Leading in a recession

For many of us the working environment has changed substantially over the past year. It is still changing and may continue to do so for some time. The rules are different and sometimes difficult to understand. Sometimes it is even unclear whether there are any rules at all. Things happen very quickly and we are making difficult decisions often daily and with little time to reflect. It is an extremely tough climate for leaders.

We have been working with leaders and leadership teams on how they navigate the choppy waters of the downturn. We have found that they most want to work on:

1. Building resilience in the team
2. Making informed decisions
3. Seeking more results with fewer resources
4. Setting the organisation up for future success

This article sets out some guidance on the first two challenges: building resilience in the team; and making informed decisions.

1. Building resilience in the team

Your organisation may well be weary. The combination of longer days, complex situations and emotional pressure could have taken their toll. A lot of our clients say they want their teams to be resilient: to be able to withstand pressure in a sustainable way. An even greater ambition is that their teams emerge stronger and able to progress as a result of the challenges they have faced. Here’s what we see as the most important ways to lead an organisation to develop or maintain resilience.

• Build clarity of meaning. A sense of meaning helps bind people together, promotes good decision-making, and reduces conflict and competition. It also helps reduce wastage of energy on distractions and helps people keep going through the difficult moments. There is evidence to suggest that clarity of meaning is a key survival factor in highly difficult situations such as captivity.
  There are two parts to building meaning in an organisation. The first part is making sure everyone knows why what the organisation does is important. The second part is making sure every individual is able to connect their own contribution to the overall contribution. Even when this connection is obvious logically, the key is to help the individual see the practical and emotional connections. This can be particularly important for back-office staff, who may not always witness direct impact in the way that front-line or professional staff do.
  Each person will have slightly different priorities and values, so what is meaningful to them will vary. It is the leader’s job to help them in the process of making meaning, rather than assuming a generic meaning can apply to everyone. That said, we find that when meaning is oriented towards something external to the individual/organisation and their immediate circle, the stronger and more enduring it is. The best leaders help others find meaning by talking regularly about what is meaningful to them in the organisation’s work. They also find ways to help staff experience directly how others (e.g., customers or clients) have benefited from the organisation’s work and use this to reflect on what matters to them.

• Lead clarity of direction. Rats learn to tolerate self-generated electric shocks relatively well (e.g., if I press this lever I will get a shock, but then if I do it 20 times I’ll get some food). However, when a rat in a neighbouring cage is given shocks at exactly the same time but has no control over them, it will develop a state of severe anxiety. The same is true for humans: we are not very good at living with uncertainty and we suffer when we feel that things are being done to us with little control.
  Stating clarity of direction is a first step in reducing fear of uncertainty. Equally important is to give people more chance to input to direction. Giving input allows people to feel they have contributed and are being proactive. It also allows them to make sense of the current reality and how things are, or may need to be, different. The key here is to balance the instinctive pull towards heroic or directive leadership (a desire from others for answers and a leader feeling it is their job to provide them) with the longer-term benefits of involving people in setting direction.

• Set a tone of practical realism. Leaders have a disproportionate effect on the mood of an organisation because (a) people watch them and (b) people think that leaders have better information. This provides leaders with a great chance to help set the mood of the organisation. We encourage our clients to strive for something called practical realism. This is the combination of a strong belief that (in the medium- or longer-term) things will work out positively and honesty about how things are now or in the near-term. This is particularly important in recession to help people deal with uncertainty. It’s also a key to sustained success, as Jim Collins has found in his research on companies that have been successful over the long-term.
  There are other things that leaders can do to help keep the mood of the organisation balanced and productive. They can help people celebrate the small successes in amongst the difficult times. They can keep their sense of humour (sensitively) and help others to do the same. Perhaps, most challengingly, they can encourage people to direct their energy productively. This means learning from and moving on from the past and instead focusing on looking forward and on what we can do. It also means switching off and supporting others to do the same: in general performance is much more likely to suffer because a manager is tired and stressed over a few months than because they turned off their Blackberry for a week. This feels doubly difficult in a recession, but it is doubly important.

• Build a culture of personal responsibility. By personal responsibility, we mean seeing ourselves as agents (shapers) in any situation. This means us making sense of situations and how we have contributed to them. It also means seeing and choosing options for how we can respond productively. The mindset of personal responsibility is a tough ask, particularly in really difficult situations such as during recession. It can be much easier in the short term to blame others rather than take a cool look at ourselves and how we have contributed to the situation.
  However, it is crucial to long-term success. This is because (a) it promotes reflection and development (b) it encourages us to manage our emotions productively and (c), perhaps most importantly, it allows us to feel we have the chance to make things happen. This feeling of control (as long as it is genuine) reduces anxiety (see earlier). Research shows that self-efficacy (or the belief that one can succeed) is linked to success and this makes perfect sense: if you don’t believe you will succeed you will make less effort, be less creative and be more likely to give up at a hurdle.
  The best leaders we know seek to build a culture of personal responsibility by being good role-models of it. They also encourage others to take on collective responsibility, for example for poor performance or for lack of collaboration between divisions. Their organisations become proactive places where it is safe to admit mistakes and learn from them. This is all particularly crucial during difficult times when we need to be learning quickly, managing our emotions productively and navigating the choppy waters as best as we can.

2. Making informed decisions

Most of us can’t afford the luxury of commissioning a report and waiting for the quarterly away day to make the important decisions. Decisions need to be made yesterday and, anyway, the reports are out of date by the time they are printed. The decision-making environment is different and so is the way decisions need to be made. Some suggestions:

• Get the data anyway. Data is doubly important right now because our operating assumptions are often invalid and data can help us spot that. However, it is also harder to get good data because things change so fast and because no one wants to bring bad news.
  It is important to look at how data is flowing through both formal and informal channels. Formal data feeds need to include leading indicators to help spot problems and opportunities. It is also important to cultivate informal data channels: what about informal weekly updates from a few front line staff or trainee analysts? Above all, leaders need to make it safe to bring bad news, especially when it is brought early enough to mitigate the worst.

• Do contingency planning...and then do it again. Most of us hate imagining worse case scenarios and doing contingency planning. But teams we have worked with this year have found their Plan Bs to become true faster than they thought possible and were relieved they had them in advance. Doing the next contingency plan now gives leaders the relative sense of control and time. Most importantly, it also helps them think systemically – which is really important when our assumptions about cause and effect no longer seem accurate.
  It is important to figure out for which aspects of the business there is a good Plan B and for which aspects of the business one needs to be created. The next step is to take a deep breath and ask whether the worse case scenarios cover the full range of possibilities. Most of all, leaders need to take time to think through (creatively and logically) the second order effects that may emerge or become a consequence of their actions.

• Recognise that no decision is still a decision. At best, no decision is a sign of confidence that the status quo is the best for now. At worst, no decision is an acceptance that there is nothing one can do to shape or manage events. Yet we all know that a ‘yes’ or a ‘no’ is almost always a clearer and more comfortable place to be than the perpetual ‘maybe’ state.
  It is useful to keep asking which decisions can be delayed or avoided and which decisions must be made. If leaders decide to delay a decision, they need to check why they are doing so – and keep asking why. We often find that clients will identify a particular attitude or fear, such as how others might perceive them to be weak or unfair. This attitude or fear may be well-founded in the short term but usually is not productive over the medium or long term.

• Spend more time with your team on how to make decisions. The new rules mean that team members are making decisions in a different context. Seemingly small decisions may have bigger implications. Timing may be too tight for them to properly consult the CEO or each other. They may be operating more on principles or pattern recognition than accurate and timely data. This is all likely to be combined with a feeling of greater pressure and less desire to spend time locked up in management meetings.
  Leaders can help their teams make better decisions together and individually by spending more time on decision making, not less. Good leadership teams work together on decisions where consistency is important or where multiple viewpoints are helpful. It is also be helpful to work together on decisions that produce general operating principles which team members can then use to help them make other decisions.

We hope you find this article useful and would welcome your feedback, which you can give by contacting us here. Click here to sign up to Veritive.