Leading in a downturn: the recession playbook
In this episode, Dan Parisi, Executive Vice President, and Darsh Shrestha, Principal and Vice President, share tactics, principles, and mindsets for individuals to implement during uncertain times, so that their organizations emerge from economic downturns better positioned than ever before.
Most of us want to lead in a way that matters; to lift others up and build something people want to be part of.But too often, we’re socialized (explicitly or not) to lead a certain way: play it safe, stick to what’s proven, and avoid the questions that really need asking.
This podcast is about the people and ideas changing that story. We call them fearless thinkers.
Our guests are boundary-pushers, system challengers, and curious minds who look at today’s challenges and ask, “What if there is a better way?”If that’s the energy you’re looking for, you’ve come to the right place.
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Masami Cookson: Welcome to Fearless Thinkers, the BTS podcast. My name is Masami Cookson and our host is Rick Cheatham, head of marketing at BTS. Hey Rick, how are you doing today?
Rick Cheatham: I'm great. Thanks. What have you been up to?
Masami Cookson: Now is one of those times where I've really dialed down my consumption of news and media. Sometimes there's just a little bit too much bad news out there, and I need to insulate myself a little bit to stay productive in life and work.
Rick Cheatham: Yeah, I think that's brilliant. I, for a while now, have enjoyed doing a time-to-time media fast myself, and actually that's pretty timely for what our show's about today. We have Dan Parisi and Darshan Shrestha from our Center of Excellence in Strategy Alignment and Business Acumen. And they're talking about the research they've done and the experience they have with clients as they prepare for a downturn.
Masami Cookson: That's curious. Let's get into it.
Rick Cheatham: Hi everyone. Thanks for joining us today on today's show, we have Darsh Shrestha. Darsh, what's going on in your world?
Darshan Shrestha: It's summer. I'm grateful for air conditioning, but then also a time to get out with family.
Rick Cheatham: Very nice. Yeah, we've been having crazy heat in Texas and on top of that now, we somehow have dust storms coming in from Africa, which is impossible to believe, but making the air quality in Austin crazy. But we also have Dan Parisi. Dan, how's the world of cycling going for you?
Dan Parisi: Well, you mentioned Austin, Austin and air quality, and the home of Lance Armstrong. I hope he's able to get his cycling in, but no, I've been riding a lot and working on cycling fitness is what I'm doing like five or six days a week when I'm not working.
Rick Cheatham: Very, very cool. And we have you both here today to join us to talk about some of the work you've done, some of the research you've done, and how leading in a downturn or a recession can be different, something that's sure on the top of mind for many as the uncertainty in both the economy and the political landscape continues to shift. I would be just really curious if you could give us kind of the high-level summary of the work you've done.
Darshan Shrestha: Right now, if we look at the mind of the CEO, we just started some research and looking at this, recession is one of the top things on their minds, but it's the idea that it's potentially a recession, there's not enough confirmation. We were looking at data: 70% of economists believe a recession's likely in 2023, and pretty much 0% agree on what the criteria is to decide on whether that recession has hit and when. By the time recessions are declared, usually it's too late. And so this is really around leading in a crisis, that ambiguity, that volatility, the uncertainty, the whole VUCA idea is at a peak right now.
Dan Parisi: On the VUCA front, just to call out the acronym — VUCA stands for volatility, uncertainty, complexity, and ambiguity — and boy, if that doesn't explain the current environment. Here we are, staring down inflation that we haven't seen in maybe two generations. We have to go back to the late seventies, early eighties to see this kind of inflation. And now on top of that, we're talking about a stagnation in the economy. So, whether we're in a recession now or it's coming soon, the combination of inflation and stagnation conjures that scary term we heard about an economics class, “stagflation,” and that meets the criteria of VUCA. I guess the work that we're talking about here is how do you navigate, not only navigate a VUCA environment, but try to be as successful as possible in it?
Rick Cheatham: Great. So, I'm officially on the edge of my seat, because it is so incredibly difficult to see so many good things, so many busy, busy people, new jobs being created, but at the same time, this swell of uncertainty. So in the work that you've done, what you see great organizations or great leaders doing?
Dan Parisi: Yeah, Rick, there, there's been some really interesting research. This comes from Bloomberg on winners and losers when navigating a recession and coming out of a recession, I'll give you some highlights. So in an economic downturn, it brings risks of making mistakes and unique opportunities to take advantage, creating winners and losers. So, companies usually make more dramatic gains and more dramatic losses than during boom times, depending on the type of recession. And downturns of all types are a great time for strategic repositioning if approached right. So if you think about a recession in three acts, there's the pre-recession, during recession, postrecession.So, in the pre-recession, the winning companies anticipate the downturn, they build resilience, they prepare an action plan or a playbook. That happens in the pre-stage. The losers during the pre-stage are complacent. They are complacent about their growth, and they don't have a contingency planning, and they haven't done full situation assessment. During the recession, the winners take opportunities, and during a recession, the losers acknowledge the recession too late, and they end up cutting too deep to survive, which I'll talk a little bit about later. It's a very normal reaction to start cutting. That also has big risks. In post-recession, the winners, because of the prior planning and the readiness, the winners accelerate growth coming out of a recession and the losers struggle to bounce out of it. They don't have any momentum coming out of the recession.
Darshan Shrestha: And to Dan's point, leading in this volatility, leading through a downturn, leading in a recession, is a very different position to be in for a leader than leading in normal times. And it actually requires a couple of different ways of thinking and mindsets and alignment that's necessary. And so, if I had to boil all of this down, preparation is really important and alignment is key. And when it comes to preparation and alignment, the number one question that I would ask leaders to say, because if you start an exercise and you say, oh, looks like there's a downturn coming, what should we do? Everyone's going to come up with great ideas.However, if you ask them, when should we make the play? When should we do the act of whether it's on talent, whether it's on supply chain, whether it's on anything, then suddenly there's silence, because nobody can actually determine when to actually make the move. And the tricky part is if you do it too early, then you've just might have wasted some very important things. You might have cut people too fast. You might have started cutting costs and renegotiating contracts. You might have gone out there and pulled back on investments that you would've made otherwise. If you do it too late, then, well, it's too late. And so, really, the magical question is not what we do, but when should we do it, and that boils down to signals and place.
Rick Cheatham: Interesting. So if I'm really hearing you right, what your experience has shown is that leaders that take the time to not only plan contingency actions, but create signals that — “Hey, this is the best time. If the data is showing us X, it's time to move on contingency Y. But if the data's not showing us that yet, then we don't do it yet — is that, am I understanding you correctly? Or am I taking it further?
Darshan Shrestha: Absolutely. You're absolutely right, Rick. And in theory, it sounds so easy to do, but there are a couple of snags that leaders get aligned around. The fundamental fact is, most likely 100% of those goals that you had, planning for a steady state or business as normal, is not going to be achievable. So, what are the trade offs that we are willing to give up? And the really good sort of commander's intents or those mandates that the leaders solicit ideas and input on, are things like, okay, we will protect our people and we're not going to lay anyone off, or, it might be something around we are going to protect our market share. We might take a hit on price. There might be a natural decline in volume, but our share in the market is going to remain constant.So they'll give very specific guidance around what they want to be for. And then also what they're against. A lot of times the leaders are making mistakes of saying, we're looking at data that we have readily available today. And you're looking at traditional metrics, and this is the time to start looking at non-traditional signals. It's really doing the sort of “Five Whys” and going deep into saying, if, fewer RFPs for my products and what we're competing for — ss there something that I can go even deeper to find out even earlier before those potential RFPs are starting to decline?
Rick Cheatham: Gosh, Darsh, that's really, really interesting to me because I think becoming clear on, as you put it, that commander's intent, so that everyone knows that these are the things that are the most important to us, automatically, I would assume, rallies people around those types of goals. But the more interesting thing to me, from the signal perspective, is I think so many organizations make the mistake of using data as a rearview mirror to tell them why things were the way that they are. And what I'm really hearing you talk about today is using data as our windshield to help us see forward, move faster, anticipate the next big turn. And I think that that's a mistake that most people make because they're kind of assuming today's circumstances are going to last throughout our current strategic plan, when in the world we live in today, nothing could be further from the truth.
Darshan Shrestha: And the last piece, this is really around the plays. And we've even gone in with organizations where we build out a recession playbook. And the essence of the playbook is trying to capture what leaders have done successfully that have navigated previous recessions and capture them into one resource where it doesn't serve as sort of a guide that says, oh, these are the things we need to do, but really on the spirit of standing on the shoulders of giants. Like, what can we learn from the past that can help us and guide us towards new plays and new moves we can make? And what we've learned is that you don't do too many things. We advocate for about three to four key plays or key decisions, and fewer is better. And at that point, it's all about prioritizing and sequencing those plays, because you can't do everything at the same time.
Dan Parisi: You know, Darsh talked about the playbook and making plays, and I'd like to give, once again, turning to some research, give you some advice here that might be helpful. In an HBR article called “Roaring out of Recession,” they highlighted a couple of really key things. They looked at what they called prepared companies versus unprepared companies, and prepared companies came out of recession with a 17% average revenue CAGR, and unprepared companies came out with a 4% average revenue CAGR, CAGR being Compounded Annual Growth rate in Revenue. So that's a big difference. And the research showed that the companies that had the best outcomes were very thoughtful about mixing defensive moves with offensive moves.So, everyone understands intuitively “defensive,” right? I mean, it's a stereotype that in a tough environment companies cut costs. Well, I had an executive once share a metaphor, a colorful metaphor, as Darsh mentioned, around the risk of being too “cut-oriented.” So he said to me, he said, look, there's always fat to cut. You can cut through fat and that's good. But if you're not careful, you'll eventually cut through fat and cut into muscle. And if you keep cutting, you'll cut through muscle and cut into bone. Now that's grim, little macabre, but you've seen companies do this throughout history, paying attention to what companies do. Companies who cut too much to increase short term profitability will end up hamstringing their ability to grow when they come out of the recession.So, this great insight from the HBR article is you have to be thinking offensive. You have to be on the balls of your feet. And that means, couple of examples could be that in a real recessionary environment, market cap, the value of companies, drops. Well, can your company acquire interesting companies that they couldn't when there was boom times, because the prices have dropped? Or while your competition is cutting and cutting talent, could you pick up top talent in the marketplace while you get ready to come out of the recession? Just a couple of simple examples of offensive moves. So, I would just caution you: we know the reaction is to go defensive and cut, but force yourself, force your leadership team and managers to think offensive as well, because that will greatly benefit you coming out of the recession.
Rick Cheatham: To me, it makes complete sense with what we were talking about earlier around making sure that going into this recession, we have very clear goals on what are our non-negotiables, what has to happen. If cutting into muscle prevents that thing from happening, we've got to make sure we don't. Well, gentlemen, I can't thank you enough for spending so much time with us today. I would like to ask you each to just give us a final reflection on these times that we're in and specifically these challenges that so many of us are facing right now.
Darshan Shrestha: Yeah, for me, I think this is a really tough time and leaders are, there's a natural confusion that goes on. And as an inspiration or reminder, I love this quote from Winston Churchill, which is "Courage is what it takes to stand up and speak. Courage is also what it takes to sit down and listen." And in a downturn, when there's so much volatility and confusion, sometimes leaders just need to sit down and really listen to their customers, their employees, their suppliers, to market trends. And that's really the difference that getting that alignment and making the right plays and moves will — that's what it really boils down to.
Dan Parisi: Yeah. Rick, on a final thought, I want to share something. Well, one of the fun things about being a consultant is you get to be a fly on the wall inside companies and watch really capable CEOs and senior leaders in action. And I think back to 2009, pretty grim, the Great Recession, we can learn from that experience. And I was in a room with the CEO of a transportation company, and I watched him rally his team to navigate the recession. And he said, We are not participating in this recession. He said, We can let our competitors participate in this recession, but we are not going to participate in this recession.And what he meant was, we were not going to participate in the gloom and doom, in the mental mindset that believes that everything's gone negative and it's time for pessimism. He was saying, we should do the opposite. So, we are not participating in this recession is something I remind myself as our business could be headed into a recession, that you always go, you put the extra effort. If in doubt, spend the extra hour with the client. If in doubt, make the extra sales calls to grow revenue. Think optimistically around acquisition of talent or acquisition of companies. Do not, my advice to you is when it happens, do not participate in it. Let your competition participate in the recession. You have better things to do.
Rick Cheatham: Wow. That is, that's very thought-provoking. And I appreciate you both sharing such great insights with us today and cool things that we can actually start to begin to go do in our own organizations to make sure that we've got the right level of preparation to potentially not participate. So, fantastic time. Thanks again to you both.Dan Parisi: All right. Thanks Rick. Thanks for having us.
Darshan Shrestha: Thank you, Rick.
Masami Cookson: If you'd like to stay up to date on the latest from the Fearless Thinkers podcast, please subscribe, or you can always reach us at BTS.com. Thanks again.
Related Content
When will the recession begin? How bad will it be? The answers to these three questions are anyone’s guess.
What we do know is that a recession is coming – the current geopolitical conditions foretell the future: rapid inflation, spiking interest rates, political unrest, and resulting supply chain issues, as well as the ongoing challenge of a highly contagious virus that will most likely never go away.
The writing is on the wall. At some point, the economic cycle will turn, and the economy will begin to decline or continue to stall.
Recessions happen all the time, it's a normal part of the economic cycle. However, what’s particularly interesting about this environment is that it will likely be the first recession that members of Gen-Z and most Millennials have ever experienced – that is, aside from the initial shock of Covid-19 pandemic. Any Covid-induced economic shrinkage was more of a disruption than a true recession. This type of downturn can be described as “V-shaped,” or characterized by a short duration and swift recovery (for example, Western economies’ post-pandemic growth, driven by lower interest rates, constrained supply, and government stimulus).
Under the current economic conditions, the recession ahead is classic both in the sense that companies are cutting costs and delaying investment in anticipation, and that its causes can be attributed to external factors. Younger leaders are facing a new, but not entirely unfamiliar, challenge.
Over the past few years, Millennial and Gen-Z leaders have risen through the ranks, taking on significant leadership roles across all industries. During the pandemic, these leaders leveraged their tech savviness to weather the challenges of working from home and the shift to a hybrid-virtual environment. Now, new generations of managers and leaders will experience this set of recessionary economic conditions for the first time, and it’s impossible to predict what will happen.
What we do know is that a recession can change many things, from the obvious to the less obvious. Let’s start with the obvious. Companies will quickly look for ways to conserve cash and protect margins, which often means slowing spending, layoffs, and restructuring to cut costs. Tech companies that boomed during the pandemic have started to reduce spending and announcing hiring freezes, signaling for companies in other industries to do the same. Jobs will be at risk. If you cannot prove a good ROI, your project is at risk. There are no longer unlimited resources to try out new ideas, and emphasis shifts from growth to profitability at all costs. An increase in uncertainty will make companies more conservative and tentative. All these are well-known dynamics.
Less obvious is the impact of increased uncertainty on people. Coupled with rising fear in general, volatility is the name of the game. Your investments just lost a lot of value. High inflation means that your purchasing power, and the new house that you stretched for, are declining in value. You’re worrying about your job, or are not getting the bonus you banked on.
The combination of fear and an increase in messy information escalates your “cognitive load,” or the need to tap into your cortex. Responses triggered by fear force you to call on more ancient and less intelligent parts of your brain, effectively reducing your IQ and decreasing the thoughtfulness of your decision making. The solution? While your brain is triggered to respond with its most animalistic “fight or flight” parts, you need to be smarter about navigating your new work and home life.
What are the implications of this on organizations? For one, fear responses may decrease teamwork and collaboration while increasing peoples’ self-interest (aka – the burning need to keep their job). At a time when teamwork and tapping into everyone’s intelligence is more important than ever, external stresses will likely drive your team to be less than their best.
Given this understanding, as a leader, what are you doing to build resilience in your teams? How will you help them tackle this uncertainty and thrive? Resilience can be built on both an individual and team level through intentional coaching and practice. Cultivating these behaviors not only builds a better workplace culture — it also gives your people the tools to bounce back.
You may also need to develop a recession playbook that helps you map out how you’ll support your people while also driving the business forward. It’s no easy feat, but remains critical as you move forward during this challenging period.
One practice we know helps build team and organizational resilience is something we call Future Storming. Future Storming is the process of preparing your business leaders from the “future-back” rather than “today-forward.” This means anticipating trends that have yet to occur and envisioning how they might intersect in surprising ways. This exercise, which can be practiced by leaders at all levels, helps them build the capacity to navigate uncertainty, strengthen collaboration with diverse stakeholders, and bolster your business’ capability to manage risk and uncertainty.
For example, you can run Future Storming exercises where your team thinks holistically across business silos about where the industry, customer trends, technology, and competition will be three, five, or ten years in the future. As your team evaluates the intersection of these trends, they build the capacity to mitigate risk and uncover insights that provide opportunities for innovation. The focus on opportunities is essential, as recessions can be rocket fuel for disruptive ideas and startups. Furthermore, customer buying criteria changes during recessions, and can upend traditional relationships.
A good example of this disruption is Airbnb, which was born during the 2009 subprime mortgage crisis. In a time when many were strapped for cash, but had a few extra rooms to spare, it offered people the opportunity to gain an extra source of income by renting out their extra rooms or vacation homes. By injecting a new supply of affordable short-term rentals into the market, Airbnb disrupted the hotel industry and drove down hotel costs. The hospitality industry was already primed for disruption; the recession was just the multiplier.
In the next recession, which new, disruptive companies will thrive, and why?
Lastly, how can you empower the new generation of leaders to drive the cost and cash flow initiatives needed in your organization? Your team needs to be capable of contributing to improved cash flow ahead of time or just in time. This requires strong business and financial acumen to understand how their decisions will need to change in tighter times to free up cash and realize better margins or returns, while simultaneously continue innovating and testing out new ideas to drive the business forward.
Are your young leaders ready and capable of doing this? Have you developed them to be effective in such a scenario? Up until now, Gen-Z and Millennial leaders have focused almost exclusively on growth. Moving forward, they need to focus on margin, cost, asset utilization, and cash flow. While in growth mode, investment dollars for innovation were plentiful, but now disciplined innovation is the name of the game. These leaders need to be prepared to fail fast and cheap, and move with agility towards the better innovations and investments.
In good times, leaders may not be aware of how the decisions they make every day at work impact margins, but in a recession, leaders need to be hyperaware of how they spend time and resources. Furthermore, funding is easy to come by in the name of growth, but in a recession? Not anymore.
Learned future preparation, resilience, and the financial proficiency and confidence to drive cashflow are critical for success in this new environment. By providing tools, expectations, and discipline now, you can inspire your young leaders to take control of the future. Instead of acting rashly when the increase in uncertainty tricks brains into inaction, acting ahead empowers your leaders to drive the improvements required to be successful.
It’s time to get ready. It’s time to prepare your leaders to flourish in tough times. Prepare your team to storm the future by building the resilience and confidence necessary to make good business decisions when they are in the eye of the storm, all in the name of managing through this recession. Better yet, give them the skills to innovate new products, services, and business models to propel your organization forward, and do it all while using the smart part of your brains.
Being ready for recession means asking your teams to think differently.
There’s an entire generation of leaders today who have never led through a recession. Now, faced with raging inflation, tumbling profits and volatile stock prices, they are flummoxed. While this is not another global pandemic, there are whispers in the wind that troubled times are coming. How can you help your teams work together in an agile way to prepare for whatever is next?
There are lessons to draw from winners post-COVID who seemed to nimbly navigate the last crisis, and those that lumbered and bumbled their way through.
Among the losers were those that didn’t just get it a little wrong – they doubled down on a single bet. They kept rolling the dice at the same table despite the odds that their “luck” could run out.
- Peloton produced more bikes than people wanted and were left peddling in the wind with quality issues and a saturated market for their product.
- Bed Bath and Beyond bet on branded goods instead of investing in technology that would have brought loyal shoppers online to buy goods for staying home and feathering their nests.
These companies looked like early winners, and yet the falls were more spectacular than the rise. They had a plan. They were aligned. Where they failed was in imagination. Marching in lock step they went right over the edge.
Why it’s easy to go over the edge
In hindsight we can see mistakes. But how does a smart team keep from outsmarting itself? It comes down to a discipline – avoiding the tendency toward group think and coalescing around one possibility.
Breaking the cycle to think differently together
Breaking this cycle of group think is difficult, but there is too much at stake not to do it. The discipline that saves the smartest, most successful organizations in times of uncertainty is a dedication to scenario planning.
Scenario planning is both a process and a discipline that enables your team to imagine “what happens if…” by reflecting on the variables for your business and speculating with the best of your current data and experience how those might play out.
With this process your team can go deep and long before events occur, playing out how they might respond. They can then agree on the critical factors that they’ll need to consider as events unfold. They put together plausible scenarios – not only Plans A and B, but also plans C, D, E, F, and G.
Scenario Planning
Scenario planning is the practice of creating varying courses of action for a business to implement based on potential events and situations, known as scenarios.
It enables teams to challenge their own thinking, consider possibilities, and later, respond dynamically to an unknown future. There are many ways the future may unfold with scenario planning, guiding teams to be responsive, resilient, and effective.
The process begins when you define your critical uncertainties and develop plausible scenarios.
This requires teams to both apply a sophisticated process and develop the team dynamics and characteristics of agile teams.
Scenario planning is a team sport in that it first requires us to acknowledge no one of us is smarter than all of us. When your team develops this capability, you have the ingredients to become agile. Agility is not so much response to crisis as it is planning to pivot when necessary and knowing what you will do. It may mean changing the metrics by which you’ll measure success so that you can manage through a challenging period.
There may be no industry that suffered during the pandemic more than the airlines. Many tried and tried again to “guess” when air travel would resume. CEO of United, Scott Kirby told analysts “We’re not going to pretend we know what demand will be.” After spending months pouring over data, they concluded it couldn’t be done.
Instead they assembled a “bounce-back” cross-functional team to consider slow, medium, and fast rebound scenarios. Conversations on cutting costs were scuttled for debates on growth. Many had never met each other or worked together. But they set a goal of becoming a “just in time” organization, looking at options, risks, plans. Through that they placed some bets. The result was a different version of success – liquidity – which enabled them to ride out volatility in demand indefinitely.
Why can’t more teams do what United Airlines did? The answer is they can if they know how to get there. There are qualities of leaders and teams that give them the capabilities to work together more effectively and thrive in uncertainty, and tools to support them through the churn. Scenario planning is one of those tools – the most powerful way to ensure your team has the debate before there is a crisis. The difficult conversations have been started, the tradeoffs contemplated, so that when it’s time to act, it feels familiar.
Leading a future-proof team
The role of the team leader is to create space and environment for acknowledging what is unknowable and building a process that moves away from report-outs and political debates to alignment around critical factors and criteria for decision-making.
The team needs to be empowered and expected to debate constructively and bring discipline to its decision process. We know from research and through our work with agile teams that there are three qualities of these teams that make it more likely they’ll be able to plan for various scenarios, stay current on the critical factors, and be ready to pivot.
Seize the power of Both/And thinking
Both/And Thinking is the ability to hold that more than one seemingly conflicting fact or set of facts may be true, or there maybe be more than one scenario, potential outcome, or impact of any decision.
Both/And Thinking in teamwork requires all members to hold for the group the notion that seemingly opposing points of view can both contain truths. For example, it can be true that a recession may be painful, but also positive for your company.
To encourage both/and thinking, enable your team to embrace the plausibility of numerous scenarios, as well as options for the best actions based on emerging data. Helping your team to explicitly understand and analyze both sides of the seemingly contradictory truth is a key step forward.
Unlock the creativity that comes with curiosity
In teamwork, curiosity is ability of a team to display humility by soliciting input and other points of view. Curiosity avoids narrow, myopic thinking. It prevents your team from closing ranks at critical moments and helps open the aperture to see all possibilities.
To encourage curiosity, insist on questions even from those who have “been there and done that.” Seek to understand, model the behavior by asking questions yourself, even if you believe you know the answer. You never know when the “crazy” idea will be the one that makes most sense.
Make the path forward real through Decision Savvy
All the curiosity and flexibility in your approach won’t mean much if your team can’t make good decisions and move forward together. Agility requires a discipline around decision-making that encourages the team to decide on the criteria for decision before advocating for a point of view. When your team does this, it is far easier to build alignment and get to the right decision.
To foster decision savvy requires the leader to insist on taking a step back to ask “what problem are we solving” before the team begins solutioning. This step alone will prevent your team from solving before they get to the heart of the matter. Then, simply ask, “what are the criteria that this decision must meet?” and generate those in writing. Use it as a checklist to consider the various options, and then, tally up how well each potential solution meets the criteria.
Scenario planning is not a cure-all for thriving in a recession. But it will give you and your team a multitude of options and a path forward to take now. Perhaps most important, it will change the crisis mentality and alter the chemistry of the team. You’ll be able to meet each challenge head on, with greater confidence, agility, and resilience.
Most CEOs are revising downward their forecasts for business, though they remain reluctant for the moment to declare a recession is at hand. Within the current administration, and in congress, there is broad disagreement about what to do to head it off. This uncertainty is wreaking havoc on business planning. Chief Executive reported in June that 300 CEOs downgraded business forecasts for the next 12 months to 5.6 out of 10. CEOs are telling their people to prepare recession plans.
At the start of the 2020 pandemic, we also lacked foresight to imagine the dramatic swings in the fortunes of companies. There were big winners like technology, retail, financial services, and home entertainment; there were big losers like travel and tourism, hospitality, and energy. The massive shifts in the global business landscape rendered strategic plans out of date and useless.
So, what now? How do we navigate the next big, bad thing?
In 20 years of advising CEOs and senior executives on strategy execution, we’ve learned that during crisis, some teams rise to the occasion, while others are less resilient and more susceptible to doubt, which prompts reaction in the moment and can foster a chaotic sense of doom. While there are winners and losers in industry sectors, it is also true that some defy the odds, look around corners, seize opportunities, and keep steady hands at the wheel.
What kind of leaders weather tough times?
Through a review of our data on leaders and teams, we’ve discovered that inevitably there are qualities of both that drive growth and innovation, even in the most challenging times. These qualities are not always intuitive. In fact, in shorter supply your team is stretched thin, exhausted, and too busy to stop the whack-a-mole game to think clearly and provide direction to others. What do these leaders and their teams do right?
They tap into the stabilizing power of composure and restraint
Leaders who demonstrate a high level of composure and restraint in challenging times create an environment where it is safe to make mistakes, and to tell others when things are not working. Leaders are then able to foster discussion in a calm environment and resolve small issues before they become bigger ones. These leaders get a read on the fast-changing environment and quickly problem-solve with colleagues.
They dial up their antennae of awareness and concern
Awareness and concern are two additional qualities that go hand-in-hand in times of change and uncertainty. As people struggle to navigate the pressures and volatility, it’s more important than ever to know what your team is thinking and feeling, and to be aware of the pulse of the organization. If a downturn is ahead, you may be glad that not every position post-Pandemic is filled. However, the reality for most companies is that their best talent is most at risk and likely to leave. Staying aware helps you shore up your best defense against threats to growth.
They ramp up their curiosity and interactivity
These are two leadership qualities that work together beautifully when you need to solve problems. During challenging times, many leaders turn inward to try to shoulder the burden of solving problems with a ready-fire-aim approach. They hear about an issue and move immediately into action. They may ask for input, but not in group settings. Thus, they put spokes in wheels and their best people are talking only to them; not to one another.
It may feel counterintuitive, but when you can be intentionally curious and convene smart people, you learn that they can solve the problem better and faster than you can. Because they’ve authored the solution, they claim ownership of it and put all their energy behind it. As you move through uncertainty, they begin to feel more confident of their own agency in managing turbulence. As Ken Blanchard once said, “All of us are smarter than any of us.”
They focus on unleashing the capabilities of their interdependent, interconnected teams
Virtual and hybrid work have already laid bare the hidden, destructive issues that can derail relationships and teams. Teams that had less face time and more conflict found the challenge of misunderstanding and unresolved conflict even greater. It isn’t only each team but your network of teams, and how they operate together, that makes your organization resilient.
The performance of teams is vastly more important to the future of work than individual performance. Teams are really the new heroes of organizations. When you see unresolved conflict between teams, you can diagnose, with absolute certainty, the role that the friction is playing in creating drag. As you try to pivot in a recession, it’s time to prioritize how teams in your organization are actively engaging with one another, aligning on the goals, and working with enterprise focus.
Our research on teams has found that in challenging times, trust, support, candor, and curiosity lay the foundation of team culture. Make it a priority to bring people together and resolve trust issues by encouraging candor and looking for solutions. Do this by first being curious yourself, and then encouraging others on your team to seek to understand. Take the time now to ensure that your teams are performing at their best, and you’ll reap the rewards today and well beyond any recession or downturn.
What now?
I remember a CEO that I know telling the story of the commitment he made to retain all of his employees during a downturn, even though he predicted a 20% revenue loss in the first year. That decision, while risky, turned out to be fortuitous, as the economy pivoted and demand soared long before expected. Competitors who had let go of employees struggled, while this company recovered quickly and remains above capacity today.
The decision he made was informed by the values and qualities of leadership that defined this company’s culture. The CEO led by example, demonstrating composure and restraint that others modeled. They spent time talking with their employees about the decisions that they were making and why. They demonstrated concern for their well-being when demand picked up and they were under pressure to deliver.
Take a lesson from this CEO and what we’ve learned about leadership and teams. Keep these three approaches in mind as you move forward:
- Stay focused on what works – good leadership will get you through.
- Double down on your people and your teams – listen, learn, respond, and invest to make sure they have the knowledge, support, and tools to do their best.
- Bring your leaders and teams together to navigate the uncertainty together – forget being a hero and instead draw in your organization to collaborate, cooperate, and invent the future – you will all be stronger as a result.
As the next months unfold, we can all prepare to be better leaders by reflecting on what we already know about leading in uncertain times. Think about what worked and didn’t work over the last two years. Ask yourself: what is the lesson and how can we apply it now?
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