Leadership In an Economic Downturn

In the last few months, we dedicated considerable attention to the leadership challenges of hypergrowth. Suddenly, we now find ourselves facing a very different economic forecast. Predictions indicate that we are approaching a downturn that could lead to a recession, slowing growth across industries.

Consequently, financial institutions are already engaged in pre-emptive action as business leaders seek to minimize risks. They are focused on assuring a stable future in turbulent times.

For many, preparing for difficult times ahead is an automatic response. We are already seeing defensive actions by leaders. Minimizing expenses, putting recruitment on hold, and cancelling non-core projects are increasing in frequency. Discussions about employee benefits and employee welfare are dying down.

As rational as these actions may seem, they could trigger unexpected consequences. While trying to maintain stability for the future, leaders may turn their caution into a self-fulfilling prophecy, even if there is still little harm to company performance.

Our disruptive reality teaches us that downturns and hypergrowth can quickly follow one another. Organizations and managers must develop agility and flexibility to adapt and move between phases of hypergrowth and recession (like Alice in Wonderland growing and shrinking). This switch must be done without causing unnecessary harm to the bottom line and with as few shocks as possible to employees and organizational processes.

We advise decision-makers across organizational levels to embrace a balanced and well-communicated approach. And, most importantly, to involve and engage employees and partners in key decisions and actions about the future.

We offer you several leadership principles you can apply while preparing for a possible economic downturn:

1.?????Do not carry the burden of responsibility alone. In times of crisis, we tend to retreat into ourselves and become self-sufficient, acting like “lone wolves”. Instead, we recommend that you share with senior staff concerns, situational assessments, and risks. Build a shared understanding of the situation and how to deal with it.

2.?????Lean into your organizational culture. Assuming you have a solid culture where individuals share core values and enjoy a high degree of resilience, this is the time to cash in the check and lean into those strengths. Particularly in times of crisis, harness and reinforce your strengths and the people who embody them.

3.?????Plan a scripted response approach. You don’t have to go in “guns blazing” early on. It is possible to work through different options as the situation evolves. The main thing is to act together with other managers based on shared and agreed-upon principles.

4.?????Develop a process to discuss the situation with employees. As concerns arise, it is important not to announce directives and difficult decisions without laying the proper foundations. Shocks such as “halting all hiring”, “stopping flights”, etc., only exacerbate stress and concern. Instead, we suggest that each executive manager who was involved in crafting the response sit down with his/her direct reports. Assess the situation and develop a plan to communicate with the entire organization. Create space for department heads and team leads to raise ideas about how to respond to the situation and the risks and opportunities it presents.

5.?????Remember that all crises hold hidden opportunities. Be present and aware so you can recognize potential out-of-the-box solutions. Each crisis also presents opportunities so don’t miss them. Listen actively to multiple voices, both from within your organization and from external stakeholders who might offer helpful ideas.

6.?????Communicate to the entire organization a clear narrative about how you plan to cope. After collecting ideas and data, gather top management and together craft the narrative and key messages you wish to convey. Clearly explain to all stakeholders how you plan to handle the situation while emphasizing the opportunity for important change. Intertwine within the narrative success stories, employee involvement, and a sense of partnership and pride as you maintain your valued organization during difficult times.

7.?????Focus on what matters. Make the most out of this period by focusing on the core issues – the main pillars of your organization – to prepare for the day after the crisis.

These principles will not only guarantee a better chance of survival in periods of crisis; they will also enhance post-downturn growth. They will strengthen your credibility and brand and help the market recognize your organizational resilience during these difficult times.?

The Institute for Quality Leadership?