company is past success. In our many years of experience in Management Appraisal at Egon Zehnder International, we have found that nothing stunts the ability to lead through turbulent times as completely as a long spell of continuity and prosperity. Top managers can grow accustomed to success without ever asking themselves which conditions are key to its existence and how these are best maintained or created.

When we compare the aggregate competence profiles of managers at crisis-hit companies with their counterparts at stable companies, the most striking differences are in results-orientation and strategic-orientation. This is logical, given that results-orientation measures the strength of people's drive to improve business performance. Good companies treat this competence as critical and go to great lengths to recognise, foster and reinforce this capability. In other companies, however, it is rare - and sometimes even systematically discouraged - for managers to take personal responsibility for goals other than those that have been set for them.

Strategic orientation is also critical because it provides the road map to the company's entrepreneurial goals. To bring about far-reaching change, managers need a capacity for critical analysis and an ability to draw-up not just short-term action lists, but workable mid- and long-term solutions.

The right leader at the right time - and beyond?

As the demands placed on the character, the experience, and the leadership qualities of the successful crisis manager are so diverse, it is hardly surprising that it often takes several managers in succession to steer a company out of the economic turbulence and into calmer waters. The more difficult the situation, the less likely it is that an existing leadership team will succeed under its own steam - particularly if they are themselves part of the problem. It is in the first phase - overcoming the acute crisis - that the tough decisions need taking and pushing through. First and foremost, that means restructuring and rigorous cost management, which in the modern world inevitably spells substantial job losses. The manager who handles this thankless task does an important job but rarely proves popular. The respect they earn for the corporate rescue may be laced with a measure of fear. Deciding whether the turnaround leader can continue the task over time is the next critical question facing the organisation and its stakeholders.

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