As a veteran of the telecommunications industry, I can say with conviction that volatility is not a new concept to me. From the rise of the Internet, to the bursting of the telecom bubble and the dot.com bust to today, the industry continues to experience relentless change – change that is often unpredictable and always challenging.
When I joined Lucent Canada as the new CEO in July 1999, the company was prosperous and had excellent prospects. The share price was $75.00 U.S. after 13 consecutive quarters of growth. We were building new facilities, exploring new technologies, and introducing new services – here in Canada and around the globe.
Meanwhile, consumers and businesses were hooking up to the Internet at an astounding rate. Thousands of start-up companies rushed to capture the exciting new “e-opportunities”. The stock market soared to new heights. The telecom industry was largely responsible for this peak. Success seemed unstoppable.
But, it wasn’t. Three years later, Lucent’s share price plummeted to around $7 U.S. The company downsized to about half the size it was when I first joined. And Lucent underwent a massive restructuring that touched every facet of its business. At the same time, hundreds of dot-coms went under in a matter of months. More than half a million high-tech workers in North America lost their jobs, and a trillion dollars was lost in stock value. A virtuous circle became a death-defying spiral.
Today, this same volatility is no longer limited to a specific company or industry. As the ongoing global economic crisis so vividly underscores, difficulties in one sector can now wreak havoc across sectors, markets and countries. Who would have thought that the toxic mortgage market in the United States would so dramatically hamper the economic prospects of other countries across the world? Who would have imagined just two years ago that governments today would invest trillions of dollars in stimulus funding and bailouts? And who could have foreseen the widespread and devastating impact of the economic crisis on most financial markets, including pension funds?
With globalization, technological advances and the continuing proliferation of networks, no single business operates in isolation anymore. Changes in one area inevitably reverberate across different areas, often in unexpected ways. Clearly, volatility is here to stay. And clearly, the challenges facing leaders have now reached a whole new level of complexity, in terms of their scope, magnitude and interconnectedness.
What lessons can we learn from today’s experience? There are three that I believe are most important. The first lesson is that short-term gain at the expense of long-term growth is disastrous. Sure, you can cut costs or lay off employees to immediately gain new efficiencies. But what are the risks and the other consequences of these actions? Will this decision jeopardize the company’s relationship with its unions and other stakeholders? Will it detrimentally affect corporate culture? What impact will it have on the community in which those employees live or where that operation once helped to support the local economy?
Given today’s volatility, business leaders must continually strive to achieve the right balance between near-term efficiency and sustainable effectiveness. In this same context, I believe that compensation schemes that reward executives, directors or any employee for solely meeting the next quarter’s results can, and often do, serve to ultimately harm the company, not to help it.
The second lesson we can learn in the midst of today’s volatility is an old one, but one that is no less important. It’s this: Honesty, integrity and transparency are essential, especially for leaders. Over the past few years, the misdeeds of a minority of executives have eroded investor and customer confidence in business as a whole. This mistrust has also affected employee morale. Rebuilding trust won’t be easy, but it is absolutely vital.
Consider what happened at Maple Leaf Foods last year with the listeriosis crisis. It was a potential public relations nightmare. Conceivably, it could have damaged the company’s reputation beyond repair. But when CEO Michael McCain admitted the problem, expressed his deep appreciation of its consequences, and promised to solve it, people believed him. What is more, as Gordon Pitts of the Globe and Mail observed, he emerged “as the human face of a company that cared about its customers.” For Michael McCain and his team, “The core principle was to first do what’s in the interest of public health, and second to be open and transparent in taking accountability.”
This brings me to the third important lesson for leaders in these volatile times. With today’s interconnectedness, business and society are now more deeply and dynamically interdependent than ever before. As such, the decisions companies make and the actions they take reverberate deeply throughout society. By the same token, society has an impact on business. It ultimately determines which companies succeed and which ones do not. At Ivey, this interdependency is at the essence of what we call cross-enterprise leadership.
I believe that the most successful business leaders today – the ones who consistently gain positive results for their companies – acknowledge this interdependency and embrace its possibilities. They see their companies as part of an “enterprise” and they value the role that their organizations should play in enriching that enterprise. In other words, they understand that any company has both a corporate and a social purpose. They know that environmental, economic and community responsibilities are part and parcel of the leader’s job.
Today and tomorrow, the best business leaders will always look to the long term. They will remain open and honest at all times, even during the difficult ones. And they will continue to value the role that a business plays as an integral thread in the warp and weave of society. In the midst of the volatility that now characterizes business world, these are the important realities that leaders must keep top-of-mind.