Back in March last year, the official flag of recession was hoisted up the North American economy’s mainmast. After nine years of record growth, the markets finally caved in to reflect the reality of global oversupply and the partial collapse of the new economy. The Dow retreated to its 10,000 plateau, and investors who found themselves holding shares in doomed e-companies such as ICG or Webvan made a quick egress from Wall Street and Bay Street. Then came September 11. With the grimness of recession supplanted by fear of terrorist attacks and war, business faced a new challenge: how to deal with the double play of deflated economic prospects and the anxiety of flying and doing business normally in anything-but-normal conditions.
Even though the specter of a prolonged recession has been replaced by sluggish recovery in the U.S. and Canada, the ripple effect of Sept. 11 and economic uncertainty have spun leadership challenges rarely seen before: How are business leaders supposed to motivate, energize and focus themselves and their distracted employees on the task at hand? How do leaders combat the paranoia of bad times—the “are-we-next symptom?”—and fire up morale when everyone is busy looking over their shoulders? What is a leader to do when just “staying the course” is a challenge, and introducing change now seems as improbable as launching an IPO? Companies with offices in the World Trade Center, by having to respond to the unthinkable, have learned the lessons quickly: Acknowledge the facts, be visible, reassert purpose and foster new leaders.
ACKNOWLEDGING THE FACTS
Perhaps the most urgent task for leaders in tough times is to take a break from speed and change. Just pause. This is almost counterintuitive in an age of constant re-engineering, innovation and change. Yet pausing in the present allows leaders to think and recharge their batteries, and gives people an opportunity to catch their breath without the added anxiety of coping with taxing change. Vladimir Lenin, who overthrew the Russian monarchy in 1917, understood this. In 1921, after four years of gruesome revolutionary reforms, he stunned his critics and followers by ushering in a New Economic Policy (NEP) that stopped all reforms and actually turned back the clock on radical changes his party had initiated. After this seven-year hiatus, Lenin’s successor, Stalin, felt that the country had recovered enough strength and resumed the pace of change. The lessons for today’s leaders: While driving change is often at the top of the CEO’s agenda, it is important to shift to neutral for brief periods of time to recapture energy. Athletes give their bodies a day of rest per week for the same reason.
This shift to neutral occurs naturally when catastrophic events unfold. On September 11, most business activity ceased in North America, because watching these events on television was simply too hard to withstand without taking time out to grieve. The brutal facts—terrorism, hijackings, the huge loss of life—sunk in immediately. But when companies are hit by non-life-threatening events, such as lower-than-expected quarterly earnings or shrinking market share, the opportunity for denial is far more acute. Recall the slow reaction of Nortel to its quarterly sales reports in early 2001, and the CEO’s insistence that the annual earnings growth forecast remain unchanged. At times, leaders need to recognize that enough negative energy is trapped under the hood, as Lenin did with the Russian economy, and yank the parking brake to avoid a complete meltdown. They need to stop the constantly beating drums of change to allow for fresh reflection and personal recovery.
Creating a pause in the action does not imply being idle. Russians did not stop work during seven years of the NEP. They were simply allowed to resume certain commercial, wealth-building activities curtailed under communism—things that gave people hope and stability. It does mean, however, pausing long enough to take stock of the current situation and determine what must be done to respond. Hours after the September 11 attacks, Continental Airlines’ board met to devise a strategy to communicate with customers and employees. This meant getting in touch with customers around North America to find out how many business frequent flyers were stuck in which cities. Other activities and discussions stopped because it was the obvious thing to do. The same reflex needs to be built into any company’s plan to battle adversity. Leaders must learn to use the platform of momentary shock to create a break in their operational tempo and acknowledge the facts, however unpleasant.
BEING VISIBLE COUNTS
Acknowledging the facts must quickly sire a new leadership behaviour—being visible, on the front lines, to let employees and customers know that this is not business as usual. The outgoing CEO of Young & Rubicam Advertising, Ed Vick, did this the Monday following September 11 by shaking hands with employees as they entered the firm’s headquarters in midtown Manhattan. “You either lead by example, or you don’t lead at all,” he explained. Gordon Bethune, CEO of Continental Airlines, hosted a party at his Houston home for 100 elite frequent-flyers. The news of the party galvanized Continental’s employees and customers. Being visible sends the signal that leaders are not in denial, waiting for the storm to pass. In times of crisis, visibility equals credibility.
The absence of visibility, or withdrawing during a crisis, can have a dangerous effect. The greatest criticism of President Bush on the day of the attacks was his lack of early visibility—diverting to an air force base on his way back from Florida and only returning to Washington in the evening. By contrast, former New York mayor Rudolph Giuliani’s instant rush to Ground Zero and media sites mesmerized the world. The very same factor—immediate visible presence—impacts leaders worldwide. Just ask President Vladimir Putin, who continued his holiday after the sinking of the Russian submarine Kursk in August 2000, instead of heading to the disaster area. After about a year of trying to justify his decision, Putin finally admitted that he should have been on the scene the next day, instead of delegating the task to his Northern Fleet commander. This may cost him in the next Russian presidential elections.
By being visible, leaders fill a yearning for comfort and pain-sharing that cannot be left unattended. They may not have the answers as to why terrorists struck the World Trade Center or why the company’s stock dropped down to sea level, but they let others see that they are in charge and understand the significance of the moment. The CEO of one company who lost employees on September 11 chartered planes for family members and went on to greet them as they arrived at the head office’s parking lot. As one executive put it, “What you must never do is retreat in the face of crisis.” People will remember who was out there personally shaking hands and talking to people, not the ones sending e-mails from afar.
Leading in tough times is a symbiotic act: It requires the ability to pause and acknowledge the damage, while at the same time to tap new sources of strength that will revitalize the organization. Even though many of the World Trade Center’s financial services tenants were deeply wounded by the September 11 attacks, many day traders from Merrill Lynch and other firms had resumed their duties in makeshift facilities in New Jersey or midtown Manhattan by the 12th. There is a natural human tendency to want to go on and rebuild, which business leaders must tap into. The task for leaders at this turning point is to reaffirm the organization’s core purpose, explain why it is still valid or about to change, and let that bridge transport people into the new reality.
Finding a meaningful purpose amid the chaos of on and-off recession and war is no mean feat. Beating the competition or increasing wealth, which works in normal times, can appear overwhelmingly self-serving in tough times. Leaders need to abandon old clichés and tell others how contributing now will make a difference. During Desert Storm, U.S. Army General William Pagonis (in charge of a logistics organization 40,000 people strong) had a clear vision, “Good logistics is combat power!” posted throughout his headquarters. Simple ways to refresh or remind people of the organization’s core purpose are good stress-busters.
The point of rebuilding purpose is to help people see how they can influence events, rather than be passive in the face of danger. A list of the challenges confronting corporate leaders pre-September 11, according to Fortune and the consulting firm, Strategos, includes: “an unprecedented rate of change, relentless margin pressure, ever more powerful customers, diminishing returns on yesterday’s surefire strategies, anemic growth and enormous pressure to innovate.” The events of September 11 and economic recession have catapulted other factors such as safety concerns, unemployment and shrinking capital resources to the top of the list. These meta-concerns sit as a dull canopy over every organization’s precious human capital. The leader’s role is to part this canopy so people can breathe in fresh ideas and find alternatives to chaos.
The task of rebuilding purpose involves three crash actions:
1. Reaffirming the vision and strategy for the business In uncertain times, people need to be reminded more frequently about the direction the business is taking and why that direction is best under the circumstances. Assume that the organization’s credibility counter—i.e., the accumulated positive effect of positive performance—has been wiped out, because in effect you are now playing in a new arena and people need to get the new rules. Reaffirming which parts of the vision still hold and how the strategy for the business needs to evolve in order to fit the new environment will act as both tranquilizer and motivator.
2. Setting realistic short-term goals In tough times, no problem is a simple problem and issues get compounded through inaction and delays in decision-making. Trying to rectify too much too soon can backfire. Note how the United States approached the global fight against terror: First it declared that it would go after the Taliban unless it turned over Osama Bin Laden. Then it took the fight to Afghanistan, while serving notice to states like Iraq that it too would become targets if implicated in the September 11 attacks. Taking on terrorist organizations and duplicitous states around the world would have been a far-fetched short-term goal, even for the U.S. military. Identifying a specific goal—rooting out the Taliban and Al Qaeda—offered a realistic starting point to prosecute the war.
3. Making what really matters really clear Most of the successful businesses that managed to thrive in the first few months of the recession did so by telling their people to temporarily forget about the bottom line and concentrate on keeping the business running. JetBlue CEO David Neeleman, whose airline flies out of New York’s JFK, kept flying his airplanes to 17 cities with barely any passengers in the aftermath of September 11. This stay-in-business at-all-cost tactic eventually landed JetBlue new customers. In November 2001 the airline introduced service to seven Florida destinations.
Making what really matters really clear, whether it’s gaining new customers, improving connectivity or growing through acquisitions, tells people and investors what you truly, deeply believe. At Bank of Montreal, despite a disappointing 2001, the bank has told employees that it will continue investing in two key areas: regional acquisitions in the U.S., and the rollout of a new customer-facing platform in every eligible branch. Sticking by one or two business priorities sends a clear message that business will go on.
TENDING TO NEW LEADERS
One of the rewarding side effects of crisis is the emergence of new leaders—individuals who simply didn’t stand out during their regular watch, but suddenly burst out under fire. These new leaders quickly become the linchpin of recovery efforts and a symbol of hope for the organization; they get talked about as “the ones who stood up and took charge.” A senior officer from the USS Cole recalled how, after the destroyer was ripped apart by a suicide bomb in Yemen, “there were others [sailors] who in a million years you would never have thought you’d see what you saw from them.” Recognizing these new leaders is key to enacting what is essentially a “new deal”: keeping the corporate ship afloat, fixing the damage and preparing for the next event.
Why do new leaders emerge under tough, demanding circumstances? Because the leadership skills required to perform in turbulent times are different (see sidebar, “Leaders in Good Times and Leaders in Tough Times”). And because the heat created by a bombshell—shares tanking, results lower than expected, customers defecting—simply melts some people’s coping mechanisms while invigorating others. Retaining clarity of thinking and speed of action in these times is not a skill practised widely in the business world, as opposed to the military, where every aspect of training and leadership aims at preparing individuals to perform under live fire. And this difference is why most companies are caught unprepared. There simply is no game plan, no scenario rehearsed every day, to guide individuals through the minefield of recession or business reversals. So watching how leaders behave under fire can be a valuable lesson for leaders and non-leaders alike.
The first matter of attention in the fight to foster new leaders is to disperse leadership across all fronts. As the senior leaders identify the top three or four tasks that need to be executed in order to get back to business, they need to match those assignments with the right people. And this is the tricky part. The natural tendency will be to select “known leaders,” but how do you know that these leaders will perform under duress? When a Confederate army general was injured in the middle of a U.S. Civil War battle, his second-in-command, a Major General Gustavus Smith, was required to take over. In the midst of the battle, Smith became so overwhelmed that he asked Confederate President Jefferson Davis what his next move should be. He was cashiered the day after. Relying on “probable leaders” or “known leaders” is not a guarantee of success. The primary role of senior leadership is to recognize and deploy leaders that rise to the surface, a process that unfolds at 10 times normal speed. Giving these new leaders a chance is key to developing the next generation of talent in the organization.
The second requirement is to demonstrate the right touch in communicating with people, to allay the sense of apathy, anger or frustration that can overcome people as they battle with new difficulties. In tough times, people not only look up to their leaders for direction and guidance. They look to them for unequivocal confidence-building signals: We are here to stay, we believe in our brand, we will fight this battle—a throwback to “We shall never surrender,” which Churchill uttered during Britain’s darkest moments in the Second World War. Ironically, Churchill was not thought of as much of a leader in British politics before his appointment as prime minister. By voicing his resolve, he captured the sentiment of Britain and carried the day.
Third is finding ways to let people see how they are contributing to the rebuilding effort, either directly or indirectly. Shortly after September 11, eBay hosted an Auction for America to support families of the World Trade Center victims. One investment broker firm donated the entire day’s trading profits to the same cause. Finding innovative ways to let people feel that they are making a difference, and involving them personally, can turn around the tide of defeatism. Once people stop feeling that events are beyond their control and find outlets for constructive action, research shows that they become productive again. New leaders step up to the plate by helping others regain control and channel their energy into meaningful projects.
Finally, leaders need to recognize the ordinary before they can once again focus on the extraordinary. Recognition typically benefits employees whose performance exceeds expectations. During extraordinary times, however, it is important to understand that employees who are able to concentrate on their task and return to a state of normalcy need to be recognized and encouraged. While a few employees may continue to outperform expectations, it is doubtful that a great majority will cope with life-altering change and simultaneously deliver superior performance. Leaders must acknowledge this gap and treat a return to regular work habits as an accomplishment. Superior performance will follow.
The challenge of dealing with a comparatively mild recession and distant war is not new. In fact, during the 20th century, war turned out more than once to be a panacea for recession. Over the past 15 years, we have overcome a recession that followed the Cold War, the internet-bubble crash, and financial crises spun out of Russia, Southeast Asia and Argentina, which is far from resolved. These events have tested organizations and leaders worldwide. It is clear now that to survive in this crisis-rich world, business leaders must develop the same discipline that their military counterparts have practised for centuries: Prepare for rough times, and in rough times respond visibly, reinforce purpose and encourage new leaders. As Sun-tzu said, “In military combat, what is most difficult is turning the circuitous into the straight, turning adversity into advantage.”