The Journey to Leadership -- A Four-Part Series for New, Transitioning, and Established Leaders

The Journey to Leadership is a four-part series that provides structure for new, transitioning and established leaders in the process of charting, redefining, or redirecting their career course. For some, this series will take you into new territory; for others, it will serve as a reminder of the vital tools that will sustain you through the next stretch of your journey.

Part III – The Art of Effective Leadership in a Slowing Economy

When the economy is robust and all is well with a company’s bottom line, corporate executives’ leadership abilities and practices are seldom scrutinized or called into question, short of controversial events, activities or scandals worthy of headline news.  As a rule, when times are good there is generally little cause for concern over how corporate executives conduct business and lead the organization. 

However, in an economic downturn the rules quickly change and executives’ leadership competency becomes fair game for anyone to judge.  If corporate profits plummet, heretofore disinterested stakeholders suddenly are in a position to hold executives’ feet to the fire and demand financial miracles. If they become excessively dissatisfied with leaders’ courses of action to effect change and are predisposed to commiseration, stakeholders have access to today’s extensive array of interactive and social media through which to publicly vent their grievances.

In these pre-recessionary times it becomes critical for executives at all levels to anticipate extraordinary scrutiny from shareholders, clients, trustees, lenders, employees, and other such interested parties, and prepare a broad leadership agenda that includes a strategy to manage their expectations.  Optimally, demonstrating strong and effective leadership under the pressure of economic uncertainty will build stakeholder trust, preempt a counterproductive rush to judgment, and avoid relegation to a defensive posture.

Communicate, Communicate, Communicate – Leverage Innovation and New Media
 
As with all corporate crises – and an economic downturn can result in a crisis situation for many companies – it is essential for leaders to place communication with stakeholders near or at the top of the strategy agenda.  This is the time for communications and investor relations teams to spend time in the war room and, with senior management, craft a preemptive strategy to ensure stakeholders and, for a publicly traded company, the general public, are fully informed of how corporate leaders are addressing, managing and protecting the company’s health and wealth.  Leverage innovative methods and new media options to reach out to relevant constituents, to ensure messages effectively reach target audiences.  Be forthright, optimistic, transparent, truthful, and realistic.

Embrace the Notion of Inclusiveness to Build Stakeholder Confidence

Leaders of both publicly and privately held companies should make every effort to engage stakeholders and secure their input during the process of developing short- and long-term strategies to address issues related to an economic slowdown.  While respecting disclosure and legal boundaries, encourage them to become partners in identifying preemptive solutions.  Issuing a simple electronic questionnaire to gauge their level of anxiety would be a sound starting point, asking questions such as, “What concerns you most about the impact the current state of economy may have on XYZ Corporation?”  “What is the level of visibility you believe XYZ Corporation’s senior leadership has vis a vis change management?”  Two-way communication and embracing the notion of inclusiveness will help build stakeholder confidence and, at the same time convey thoughtfulness and empathy.

Take a Leadership Skills Inventory 

As I wrote in Part II of this series, I believe that a keen sense of self and an understanding of one’s leadership style is critical before one can lead effectively.  Strong self-perception is vital to achieving and maintaining leadership credibility and legitimacy in any organizational structure – particularly when facing market uncertainties.  This is the time for executives to scrutinize their own leadership traits before stakeholders undoubtedly will, if those constituents believe their job or investment may be in jeopardy.  Leaders must balance the appropriate amount of risk, innovation, drive and ego with common sense, judgment, vision, and credibility during the development of a new strategic direction, in order to be in the optimal position to secure stakeholder trust.

Established, Transitioning and New Leaders

The approach to diverting stakeholders’ fear of a corporate leadership crisis during this current slowdown will, of course, differ among executives who are established, transitioning and new – as well as by myriad factors such as company size, industry, cash position, history of organizational change, and other circumstances ad infinitum.  Although the courses of action that I’ve stated above apply to all leaders, executives from these three categories should also give thought to their own unique situation and leadership genre. 

• The established leader may choose to draw from organizational management strategies and practices he/she instituted in prior economic downturns.  Although experience handling a previous financial crisis is highly beneficial to leading in a similar situation, established leaders need to rely on more than lessons learned through their past corporate worldview, and draw upon the insights from leaders of the future to ensure currency in managing today’s complex issues. 

• The transitioning leader will improve his/her employment prospects during a period when companies will be laying off employees if he/she emphasizes competence working in an environment of ambiguity, change, and financial challenges, as well as possessing attributes to effectively lead in such a setting.  Demonstrating core competencies and expertise that will add value to one’s candidacy for a position at a company facing financial challenges is essential in the current state of our economy. 

• The new leader may face a significant challenge during this period as expectations run particularly high for him/her.  A slowing economy will test his/her ability to mark positive achievements within the crucial first 100 days of employment.  The optimal approach for new leaders is to demonstrate competency in a changing environment by responding quickly and develop strategies for managing potential issues that may arise as a result of the downturn.  Determine hypothetical worst-case scenarios and strategic plans for realistic solutions, identify new targets and goals, and ensure relevant constituencies are informed of the new direction and the reasoning behind such strategy.

Effective leadership in the best of times, and particularly during an economic downturn, is an art for corporate executives.  In my opinion, embracing opportunities for change, input from key constituencies, innovation and communication, and professional reflection is a powerful palette from which to paint a picture of corporate health, as well as to create one’s leadership career masterpiece.