How to be a good boss in bad times

When the going gets tough, the best leaders make like Harry at Agincourt, winning employees' hearts as well as their minds. But how do you inspire your happy band when the odds are stacked against you? Stefan Stern elucidates.

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Last Updated: 09 Oct 2013

Books may furnish a room, but what are you supposed to think when you finally tidy up your desk after months of neglect and realise that the following titles were piled up on it: Leadership in the Era of Economic Uncertainty, Leading in Times of Crisis, The Upside of the Downturn, Managing Through Turbulent Times, Surviving and Thriving in the Economic Crisis and Managing in a Downturn? And that was just pile number one.

Some people blame the media for first exaggerating and then perpetuating the mood of gloom and its ever-present twin, doom. The book-publishing industry clearly has a case to answer as well. But, in truth, journalists and authors have simply been reporting what is in front of their eyes. Times are bad. And there's a strong appetite for material that might help struggling managers cope with these unpleasant conditions.

What should good managers do at a time like this? First they have to rid themselves of any lingering traces of denial and accept how difficult the situation is. 'Confront the brutal facts,' as Jim Collins puts it in his book Good to Great. The corporate doctor and turnaround expert Anthony Holmes predicted hard times to come two years ago in a paper called 'The Gathering Storm', which, inevitably, did not receive the attention it deserved at the time (well, it was one hell of a party, wasn't it? Who wanted to listen to sober wisdom at a time like that?).

Holmes pointed out that managers often struggle to come to terms with the idea that a buoyant period of trade is coming to an end. They run through a sequence of responses, which he characterised as 'denial, concealment, discussion and negotiation, confrontation, collapse.'

This recalls Ernest Hemingway's description of how a business had gone bust: 'First slowly, then quickly'. In fact, at a time like this, Holmes argued, something called 'remedial management' may be necessary. 'Unlike incumbent management, remedial management has no emotional attachment to assets and programmes, is not encumbered by a pre-existing relationship with lenders and creditors, and is therefore able to approach the task dispassionately.' He added: 'Remedial managers are capable of instigating and directing multi-functional, simultaneous change programmes. They are experienced individuals who are unconventional in the sense that they are necessarily not industry-specific, and are probably not the executive that you would select to lead a company in more stable times.'

So here's the first big challenge in trying to be a good manger in a bad economy: you simply may not be equipped, in terms of experience, psychology and outlook, to cope. This anxiety-inducing thought in part explains why respected gurus such as Ram Charan have been rushing out primers to put some fire into managerial bellies. His latest - Leadership in the Era of Economic Uncertainty - is one of those books that have been piling up on managers' desks in recent months. 'Management challenges don't come any bigger than this,' Charan announces at the start. 'The economic peace of the past generation is over. We're in a war for survival, beset by fear, uncertainty and doubt.'

He calls for a back-to-basics approach: know your daily cash position, and demand that supposed longer-term investments start paying back much quicker. If they cannot, they must be cut. A time like this is essentially about survival. 'The new reality is that, barring acquisitions, your company will be smaller two years from now than it is today. You have to reduce your workforce and capacity ... Survival depends on cutting costs and raising cash ... Narrow your focus and concentrate on the core of your business ... In the end, you will have fewer customers, fewer products, fewer facilities, fewer people, fewer suppliers - and a stronger company,' he says. It's being so cheerful what keeps him going.

Cuts, cuts, cuts. Is that all there is to it? It hardly sounds inspiring, not King Hal at Agincourt. And won't there be collateral damage to the organisation, in terms of trust and lost morale, if managers are seen to enjoy lopping off limbs? That's certainly the view of Bob Sutton, professor of management at Stanford University, California, and author of an important article on managing in the bad times in the June 2009 issue of the Harvard Business Review.

Without compassion, said Sutton, such drastic management moves can do as much harm as good to the interests of the organisation. 'A boss delivering bad news to a subordinate is, by definition, at a later point in the emotional cycle of reacting to it,' he wrote. The perhaps soon to be ex-employee is hearing this news for the first time. 'Not only will that person be unready to engage with the considerations the boss is outlining, but he may be appalled at how dispassionately they are presented.'

Which brings us to the provocative question: Are women managers better at delivering bad news than men, and thus better placed at a time like this to lead us to a happier future? It is, of course, simplistic and inaccurate to offer a 'men bad, women good' account of organisational life. But in her new book The Female Brand: Using the female mindset to succeed in business, Catherine Kaputa says there are a lot of factors in women's favour when it comes to managing through difficult times.

As she explained to Fortune magazine in July: 'In general, women are most comfortable with a management style that is more collaborative and less concerned with rigid hierarchy. That more inclusive, collegial style is what gets results in global companies today. And it's clear that collaboration comes naturally to women, starting at a young age ...

'Of course, not all female managers are the warm, empathetic sort, but women in general do tend to be more skilled at building emotional ties and fostering a sense of "we're all in this together". Women are more inclined than men, usually, to acknowledge the emotional component of layoffs. That's important because, like it or not, depriving someone of their job is an emotional blow to that person and to the survivors who are watching it happen. It's not "just business", and women get that.

'In the book, I cite an interesting study showing that people respond much better to bad news that's delivered in a caring way than they do to good news that's delivered in a cold, impersonal style. So female managers generally are better than men at both laying people off and motivating the employees who remain.'

These decisions are certainly having an impact on morale and levels of trust. In its recent half-yearly review The Trust Barometer, PR firm Edelman found that, in the UK, only 11% of those surveyed believed global business has a good reputation. Half thought it would take until 2011 or later for business to be trusted again. And trust in business has fallen 14 points among 25 to 34-year-olds since January 2008 - down from 56% to 42%. (For more on trust, see our feature starting on p44.)

Leaders are exposed. All eyes are on them. Executive coaches Peter Shaw and Steve Wigzell, who work for coaching consultancy Praesta in London, recently published an interesting guide (Riding the Rapids) for senior managers leading their teams through the current tough conditions. 'As a leader, be conscious that everything about you gives a message to your organisation,' they write, 'not only your words, but your posture, facial expression, tone of voice and appearance. People will look for any signals that you feel things are out of control. The perception of your mood will spread like wildfire and will often become distorted through gossip. When one CEO asked his chairman what was the single most important thing he should be doing, the reply was: "Smile".'

But smiling will not be enough. If you can find a quiet moment for serious contemplation, Hartmut Stuelten, a partner in Oliver Wyman's leadership development business, suggests five analytical steps to help managers reassert some authority in a turbulent world.

First, ask again: what is the real purpose of your business? This is not the same thing as a discussion over strategy. Why do you even presume your company has the right to exist? Unflinching self-examination can help clarify and renew your purpose.

Second, leaders need to facilitate greater engagement from the workforce. Make it easier for people to feel engaged with what you're all supposed to be trying to do. Third, make joint, coherent action possible: encourage teams to work together, across conventional silos and boundaries. Fourth, leaders need to live up to Gandhi's famous instruction to 'be the change you want to see in the world'. You have to exhibit the kind of behaviour you want to see from everybody else.

Finally, recognise that we are living in a world of finite resources. That is the context for business today. We have no automatic right to survive. This fifth thought deliberately leads back to the first. Managers need to ask these questions continually, as an iterative process, Stuelten says.

Other thought-leaders are speaking up, offering routes out of the crisis. Hunkering down and cutting costs is not how great businesses will be grown, says the management thinker CK Prahalad. The challenge is to harmonise the need for prudent management with the need to innovate, marrying stability and volatility. Prahalad conjures up the image of a formal Japanese garden, with its rocks (stability) and running water (change and innovation). We cannot have either one or the other in some sort of unsatisfactory trade-off, he argues. We need to aim for both.

It can be done. In one of the UK's most fiercely competitive markets, the supermarket chain Sainsbury's recreated itself, from the struggling and confused outfit of a few years ago to the robust and reinvigorated business of today.

What does Sainsbury's want from its leaders? MT has seen an internal company document that describes a series of management approaches that could help steer any firm from the difficulties of today to happier times. Sainsbury's wants its leaders to 'follow through, obsessively', to 'plan for pace and review on the move'. Its managers should 'paint a coherent and compelling picture' for staff and 'communicate relentlessly'.

Sainsbury's managers are invited to 'raise the bar on performance every day', to 'address underperformance through honest and challenging conversations' and to 'look people in the eye and have the courage to speak up'. Its managers are urged to 'have the confidence to break new ground' and to 'apply ideas where they will make the biggest difference'.

Not too much about cost-cutting there. Of course, everyone is preserving cash, cutting costs, trimming back. It is necessary. But it is not sufficient. Tomorrow's winners are the businesses that dare to imagine a more creative and valuable role for themselves in the not-too-distant future. Once more unto the breach, dear friends.

BUSINESS GRADUATES PLEDGE TO RAISE THEIR GAME

Will the business schools come to the rescue, generating a new cohort of leaders to steer us from recession to recovery? Some may have their doubts about that. But stirring below the radar is an international movement to reinvent the MBA and get managers to re-dedicate themselves to a new professionalism.

Inspired by two Harvard business school professors, Rakesh Khurana and Nitin Nohria, this movement of MBA students is fast gathering momentum. They are signing an oath that commits business school graduates to improve their act. Explains Max Anderson, Harvard class of 2009: 'The oath is a voluntary pledge for graduating MBAs to create value responsibly and ethically.'

By the summer of 2009, more than 50% of Harvard's graduating MBA class had signed the oath. Further afield, over 200 students at other business schools - at Stanford, Wharton and Oxford - had also signed up. And it is due to be translated into Spanish for an MBA programme in Colombia.

The oath begins: 'As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone. Therefore, I will seek a course that enhances the value my enterprise can create for society over the long term.'

The two Harvard professors are clear about how important they think this initiative is. 'Our code reminds managers of their obligation to honour and further the reputation of the profession as a whole by their actions as managers, as well as by their commitment to develop and enforce the code,' they wrote in the October 2008 Harvard Business Review. 'Managers today are among the least trusted members of society. Regaining this trust for the profession of management must be regarded as an important responsibility for all individual managers.'

Of course, what people actually do is what matters. But it is a sign of how deep the crisis in modern capitalism is that such an initiative has been taken and has proved popular among such a supposedly ruthless and hard-bitten community as the MBA student body.

WHEN THE GOING GETS TOUGH ...

Tell the truth. Employees are not stupid. They can see what is happening in the economy. So be frank about the conditions you face. If you don't provide the information, others will fill the gap with their own inventions. Rumours are rarely positive. Kill them with transparency.

Don't hide. Leaders have to be visible at a time like this. Come out and field questions. Show that you are not panicking. 'When you think you have communicated enough, it is time to start again,' says Justin King, chief executive of Sainsbury's.

Find something positive (and realistic) to say. It can't all be bad news: there has to be at least some hope. Make sure the depressing announcements are sweetened with something more uplifting.

THE EXPERT VIEW

Bob Sutton, Stanford, says ...

- Offer predictability Give people as much information as you can.

- Show understanding Explain why the changes you're proposing are necessary.

- Try to exercise some control. Break down the big challenges into more manageable bite-size tasks.

- Display compassion Put yourself in other people's shoes.

Ron Heifetz, Harvard, says ...

- Foster adaptation People will need 'next practices' as well as 'best practices' in the future.

- Embrace disequilibrium Maintain just enough anxiety about the future; people are ready for change, but not for panicking or freezing.

- Generate leadership Give employees at all levels the opportunity to experiment.

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