I often wonder if it’s true that, as the saying goes, when times get tough the tough get tougher, or whether the truth is that when the times get tough what actually happens is we all get a little more timid, rather than tough. By most “expert” consensus, we are in the middle – or perhaps past the middle – of the most severe business and economic retreat since the Great Depression. Except for some really old (and no doubt very wise) people, none of us has experienced anything close to the downturn the first twenty months of the Great Recession of the 21st Century have heaped upon us. I know I haven’t. And the fact is, for me as well as you, we have no idea of exactly what to do to combat this tsunami of reduced demand, restricted credit and uncertainty about our futures. Sounds like a perfect opportunity for leadership!
Often, when we encounter rough patches in our business, we resort to re-focusing on our preservation instincts; Reduce Costs (at all costs – human and future potential), Manage Cash Flow (i.e., take advantage of your vendors' goodwill), Right Size (an invitation to jettison those who’s latent competency you might otherwise ignore), etc. We batten down the hatches – there’s a storm ‘a brewing, don’t you know.
I’m not suggesting that this is bad advice. But if you’re a CEO and don’t know about these basic business fundamentals which, by the way, if employed properly and consistently, need not be “rediscovered” in times like these, then perhaps another job is more suitable for you.
But rather than be judgmental, I’d rather be pragmatic. When, like so many businesses in this recession, you see revenues drop 20-30-40 and…..yikes 50% or more, it would be miraculous for anyone to expect that you would stealthfully and systematically manage your way through it. The truth is, at least in most cases – and especially in this recession, you notice it like you might an asteroid descending to earth -- it’s extremely fast and, when it hits, let’s just say (like Tommy Boy might) it’s gonna leave a mark. But just because its trajectory is fast and powerful doesn’t mean that we, as CEO’s, are entitled to a reprieve from our job which is to manage our company's growth and risk, in good times and in bad.
The fact is that many of us are making short-sighted, and damaging, decisions in our companies; decisions for which we will, ultimately, pay many more times for over time than what we believe we will save today. We are scared. And when we are scared, our instinct is to make a decision; quickly. That shows we’re in charge and taking action. But is that effective leadership or good management?
In our business, we see many clients who are truly struggling with their businesses (and we’re not having any Sunday picnic ourselves). Every day is a challenge not only to stay competitive, but, in many cases, merely to stay afloat. Revenue erosion, out of whack bank covenants and restricted lending, cash flow issues, declining order backlog…all are flashing red lights, not the green (or at least yellow) that so many have been used to for so many years. REDUCE COSTS…NO MATTER WHAT! Really? If reducing costs, no matter what, was the answer to business success and longevity in tough times, there would be no need for a CEO. Accountants would have all the tools necessary to run the business world in such matters were indeed so black and white. But the CEO’s job isn’t often so black and white. In good times and tough times, the CEO must balance the realities of today with the plan for tomorrow, sacrificing neither one for the other. That’s tough.
So what is the answer to the unique and (again, unless you are of the age most might consider exceptionally wise) unprecedented times we face today? The answer, of course, is the same as it was in 1929 and the early 30’s; LEADERSHIP. Leadership is always in substantial demand, in good times – when the lights are always green, and, even more in bad times, when the lights are yellow and red. Leadership is about being smart and not about being merely reactive. It’s about the present, but not simply about preservation. Preservation is an animal instinct. It’s not unique to a leader. We ALL have it and it’s always based on fear of loss rather than on opportunity of gain. But preservation (fear) alone is no way to run a business. Preservationists perish as they deplete their stored rations and their accumulated goodwill.
Times like these challenge leaders and leadership to the very core. We all (you can’t fool me) question ourselves and our abilities in times like these. That’s natural. It’s also natural, again in times like these, for fear to creep inside our beings, to challenge our beliefs and, like Garth, to question our worthiness (“we’re not worthy….we’re not worthy”). But, leadership isn’t about being simply reactive or “worthy”, it’s about being effective.
I’ve heard that it’s possible, like when you witness an accident, to have a brief, extraordinary burst of strength that, for example, allows one to lift a car off of a helpless pedestrian. That sounds a lot like what I see being passed off as leadership today, lifting cars off of struggling companies (whew, that’s hard work). But, like all accidents, the substantive lesson doesn’t come from the response, it comes from (1) The study of the cause and (2) The action to prevent the repeat of the cause.
Leadership in tough times, like all times, requires the courage not only to make the hard decisions but, more importantly, not to make those decisions in your business today at its expense tomorrow. We’re all learning powerful leadership lessons in this recession, but the education can’t come at the expense of relationships, ideas and our job to create long term value. Be careful not to take so many steps back that there is no gas in the tank left to go forward!
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