Leadership : Surving the terrible Two (thousands): A Leader's Guide
Albert A. Vicere is executive education professor of strategic leadership at Penn State's Smeal College of Business, and president of Vicere Associates, Inc., a leadership consulting firm with clients around the globe. He is one of the country's top leadership coaches, and is the author/editor of several books including Leadership By Design, The Many Facets of Leadership and more than 80 articles on leadership development and organizational effectiveness.
“It’s scary at the moment. Most of us never foresaw the depth and the breadth of this downturn. There’s not likely to be a meaningful recovery until late 2010. But it’s a great time to reinvent a company.”
The above collection of statements was culled from a recent series of interviews with a panel of nine business and thought leaders.
Six of them were CEOs of small to mid-sized companies, the type of companies that tend to emerge first and fastest from an economic downturn. One was CEO of a well-established NGO. One was the dean of a major business school, while the final panelist was a professor who has interviewed hundreds of CEOs over his career.
Overall, the panelists painted a bleak picture of the business environment in the near term, but through their insights, they helped to clarify the role of leaders in periods of economic chaos.
Some pundits are calling the economic crisis a “mega meltdown,” with over five million jobs lost, corporate profits down nearly 75%, and the stock market down 50% at its most recent low. Even the current market rally was seen as temporary by many of the panelists—what might be called a reflexive response by former Merrill Lynch economist David Rosenberg, or a “dead cat bounce” by someone with less of a flair for economic linguistics. Without question, all of our panelists saw this as the most significant economic crisis of their professional lives.
Joe Cavinato, Head of the Supply Chain Leadership Program at Thunderbird, has interviewed hundreds of senior executives and CEOs over the past decade. “There’s a lot of confusion among the leaders I’ve interviewed recently,” noted Cavinato. “About a third of them have a deer-in-the-headlights look, they’re stressed and seem to be unsure of what to do next. Another 40 percent are focused primarily on cost cutting and talk little about the future. But the last 20 percent seem to be seeing all of this as an opportunity.”
Sensing (and seizing) the challenge
Jim Thomas, Dean of the Smeal College of Business at Penn State emphasized that, “To get through this on a positive note you need a plan, four or five key priorities.” All seven of our CEO’s concurred, and each of them shared some candid observations on the business environment and what they and their companies were doing to take advantage of the economic chaos.
Bob Joyce, CEO of The Westfield Group, a leading insurance and financial services company, noted. “In tough times like these, you can’t just cut, you have to lead, emphase customer focus, invest in new processes and new technologies, develop new markets.”
Christina Gold, CEO of money-transfer and payments leader Western Union, said her company, which operates in 200 countries, sensed the coming downturn by observing shifting consumer demand for their money transfer services. “We made adjustments and cut costs where we could. But we also defined priorities for continued investment that could move us into the future.”
Sam Bieler of pretzel purveyor Auntie Anne’s, Inc. echoed the sentiment, “we started adjusting when we saw signs of a slowdown, things like increasing levels of unemployment and declining foot traffic in malls. We began watching costs, not filling open positions. But at the same time, we started looking for new locations, launching new products, working with our franchisees to maintain customer connection and position ourselves for the future.”
Ed Stack, CEO of retailer Dick’s Sporting Goods agreed, “We could see a shift from earnings to liquidity as the driver of our business performance. So we reduced inventories, were able to get deals from vendors who had excess stock, took advantage of that by passing the savings on to our customers. As a result, we’re still selectively adding locations while our competitors continue to retrench and close stores.”
Craig Damos, CEO of The Weitz Company, a Des Moines-based construction firm, framed the mindset, “We had to make tough decisions—freeze wages, cut dividends, adjust retirement contributions, all designed to build our coffers so we could save jobs. But we’ve also involved employees in generating ideas for improvements, we’re training people to work on new projects in different parts of the world, we’re staying focused on the critical things that will take us into the future.”
Taking advantage of the situation
“The financial crisis was caused by a failure of leadership,” noted Henry Givray, CEO of SmithBucklin, the world’s largest association management firm. “But it’s also leadership that can get us out of this mess. A great management team can make the difference in how all of this impacts your business”
Sean Rush, CEO of NGO JA Worldwide, Inc. (Junior Achievement), felt the dramatic nature of the downturn actually provided an opportunity for leaders regardless of sector, “The sheer compression of the recession surfaced problems within organizations quickly, giving leaders time to position the organization for the updraft.”
“We’re using the situation to rebuild our leadership team, we’re looking for different thinking and different skills", said Western Union’s Gold. “Although we’ve cut costs in many areas, we’re maintaining our investment in leadership development and on key strategic initiatives that will drive future growth.”
Joyce added, “There are big opportunities out there on two fronts—the chance to reorganize and get the right people in the right places, but also to bring in both outstanding talent from universities and experienced people who are looking for new opportunities and organizations.”
All of the panelists noted that this was no time for hands-off leadership. Thomas was emphatic, “Right now it’s critical for leaders to be available, accessible and engaged.” Rush concurred, “You need to be enthusiastically evangelizing, selling the vision and new directions.” Stack concurred, “You need to be out there helping people to understand that what we’ve done in the past won’t work in the future. It’s not a time to sit back and watch. There are so many opportunities out there.”
Is there light at the end of the economic tunnel?
“It may take a while, but of course there is,” noted Givray. Cavinato called it a time of transformation, “There will be big changes, big developments leading to new businesses, new industries and a new economic order.”
When asked what could block progress, Gold called for leaders to step up to help overcome negative sentiments like xenophobia and the over-involvement of government in business. Stack echoed her sentiments, “we need to keep the spirit of entrepreneurship and motivation that has helped build this economy.”
Joyce issued a challenge, “Leaders need to keep pushing for the future. There will be some big winners out of all of this. But you have to stay focused on the opportunities.” Thomas added, “this is an opportunity of a lifetime to make changes and position an organization for the future. But you need to act on it.”
The interviews reinforced the magnitude of the economic crisis, but they also highlighted the vital importance of leadership including five key actions that leaders can take to help turn economic chaos into opportunity:·
- Look out. All of our panelists shared an intense focus on developments external to their company—social trends, economic shifts, technological developments. Early action as a result of the recognition of external changes, whether it was declining foot traffic in Malls for Auntie Anne’s, liquidity pressures for Dick’s, or shifting labor markets and trends for Western Union, provided the platform for each business leader not only to stabilize the business, but also to frame future opportunities for growth.
- Look around. The external context may have helped panelists to create platforms for future growth, but an awareness of competitors’ responses to that external context also was evident. A combination of tracking competitors as demonstrated by Dick’s, moving into new markets as emphasized by Weitz and Westfield, aggressively pursuing available talent as discussed by Western Union all were deemed as necessary steps to defining opportunities for growth and development, often at the expense of less aware competitors.
- Look in the mirror. A platform for growth and an awareness of the competitive environment are essential, but the ultimate ability to execute against those growth opportunities seemed to be predicated on a leader’s ability to inspire, energize, and deploy their leadership teams. Westfield’s Joyce asking for personal feedback, SmithBucklin’s Givray extolling the importance of leadership and culture, Junior Achievement’s Rush calling for enthusiastic evangelism, all were examples of the kind of active, personal leadership deemed as critical by the panelists in times of chaos and crisis.
- Look to your team. All of the panelists saw the downturn as both an opportunity to build and rebuild their leadership teams—to find the right people, get those people in the right positions, and make the tough but necessary decisions that would lead to the emergence of each organization’s leadership team for the future.
- Call for action. Leaders not only need to spot trends, analyze competitors, build teams, engage employees, and create energy. They also must call the organization to action by focusing that energy on the creation of new markets, new businesses, and new opportunities. As Thomas noted, “When leaders stop emphasizing future opportunities, an organization doesn’t have a future.”
Harmon, T. (2009). “A New SMB Market Phoenix Is Rising.” Cambridge, MA: Forrester Research.
 Rosenberg, D. (2009). “Reversible Rally or Reflexive Rebound?” Bank of America/Merrill Lynch Morning Call Notes, 20 April 2009.
Copyright © 2009 Albert Vicere