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Here We Go Again: Leading in Tough Times - Part 2

By Lee J. Colan, Ph.D.

In last month’s issue I asserted that no graph goes up (or down) forever. The path to sustained growth is like a roller coaster ride. Your personal assumptions about change and tough times will dictate how your company will experience the roller coaster ride. In fact, the greatest opportunity for your company to create a sustainable competitive advantage is during a tough economy.

There are three common responses to change with corresponding effective responses for each one:

1. Survival vs. Opportunity
2. Control vs. Involvement
3. Panic vs. Focus

Last month I discussed Survival vs. Opportunity. Now, let’s tackle the remaining two sets of leadership responses.

Control vs. Involvement

The second common response to tough times is control. This response assumes "We know what is best for employees. They will just worry." Resulting behaviors include leaders working in the business rather than on the business and TLM (tight-lipped management). These create distrust in company leadership and an expanded organizational blind spot (weaknesses that everyone, except you, are aware of).

Many companies that have previously grown over the past several years, are now responding with control. Controlling management practices set them back to old ways of managing when they were a smaller company. When the leader shifts back to working in the business rather than on the business it predictably squelches any type of ownership behavior by employees.

Studies on organizational change show that most employees do not resist change itself; rather, they resist that unknown place between where we are now and where we will be - the Abyss.

The effective alternative to control is involvement. The involvement response assumes, "We must harness all of our ideas to manage these conditions most effectively." Leaders who take this more effective approach work on the business and solicit employee input for solutions. Naturally, these behaviors result in greater ownership behavior (what every leader wants more of) and a reduced organizational blind spot.

It is important to not just make employees feel like they are involved - a common, mechanical substitute for real involvement. Remember, those who underestimate their employee's intelligence overestimate their own.

Analysis of cumulative employee attitude research shows that the biggest concern for employees is communication. However, leaders are continually frustrated that their communication efforts do not improve employees' perceptions of company communication. Further analysis of these historical data reveal what employees want to know. It boils down to four simple questions leaders must address:

1. Where are we going? (Strategy)
2. What are we doing to get there? (Plans)
3. How can I contribute? (Roles)
4. What's in it for me? (Rewards)
   

Panic vs. Focus

The third and final common response to tough times is panic. The panic response assumes that "We better do something different to get through this." This assumption leads to a continuous eye on the next deal and an obsession with creating new initiatives. This results in eroding customer service and the "ship is adrift" syndrome.

This is a classic entrepreneurial response. Look for a new deal or create another business model. The problem is that it's five times more expensive to obtain business from a new customer than it is from an existing customer. Also, employees really want clear direction, not a plethora of new initiatives, during tough times.

Focus is the effective alternative to panic. Focus assumes, "Let's keep doing what we do best."

Leaders that respond with focus reinforce customer service and existing customer relationships, and they sustain their marketing efforts. This results in improved perception of market position and stronger, more profitable customer relationships (again, what every leader wants more of). Put your resources where you are strongest (core competency). It is tempting to try to shore up your weak areas during tough times. However, unless those areas are strategic, you will just be throwing good money after bad. Think about this - since some approximation of the 80/20 Rule exists in almost all systems, we can safely infer that it also exists in your business. This means that the most profitable 1/5 of your company is 16 times more profitable than the remaining 4/5. Needless to say, you should regularly look at your most/least profitable sales people, products, service lines, divisions etc.

In Good Times and in Bad

Many of the leadership practices that we suggest under "Effective Responses" should be done all of the time. For example, watching your expenses is like cleaning your house - you always have to do it. Regardless of where your company is on the economic roller coaster, you should consider the organizational impact of your own personal assumptions and leadership behavior.

We led our way out of the 2001 downturn, and we will do it again. First, let's get to work!

Here is a table that summarizes each personal response to change.

Response	Assumptions	Leadership Behavior	Organization Impact
Common: Survival	"We just need to stay afloat."	- Eliminate headcount - Decrease employee development - Control expenses	- Employee cynicism - Sacrifice long-term capacity to sustain growth
Effective: Opportunity	"Here is an opportunity to improve our business."	- Upgrade workforce - Strategic cost cutting	- Committed employees - Strengthened ability to sustain growth
Common: Control	"We know what is best for employees. They will just worry."	- Work in the business - TLM (Tight-lipped management)	- Distrust - Expanded organizational blind spot
Effective: Involvement	"We must harness all of our ideas to manage these times most effectively."	- Work on the business - Solicit employee input for solutions	- Ownership behavior - Reduced organizational blind spot

 

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