Five things Smart Leaders do in Tough Times

Smart Leaders

Smart leaders act strategically in tough times. While they do pay attention to costs, they also operate five key levers to focus their attention and to engage their staff.

We all seem nervous

As I write this article, business leaders in Australia seem nervous about the future. The media is filled with reports of layoffs, postponement and cancellation of projects. Even the much vaunted mining and resources sector – the so-called saviour of the Australian economy – is showing signs of a slowdown in growth.

But the fundamentals of the Australian economy seem sound, at least in comparison with the rest of the developed world. What is causing this tentativeness in business leadership? Perhaps we are simply uncertain about the future, or lack confidence in the leadership shown within the political arena. Whatever the reason, we are entering the usual round of cost cutting and job shedding as enterprises try to prepare for the uncertainty ahead. Ironically, this simply adds to the general malaise and slowdown in economic activity.

So what can smart leaders do in these tough times? Rather than simply repeat the more obvious measures many of you are already taking (1), I have focused on five strategic levers that smart leaders can address when times are tough.

Five Things Smart Leaders DoKnowing and doing

It is important to focus on what you KNOW as well as what you DO in times like these. And this focus should address both the PEOPLE and the THINGS that relate to the organisation. Diagram 1 below depicts this focus.

Five strategic levers

Using the model above, we can identify five strategic levers that smart leaders can pull during tough times:

1. Define strategy as LOVE

Most strategic plans are based on the assumption of “warfare” – ie that we under some form of attack and that we have to win in order for the business to be successful. Potentially, this mindset can be extremely limiting, because it puts competitors at the centre of your thinking. And if you do that, then there is a tendency to watch your competitors and use them as a benchmark.

But what if there was a different way of thinking about strategy? What if we thought about strategy as LOVE instead of continually thinking about strategy as WAR? What new insights would that afford us? For a start, it would remind us that customers – not competitors – are the centre of of our business. It is customers’ problems and unsolved needs that we need to focus on, particularly when times are tough. This focus and attitude will resonate with staff more deeply than cost cutting or improving the return on assets.

2. Be a rational optimist

It’s easy to understand why quick fixes and short-term solutions are rife in tough times. Leaders want results – and they want them quickly. But we can only generate value for our organisations if we take some time to understand what is really going on before acting. Correlation does not imply causality. While your sales might increase as the market grows, it does not mean that the market growth has caused your increased sales.

The key is to understand the wider system of which you are part and to identify the leverage points. Rational optimists believe that they can and will make progress by pursing a bold, but sensible, approach. It is a balanced understanding of the whole system. Rational optimists develop a realistic view of the market and their situation, but their defining point of difference is that they don’t give up on themselves.

3. Do rapid prototyping

As we move into tougher and more complex times, the relationship between “cause” and “effect” breaks down. Best practice ceases to be a goal for which leaders can strive. Usually, there is no ONE answer or best way. And so, the only sensible way forward is to experiment, observe, learn and adapt. Beta, better, best may be the catch cry in this scenario! (2)

There are some powerful emotional barriers to be overcome in this practice, however. Firstly, most leaders are wired to finish tasks before abandoning them, and are hard pressed to admit failure. It is obvious that we may have to kiss many frogs before we find the prince! Secondly, organisational systems are not geared to support multiple initiatives, each with many points of learning and adaptation. Our organisations prefer a few well defined projects where we can predict the outcomes with some accuracy.

These are barriers we will have to break down if we are to move forward in these tough times.

4. Engage your smart mob

This is about engaging your staff in your tough journey. Engagement is achieved by building a community around an agreed purpose. There are several elements to this exercise:

  1. Clarify your purpose: As mentioned above, this is best done around something staff can identify with, such as creating customer value
  2. Generate some activity: Identify some concrete things that the organisation can do in order to create this customer value
  3. Develop some content around the activity: Provide some rationale as to why this activity will create customer value, and how the additional customer value will assist the business
  4. Engage staff with the results: Provide a transparent metric that will demonstrate the progress being made towards the creation of customer value.

The Continental Airlines example3 of the late 1990’s provides a good illustration of this approach. When Gordon Bethune was appointed CEO in 1994, he was faced with a poorly performing airline and highly alienated staff. While he had to make obvious expenditure cuts, he was acutely aware that he needed some way to engage staff to join him on this journey. Traditionally suspicious of the metrics and public information generated by management, staff were unlikely to believe any internally generated data. And so Bethune chose the “on-time departures” figure that was regularly generated by the FAA.

By demonstrating that on-time departures would create real customer value, Bethune was able to engage staff in an effort to lift the performance of the airline. He also arranged to have this figure (generated by the FAA) visible to all staff. Moreover, he promised a $65 bonus to all staff each month that the performance of the airline showed improvement. The improvement in performance was significant, as was the level of staff engagement.

5. Use your strategic intuition

Strategic intuition is the ability you have to solve unfamiliar and challenging problems with a flash of insight – usually after a period of mulling it over. Strategic intuition is a combination of rational thinking and creative imagination, and is generally evoked when you face an unfamiliar challenge and allow yourself time for reflection. This is contrasted with expert intuition, which occurs when an expert encounters a familiar situation. In these cases, the expert is able to make make a snap judgement because of their vast experience and the familiarity with the situation. (4)

Strategic intuition occurs when you recognise the situation is new – and turn off your expert intuition. This is an important distinction, because expert intuition is often the enemy of strategic intuition.

Releasing your own strategic intuition depends on a number of factors. But an important aspect is the ability to develop the so-called “beginners mind” – i.e. where you deliberately push aside what you know from previous experience and open yourself up to new insights. As we know, existing paradigms offer efficient solutions to common problems, but they can restrict our willingness to see new and different solutions.

Tough situations often represent new and complex challenges where there is little precedent for how to respond. This is precisely the situation in which smart leaders allow strategic intuition to play a part.

Smart leadership in tough times

There is great temptation to knee jerk or seek quick solutions in tough situations. After all, humans are wired to avoid pain and discomfort in their environment. But smart leadership in tough times demands more. It demands a more strategic approach to deal with the external and internal challenges faced by the organisation.

The smart approach to dealing with tough times is about:

  • Viewing strategy as love rather than war, so that you place the customer at the centre of the business
  • Understanding the whole system within which you operate, so that you can probe the leverage points with rational optimism
  • Experimenting and building rapid prototypes of new products and services, so that you can learn and adapt rapidly in a complex environment
  • Engaging your staff with a clear purpose (not profits or expenses), compelling rationale and transparent metrics – so that they work with you through the challenge
  • Using your strategic intuition to address unfamiliar and complex challenges.

Notes

  1. These include things such as managing cash flow, reducing unnecessary expenditure and lowering debt.

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