The true test of leadership: how to lead during a flat economy

The true test of leadership: how to lead during a flat economy

Leadership is challenging at the best of times, but how you lead during an environment of complexity and ambiguity is the real test of your capability, writes Anthony Mitchell

While we may not be on track for a recession in 2020, economists have predicted the lowest global growth since 2012. If you find yourself in a position of leadership during lean times, when there may not be a rising tide in your favour, what are your options for staying afloat?

1. First, challenge yourself to ask “how might we maintain growth with the resources we have?”
For example, this might mean making smart investments in R&D or marketing. A renowned example of this is Samsung, whose heavy investment in these areas during the last recession led to their successful reinvention as an innovative brand. This catalysed the release of the first Galaxy smartphone and provided strong competition to the Apple iPhone of the time.

Of course, if such investments are not possible or unlikely to be productive, you will need to make some difficult decisions, which could include retrenchment and other cost-saving activities. If this is the case, consider the following.

2. Understand how to increase your impact or sense of purpose
While this may seem counterintuitive in lean times, research shows that truly purpose-led organisations outperform profit-led organisations in financial terms, by up to 10 times. Communicate and demonstrate a compelling ‘why’ to your people, and unite your team with this purpose to supercharge drivers of performance such as engagement, innovation and employee wellbeing, and maximise your organisational impact.

3. Balance the wellbeing of the business and your people
You are likely to have invested time and resources in ensuring that your financial wellbeing is gauged and closely monitored, that efficiencies are being made where possible, and expenditure is under review. Invest in a similar process for your people by conducting regular, brief health checks of the organisational climate and morale. Pulse surveys are low in cost, but high in value. Aside from providing valuable data on how people are collectively tracking, when you act on this information, it also demonstrates that you care about your most important asset – your people.

Also ensure that your leadership and management teams are equipped with the necessary emotional intelligence to effectively support people in their teams, and understand available referral channels if anything needs to be escalated. Support formal or informal events that enable individuals to foster important social connections, and model positive habits for good physical health within and outside of the office (for example, try limiting your own after-hours emails, which have the potential to interfere with sleep for yourself and the recipients).

4. Think long-term when it comes to your workforce
While redundancies may be an instinctive consideration during an economic downturn, a more strategic approach to leadership involves evaluating the cost savings of layoffs versus the costs of re-training and re-hiring new staff when the economy picks up again. More importantly, redundancies have the potential to severely affect morale and productivity at a time where you want to minimise this as much as possible.

Consider alternative solutions, such as offering shorter work weeks or days. In the case of Honeywell International during the 2008 US recession, it was decided that furloughs (employees taking unpaid leave) were more favourable than retrenchment. Maintaining the workforce was just one of the reasons why Honeywell was able to regain high productivity and effectiveness once the economy improved. 

5. Look after those who are exiting, as well as those who stay
If the unfortunate outcome of retrenchment really is your only option, how can you do this in the fairest way? If it is too costly to outsource, consider leveraging the experience within your own organisation and encourage senior employees to coach or mentor individuals during their exit period, or at the very least, task direct managers of affected individuals with this responsibility.

Understand the impact that redundancies are likely to have on those left behind (including possible feelings of uncertainty or resentment), and ensure that your communication during this time is as authentic, transparent and frequent as possible.

Whether you are operating through a lean economy, a disrupted market or a sudden environmental crisis, there are certain external factors that can create significant hurdles for you as a leader. However, with authenticity in your approach, a strong sense of direction, a long-term view, and optimism that “this too shall pass”, you can still set your people, organisation, yourself and your leadership up for success.

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