Leadership in a Difficult Climate

In this recession, have you lost your leadership direction?

The economic pressures that every organisation is facing across the globe have put increasing strain on leaders throughout their organisations. What should leaders say and do to keep their organisation afloat and improve business performance-whilst at the same time still keeping the hearts and minds of employees focused on delivering to customers? As the recession continues many businesses have to take harsh decisions to survive.

Many managers are faced with some uncomfortable and difficult choices, perhaps more so than they have ever experienced before.  For example, the manager who has always pledged to maintain continuity of employment suddenly finds the urgent need to reduce the workforce by 20%: the manager who was prided himself on his openness and trust, suddenly is faced with holding secret negotiations to refinance the organisation: the manager who sees teamwork and distributed leadership at the heart of the organisation suddenly takes that back when she has to take decisions in days, not weeks or months, and feels she has no time to consult.

In these times of recession and crisis, leaders can experience strong emotions as they lose their sense of direction. What is the likely effect? Loss of personal confidence, possibly feeling they are betraying their values, undermining their sense of direction, defensiveness, feeling they are losing control. This will often transmit itself to others and erode organisational confidence and consistency in dealing with each other and the outside world.

We believe it is important that managers who are leading their organisations regain a sense of direction as quickly as possible.  In order to do this, we believe that you need to reassess where you are heading both personally and as an organisation, to reinforce and reaffirm areas of strength, and to set a new direction where this is required.  One way to achieve this is to conduct an audit of your current situation through what we have called a change management compass.  This will highlight areas that you need to reconsider and to strengthen.  It will also help you make the most of these skills and strategies that are working well and will help you in this current situation.

The Leadership compass is a tool that helps managers read the climate in difficult situations. It is an aid to navigating in choppy waters.

Emotional intelligence

At times of strain, the ability to perceive other people's fears, hopes, concerns, and attitudes can sometimes go out of the window.  This shuts out other people and puts enormous pressure on the manager to come up with the goods, to initiate the right idea and to take the right decisions. Emotional intelligence, the ability to read people and situations accurately tends to foster a mutual sense of understanding and openness.  You are likely to need all of these skills and strategies as turbulent times develop - and this is not a time to mentally shut yourself away, it is a time to get out there and meet people, listen and talk things through.

Political intelligence

You may think that politics is the last thing that is needed at times of great organisational upheaval and during times of uncertainty.  Of course, these are exactly the sort of conditions where politics start to thrive.  Vested interests start to exert influence when they feel threatened, when decisions must be made which will affect this group or that group of people who want to put their views over and to protect their own interests, even if this is at the expense of other groups in the organisation.  What is needed is the ability to read the political situation, to leverage it and to work the situation to advantage for the good of the organisation as a whole.

However, in times of change it is necessary to sharpen your political antenna to understand how politics is influencing you and the organisation.  Also how you need to influence key groups and stakeholders to get support from within the organisation and outside it where necessary.

Business intelligence

It may be taken as read that you know your industry well and what makes it tick.  Unfortunately these are no ordinary times.  It may well be that you need to rethink long-held assumptions if you are to come out at this difficult period.  The real test of business understanding is to change course when old thinking no longer applies. This requires good business intelligence to be able to interpret macro economic data but also the feedback from customers and the data that is coming out of your organisation.  What may differ is that old solutions will no longer work in this recessionary climate.  It may be that you need to recast your business model if you are to stay ahead in the competitive environment.

Spiritual intelligence

Ethics, morality and personal values seem to be the last thing that people should be considering at the moment when there are weighty decisions to be made, and sometimes little time to make it in.  However this is just the time when values, beliefs and sense of direction are going to be called into question.  Times of uncertainty force us back on our basic principles and to question those principles.  This is why it's important that we need to be sure what these are, what are the limits beyond which we won't go, the things we truly believe in and hold firm on and are important to us.  When we have to confront managerial dilemmas, it may be difficult to live by our values and to put them into practice.  Think through what you do believe in, to stick to this even in difficult times, and use your principles as a guide to decision making.

Tackling the leadership challenges

We believe you should go back to fundamentals

-re-examine what's important, your strengths, then look at your actions and choices

-what are the alternatives, what is right for you and your organisation?

Some possible ways to do that are:

• Talk the situation through with a good listener, who can help you to help yourself and reaffirm your direction. These people might be:
• Sometimes a partner or friend, though you may feel too close
• Sometimes a colleague (too biased?), or someone in an informal network
• An internal coach/mentor (knows the organisation)
• An external coach (there is a cost)
• Raise the issue with your team and jointly determine the way forward

Issues to Address

Pressing issues will vary from organisation to organisation, but here are some critical ones common to many.

Developing a strategy for the future

One thing that is clear for many industries is that the traditional ways of seeing the world are changing. The recent demise of automotive manufacturer Chrysler in US is an example of this. Consumers globally are now seeking more fuel efficient, environmentally friendly and smaller cars. The days of the "gas guzzler" are over. With it, the automotive industry is having to re-imagine the way that it does business.

Focusing on the customer

During times of recession it is more important than ever to stay close to the customer to better understand their requirements and to anticipate their needs. During the last recession during the late "80s and early" 90s companies such as Body Shop made their mark by anticipating the trend towards ethical products. Other organisations such as BAA who ran Britain's airports took the opportunity to re-think what customers needed from their airport experience. Rather than cutting their research budget during the last recession, they increased it. The resulting changes in their customer proposition put them in a strong position that was to last almost another twenty years.

Strong leaders take time to listen to their customers. They use a variety of methods to collect customer data and make sure that they pick up cues and insights to changing patterns of behaviour. Insurance giant, Aviva, for example has discovered via its global research that customers want to be recognised as individuals. Its customers seek a personal and individualised service - not being referred to as a policy number. The company as part of its rebranding from Norwich Union in the UK is refocusing its strategy on providing an individualised service.

Questions to ask yourself are:

• When was the last time that you spoke in person to one of your customers?
• When was the last time that you sampled your organisation's own products or services?
• What insights and trends do you need to be aware of that may currently be affecting or may potentially affect your marketplace?

Keeping your finger on the pulse of the customer heart beat becomes increasingly important as customer loyalty can make or break a business. Direct mail chocolate company Hotel Chocolat for example recognises that it has two customers: the person who sends a gift of chocolates as well as the recipient of the gift. It goes out of its way to ensure that both sets of customers are satisfied with their service.

IT company, Cisco, has a proven track record in identifying market transitions and capitalising on them. It does this by listening closely to its customers as well as identifying shifts in the demographic and economic climate. For example Cisco was the first technology company to recognise that routers would one day be able to handle voice traffic as well as traditional data. It recognised the trend for customer driven technology and was able to capitalise on this.

Telling it how it is

The issue with many businesses when they do attempt to get closer to the customer is that the information is kept close to a vital few. Employees often are not informed or involved in the results of customer or market analysis. Indeed some studies show that only 40% of any customer research data is actioned.

Leaders are often wary of informing employees about the state of the marketplace. They fear that this information may disengage their workforce and demotivate them. In fact studies show that during a recession the engagement levels of people who are employed rise slightly. People do want to know where the company is going, what its performance is and how well it is meeting customer needs.

Providing regular briefings and updates is important during difficult times. Best practice organisations not only use traditional information cascade processes but actively adopt new technologies such as senior leaders' blogs and wikis to encourage dialogue and access to people in the know.

Cisco for example manages new opportunities it identifies via listening to customers using a collaborative approach. Here cross-functional teams or "councils" take advantage of video conferencing technology to call spontaneous meetings and make decisions. This methodology is particularly advantageous in difficult economic times as it spares the need to travel.

Finding new ways to retain existing staff

When tough decisions do need to be made, this recession has seen leaders who are willing to be creative in managing cost reductions.  In this recession unlike previous ones businesses are taking a long term view. They recognise that talent is in short supply. Rather than dispensing with the services of trained employees, they are looking for other means such as sabbaticals, unpaid leave and shorter working hours to keep trusted employees on the payroll.

We recently heard of one senior manager of a large European corporation who announced to employees that lack of orders would lead to 500 employees being made redundant. Rather than sacrificing the expertise of these workers, he proposed that everyone throughout EMEA sacrifice one week of their annual leave to keep the 500 employees in post. He gave everyone two weeks to make a decision on whether this would be acceptable and received 100% agreement. The French news recently publicised a scheme where several small businesses who had employees "to spare" because of sales downturn, leant members of staff to other small businesses. So for example, an accountant from a foundry business went to work for a despatch firm. The person was still employed and paid by the foundry but the despatch firm paid the foundry business a fee for the use of the services of their accountant.

Improving team and individual performance

When times are tough the emphasis is on people working smarter and more effectively. Leaders need to be honest in holding conversations with teams and individuals about their performance. Direct and authentic conversations are important if performance is to be improved.

Here is a structure of a conversation about poor performance that leaders may find useful:

• Raise the issue and say why it concerns you. Don't beat about the bush: use expressions such as "I'm  concerned about?. Because "
• Support your concern with evidence of what you have seen or heard
• Explain the impact of the non-performance -  for example on business performance, on the customer, on the team, on individual KPIs
• Ask the other person for their reaction -  what do they think? What is their view? Don't try to impose a solution without first gaining the other person's buy-in
• Discuss how the issue can be addressed. Develop a joint action plan for improvement.

Remember to monitor this plan and to review the performance of the individual and the team.

© The Stairway Consultancy   May 2009

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