Leadership in turbulent times

CHPD’s newly appointed MD Jim Tapper outlines the first of three themes that should inform the thinking and commercial approach of organisations in this severe downturn.

“The contribution of leaders to business success increases markedly during turbulent times. During these times negative factors that create drag on organisational performance become impossible to ignore or work around. An organisation that is lacking in cross-functional teamwork or has opaque processes that hinder the effectiveness of its people will soon find itself slipping behind the competition. In a deteriorating economic environment such as the one now prevalent across the globe, crises start to regularly impact on an organisation. Accordingly the need for business leaders to maintain focus on their performance while thinking flexibly and building confidence and engagement with their teams rises sharply.

Around 40% of an organisation’s performance is determined by the capability of its leaders. Studies such as Weiner and Mahoney (1981) and Day and Lord (1988) illustrate this clearly; leaders’ characteristics have a significant bearing on variation in sales, earnings and profit margins over time. With the pressure on leaders expected to last throughout this recessionary period, we have identified a number of solutions that can address the varied challenges faced by businesses today.

1. Building the capability of managers to deal with the crisis:
The capabilities required by leaders during the crisis must be aligned to the business strategy. This entails identifying aspects of their personality and preferences that will equip them with the self-knowledge to direct their efforts to where they are strong and build teams to cover the areas outside their core skill. They must develop the required High Performance Behaviours to be effective at a strategic and operational level, senior coaching and leadership simulations play a key role here. Promoting diversity of mind to foster enhanced collaboration is also essential. As pointed out by our executive chairman Chris Parry in a response to an article published recently in the Observer, the upper tier of organisations must be heterogeneous and diverse; otherwise there is the risk of a stifling uniformity of thought and outlook descending.

2. Targeted cost reduction, not blanket cost reduction:
Cutting costs to the bone without a clear idea of the outcome is counter-productive. It is vital to find out the skills sets of your people, perhaps with benchmarking and diagnostics, and then deploy them where they will be motivated and effective.

3. Consolidation and mergers:
Measuring who is ‘fit for purpose’ can enable the retention of high performers and those with high potential to lead during disruption. However, in a downturn the easy ways to make efficiency savings and streamline your operations disappear. Leaders need to be ready to make these tough decisions without undermining morale in an organisation as it undergoes rapid change.

4. Retaining and motivating the best people:
Give them incentives to retain engagement and feel valued when financial reward is not possible. Consider also whether sufficient career paths are open to those with different skills and aptitudes, there may be valuable capabilities in your talent pool that do not easily fit a very tightly defined management structure.

Finally the case for investing now:
- During the recession of the early 90s the companies who continued to invest in their people thrived. Prices were lower, customers were scarce and discounts were deep. There is a real opportunity to lock in investment cheaply and reap the benefits when the upturn comes and your competitors find the bargains have disappeared.
- Studies have shown that there is a correlation between objective measures (e.g. profitability, productivity) and subjective measures (e.g. engagement, performance ratings) – enhancing the latter supports the former.
- Become the predator not the prey – companies that survive and thrive are pro-active and quick to respond to maximise opportunities.

A last thought from a recent study: 91% of strong performing organisations surveyed have a system that identifies high potential people. Only 67% of the weaker performers do.”