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Leadership in Uncertain Times - thoughts from Sheppard Moscow

Leadership in Uncertain Times: Thoughts from Sheppard Moscow, adviser to some of the world’s leading corporate teams

A very emotional crisis
As Lehman Brothers staff emerged blinking into the sunlight on 15 September 2008, carrying their workplace belongings, they did not try to hide their emotions; many tears were shed. Their employer, their earnings and, in some cases, life savings had disappeared in a single day. One Lehman trader leaving the London offices was asked by reporters what the atmosphere was like. ‘Terrible. Death,’ she replied. ‘It was like a massive earthquake.’

An environment in which a long-established company can vanish overnight, like an aircraft disappearing off the radar screen, is deeply unsettling to everyone in business. The disappearance of established firms at the peak of the banking crisis has been followed by daily announcements of redundancy programmes across a wide range of industry sectors.

The business is not a machine
During stable economic periods it is all too easy to think of organisations as being machine–like, and that business is all about logic, rationality, market position and the right structure. When a mature organisation in a growing market has a slick operation, the leadership task can appear to be little more than overseeing operations and oiling the wheels. But it can take only one feature of that dynamic to turn negative for the machine to collapse or become irrelevant. This dramatically affects the leadership challenge.

As one Sheppard Moscow consultant describes it: ‘An individual in the financial services sector was telling me that before [the downturn] it was quite easy to be successful with numbers. Now, something else was going on. It was about direction; providing a compass for the organisation. The calls he got from his team had changed from “Can you help me with this analysis?” to people having emotional needs; wanting reassurance and direction.’

THE LEADERSHIP RESPONSE

For everyone caught up in the insecurities and changes of direction that the economic problems bring, there will be a unique personal challenge to address. At Sheppard Moscow we have experience in guiding executive teams through such transitions, and we are actively assisting some leading corporations with the current demands.

Our experience tells us that leaders need to act, and that the following are key areas to focus on:

1. Find the narrative – plot the course.
2. Deal with ambiguity ‘if things were different, they’d be different’.
3. Develop the relationships: build confidence and help people connect and to find meaning in what’s happening.
4. Maintain your own network – including peer support.
5. Open up, don’t close down.

(A detailed description of these five areas is provided below)

CONCLUSION

Is this focus on the emotional landscape, forming a fresh narrative and developing relationships, just for the turnaround stage? Can we return to looking at the numbers and operating at steady state once recessionary conditions cease – whether that is in six months or three years’ time?

Such a view might be complacent. An intriguing conclusion from the interim report of the banking industry body the Institute of International Finance in April 2008 on the causes of the banking crisis is that a near-exclusive focus on the numbers probably contributed to excessive risk being taken on. Lulled by misleading credit ratings and apparently ever-upward asset prices, risk was judged in mathematical terms, and there was not enough experience and judgement. Few people in the banks detected the similarities with the previous crisis of sub-prime lending – the Latin America debt crisis of the 1980s. There was also a tendency to be focused on the short-term, and not to create enough space to discuss organisational resilience over the longer term.

Detecting warning signs in the market is in part an emotional response; successful investors and entrepreneurs often use their intuition as much as calculation. An individual with long market experience saying ‘this doesn’t feel right’ can be a more useful indicator than a daily calculation of the Value at Risk. And a team that has forged strong relationships and is committed to the success of the organisation is better equipped to convert such warning signs into effective strategies.
All organisations need to create space for reflection, mature judgement, scenario planning and team building, as well as systems of measurement and technical skills. Switching off the emotions may never be a wise course.

Leadership in Times of Uncertainty.
The Five Focus Points in Detail

1 Find the narrative

This challenge may sound obvious, but in crisis situations an executive team may be so busy fire-fighting that it does not create sufficient space to plot the route out of the difficulties. If demand collapses in North America, or currency fluctuations make a region uneconomic, or the investors want to talk about the plummeting share price, there are immediate, pressing concerns for the executive team. They need to respond to these, but still find time to create a new strategy.

An automotive manufacturer that we are working with has described the current financial turmoil and downturn as being hit by the ‘perfect storm’. There is enormous pressure. However there is also a consistent, shared view among the management population of the new strategy and direction. There is also a glimmer of pride among the leadership team that they are entrusted with the challenge of saving the company.

The narrative has to be ambitious, but rooted in reality; more Winston Churchill – ‘I have nothing to offer you but blood, toil, tears and sweat’; than Mr Micawber – ‘Something will turn up’.

Not every narrative will take shape; not every rescue plan will work. There is psychological evidence, however, that we tend to inhabit the world of our conversations. If we talk about recovery, finding new markets, creating innovative ways out of the crisis, we are more likely to achieve these.

2 Deal with ambiguity – ‘If things were different, they’d be different’

The emotional intensity felt by many individuals caught up in the economic crisis means that they will often look to the leader for reassurance. Sometimes, the message isn’t wholly reassuring. Hence the delicate balance described above between finding a hopeful narrative, but ensuring it is plausible.

Leaders have to be comfortable in an atmosphere where there are no certainties; where interest rates, market demand, currency valuations, stock prices, commodity prices, ownership structures and the political landscape can alter radically from one day to the next. Some leaders actually thrive in such a context; but it requires a rare combination of mental agility, individual resilience and emotional intelligence. This is the type of leader that organisations need to promote. Above all, it is essential to acknowledge the ambiguity, rather than pretend there can be certainty.

An effective leader is multi-skilled. He or she will be able to deploy more than one ‘pair of glasses’ with which to view the company and the context: the logical lens for addressing technical needs; the systems lens for understanding the organisation as a complex network; the relationship lens for understanding the key partnerships and teams in that network; the narrative lens for determining which point on the strategy the organisation has reached.

3 Develop the relationships – build confidence, connect and help people to find meaning in what’s happening

Our belief at Sheppard Moscow is that a company consists of a complex web of relationships, rich in human capital. Organisational structure is just an outline - the real company is the interaction between people. Moreover, the structure often requires radical redesign in the midst of turbulent market changes, and this cannot be effected without close co-operation of the key players.

Once the narrative is settled, it needs communicating; and the employee population needs to be engaged. Emotions come to the fore in a crisis. This can create disruption, with individuals under stress losing their judgement or temper. But it also creates an opportunity: emotions can be channelled in creative ways, and no rescue plan can be effective without the full commitment of hearts as well as minds.

Leaders have to think carefully about how to communicate their plans: few people will be energised by a list of bullet points sent via email, or a PowerPoint presentation with bar charts. It might be better to call a meeting in the staff canteen, sleeves literally and figuratively rolled up, delivering a combative speech that says ‘I don’t have all the answers and I can’t predict the future – but here are our strengths; here are our opportunities, and this is the plan.’

4 Maintain your own network – including peer support

There are personal challenges for everyone in turbulent times, and this includes managers and executives. Just as it is easy to become taken up with immediate crises, so is it possible to become locked in a business silo. The demands of leadership through difficult times put enormous strains on individual managers, and it is necessary to maximise the support from families, friends and a coach or mentor. Valuable support can come from other managers, in different disciplines but facing similar challenges. It can be enormously reassuring to discover you are not alone; and a powerful exercise to enlist the advice of others in a similar situation.

5 Open up, don’t close down

Individual and corporate survival and success require drawing upon the widest possible range of resources. Ultimately, it is a test of character, but this translates as collective as well as individual character. No one individual can achieve much on his or her own. There can be a case for forging new relationships, and discovering new assets and resources, as well as for strengthening existing ones. Leaders need to be aware of the resources available, and be capable of forging essential partnerships. A crisis that threatens the very existence of an organisation, or one’s career in it, can prompt innovative thinking and fresh dynamism that surprises even the individuals themselves. At Sheppard Moscow, one of our tasks is to nurture the confidence that you can do it.

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