Proof Positive - Leadership in the Recession


Proof positive

Good leadership can help to ensure that the recession doesn’t turn organisations into miserable, creativity-sapping places to be.

Rob Goffee and Gareth Jones
Publication date: 18 June 2009
Source: People Management magazine
Page: 28

As we struggle through the most serious economic crisis since 1929, it’s clear that we do not yet know what the business landscape will look like when we do finally emerge from the recession. What we do know, however, is that leadership is more important than ever and organisations that are well led have much more chance of surviving these turbulent times. This is not the occasion to take your eye off critical processes of leadership development – and smart organisations know this.

Perhaps the most significant contribution of good leadership is the provision of meaning and purpose. As the great – and sadly departed – American writer Studs Terkel famously observed: “Work is about daily meaning as well as daily bread; for recognition as well as cash; in short, for a sort of life rather than a Monday-through-Friday sort of dying. We have a right to ask of work that it include meaning, recognition, astonishment and life.”

If we are not careful in this downturn, poorly led organisations will become miserable places to be. Creativity and innovation are inextricably linked to energy, edge and fun, but the processes of organisational attrition are in danger of crushing the creative spirit that is essential to drive us out of the current malaise. In the knowledge economy, critical to the future of Western Europe, the challenge is not to follow tradition and attempt to “get more” from your clever employees.

Open any conventional management textbook on organisational behaviour and you will see an obsession with extracting more value from recalcitrant workers through the latest fashionable techniques of “motivation”, “engagement”, pursuit of “discretionary effort” and so on. Our view is almost the opposite - the task is to make organisations more attractive to your already valuable, clever people. So often while researching our new book, Clever – Leading Your Smartest, Most Creative People, we have observed talented individuals being turned off by bureaucratic process, by internal politics and - above all – by inadequate leadership.

So what are the essential ingredients of successful leadership in these troubled times? And what are the implications for HR professionals?

The conventional wisdom has it that in uncertain times the role of the leader is to provide certainty but our observations of leaders suggest that the most effective offer not the illusion of certainty but the promise of constant change and adaptability. Leaders cannot see the future but they can and must communicate a compelling picture of what the future might look like. It is an over-used concept but vision remains important. The leader must communicate what the organisation stands for, what its purpose is and which values give it coherence. It is when organisations are in difficulties that their true commitment to core values can be most severely tested. In a world awash with information overload, the leader’s visionary voice must be distinctive in order to excite others to exceptional performance.

Barack Obama exhibited exactly that quality of exceptional communication skills in convincing the American electorate that, despite the turmoil, change was possible. He repeatedly resisted the temptation to engage in dirty politics – first with Hillary Clinton and subsequently with John McCain. As organisations contract and inevitably become more political there is a lesson here for business leaders. They must on the one hand understand the political manoeuvring and on the other they must remain - and be seen to remain - above it. It is clear that in his first 100 days as US president, Obama acknowledged problems rather than attempted to deny them.

One preliminary conclusion from these observations is that in turbulent times steadfastness is a leadership virtue. Not in the sense of having a fixed view of what will happen next, but by being true to a set of core values. A naïve reading of this point would suggest that all the leader has to do is to be their authentic self. But that’s not enough. Change will require that they play different roles in different contexts. Effective leadership involves a complex balancing act between using your authentic differences and adapting your behaviours to context. Being authentic is not about being the same all the time. The most effective leaders are authentic chameleons. The chameleon always adapts to context but remains a chameleon.

Effective leadership in these difficult times requires managing a series of inspirational tensions. Three are especially significant in a downturn.

First, since leadership is always contextual - leading in a pharmaceutical company is different from leading in a shipyard – the ability to read and adapt to context is vital. Effective leaders have a real sense of “what’s going on” – they keep one ear firmly to the ground. Remember the old fad of “managing by walking around”- it contained one great truth. You need to be in a position to collect soft data, to know what’s going on before the management information system tells you.

In the current economic climate business leaders are being tested not only by their ability to know what is going on – but also by their capacity to articulate meaning; to make sense of the situation. Andrew Higginson, chairman of Tesco Personal Finance, believes that the unpopularity of the retail banks represents a significant opportunity for the retailer to further apply its popular brand to the financial services business. And the flamboyant boss of Ryanair, Michael O’Leary, welcomes the recession. In his view it will kill off poor operators and show what a great business Ryanair really is.

Both of these examples demonstrate that the challenge for leaders is to both read context and rewrite it. In difficult times the danger is that our business leaders become entirely trapped by circumstance. The leadership skill is to not merely react but to proactively and constructively reshape.

Second, it’s obvious that right now strong task focus may be a prerequisite of survival. Leaders will be energetically focused on hard-nosed, tough prioritisation – including cutbacks and cost control – but this should not be at the expense of team or organisational cohesion. If people must leave, they must leave with dignity. Recessions are not an excuse to be nasty. Nor a time to throw away the cultural characteristics which hold organisations together and make some of them special. BMW, for instance, along with many other automobile manufacturers, faces very difficult times. But the task of the leadership is not to lose the passion for great motor cars that characterises the organisation. They must go on believing in and articulating “the ultimate driving experience” – not a strapline but a core value.

Third, it is inevitable that sensing situations and building team cohesion will require social closeness; a degree of intimacy and identification between leaders and followers. A sense that “we are all in this together”. The criticism attracted by some senior business leaders stems from the view that they continue to pay themselves bonuses while others suffer. But “strong identification with the troops” should not limit the ability of leaders to step back and see the bigger picture – indeed, paradoxically, this is a key situation-sensing skill. They will need to make tough decisions and social closeness cannot get in the way.

Leadership is never easy – nor recipe driven. But right now we need it more than ever. As we have argued, it necessarily involves several tensions. Don’t claim to know the future – but articulate a vision. Understand the politics – but remain above them. Respond fast to situational demands – but act to reshape them. Focus relentlessly on task – but build team cohesion. Identify with your followers – but be prepared to be distant. Be your authentic self – but recognise that you have different, and difficult, roles to play.

>So what does this all add up to for HR? First, and most immediately, the current turbulence must be seen as an opportunity to provide “crucibles of experience” (to quote US leadership guru Warren Bennis) for existing and potential leaders. Second, we should avoid the trap of assuming that in uncertain times, the only motive is the search for security. There is a mountain of evidence that for some members of your team this is a wonderful opportunity for risk-taking autonomy and personal development. Third, in these difficult times of headcount reduction and cost control, don’t become the Department of Misery. It is vital to keep your eye on the longer-term strategic people issues of your organisation.

Lastly, the biggest long-term challenge for UK plc is likely to be a talent drain as our best and brightest reassess their options in a low growth, high debt economy. Collectively, the UK HR community faces a creative challenge to make sure this doesn’t happen.
HR top tips
- Concentrate on making your organisation attractive to value-creating people
- Prepare people for change
- Don’t be the nasty department
- Hold things together by focusing on the values
- Guard against negative politics

Further Info
About the authors

Rob Goffee is professor of organisational behaviour at London Business School. Gareth Jones is a fellow of the Centre for Management Development at London Business School and a visiting professor at IE Business School in Madrid. They are the co-authors of Clever – Leading Your Smartest, Most Creative People (Harvard Business School Press, forthcoming) and Why Should Anyone be Led by You? (HBSP, 2006).

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