Can You Lead Through Turbulent Times?
Harriman House, publishers of finance books, asked turnaround specialist and business author Anthony Holmes to share his conviction that management teams must question their post-recession leadership skills.Being the successful guiding mind of a company in turbulent times requires counter-intuitive thinking. But this, by definition, is contrary to the way we believe managers should act. Studies by the IMF indicate that we spend approximately 25% of our time going into and coming out of recession. But do managers have the skills and historical knowledge in place to recover each time? And do good managers possess the leadership skills necessary to guide their company out of the minefield? Not usually.
Greater uncertainty is changing the commercial landscape, which means that relying on a managerial toolkit developed in times of stability and prosperity becomes increasingly misplaced and is a risk to a successful exit from recession. In turbulent times the management task changes significantly as a company moves through each distinct phase. I argue in ?Managing Through Turbulent Times? that leading a business through recession requires something other than the more stringent application of the scientific management techniques of control and analysis. Some, such as budgeting, working capital management and cost control, remain important but, in isolation, they are insufficient. Unconventional times require creative and counter-intuitive approaches yet typically, orthodox managers seek sanctuary in the more stringent application of control procedures, as if greater intensity somehow provides enhanced immunity.
Many people visualise a recession as having only two phases; decline and recovery. But closer study reveals that even in their simplest ?V? or ?U? shapes, recessions consist of four phases; decline, turning period, early recovery and late recovery. Turbulence is rarely confined to the decline phase. It extends through the turning point and into early recovery when companies that have survived are severely ?damaged? and often succumb to pressure from lenders keen to clean their own balance sheets.
Companies that survive the decline phase emerge as either healthy or damaged survivors but each condition presents management with different options and the way managers respond to survival will determine their performance in the new credit cycle.
There is no generally applicable management process that brings stability to a turbulent situation. If there were, then by definition it could be taught and fewer companies would be disabled by such conditions.
Finding the right leader for the job is a significant challenge. Few current senior executives have experience of running a company when the economy is contracting or recovering, when banks are reluctant to lend and when established management methods, which rely on the stability of economic spring and summer, are no longer dependable.
This recession has been pernicious. It is not a pause but a discontinuity and the business models that have proved robust may not be applicable in the future. The period between the turning point towards early recovery provides a time of relative calm in which managers should not only assess the damage incurred in the decline and the viability of their business model but also question how they intend to construct the operational flexibility they?ll need to prosper and whether their leadership capability is appropriate for the challenges ahead.
Transitional times require transitional leaders. Guiding a company through to healthy survival requires a specialist skill that we call leadership, which is quite different to the abilities of a good manager. But that?s the next book.
Anthony Holmes, author of ?Managing Through Turbulent Times?