Free Book Summary : Leadership in the Era of Economic Uncertainty The New Rules for Getting the Right Things Done in Difficult Times Author: Ram Charan Publisher: McGraw-Hill Books, 2009 ISBN: 978-0-07-162616-3 128 pages

The Big Idea

Economic turbulence has arrived with a vengeance, and only companies that face it head-on at the beginning of this worldwide crisis will be the ones left standing once the dust clears. Renowned consultant Ram Charan traces the causes of the crisis, identifies the essential priorities managers need to focus on now, and offers clear guidelines for top executives and managers. From executive concerns to finance, marketing, sales, and manufacturing issues, Leadership in the Era of Economic Uncertainty is the necessary primer for seizing opportunity and preserving profit in today's global economy.

The Six Essential Leadership Traits for Hard Times

The following are the six essential behaviors and traits that characterize a good leader and which are most important for managing in this downturn of downturns:

1. Honesty and credibility. Level with people and tell them how you see the world, acknowledge the limits of your understanding, and ask them for their own views.

2. The ability to inspire. Inspire your team to focus on the new priorities by doing so yourself, fearlessly. Inspiration will also come from making decisions that produce incremental successes.

3. Real-time connection with reality. In this volatile and uncertain environment, reality is a moving target. Gather it from unconventional sources. Allow the picture to change as you gather new information.

4. Realism tempered with optimism. This is where leadership becomes a performing art, introducing that touch of optimism that taps psychological reserves to deal with bad news and transform fear into action.

5. Managing with intensity. Only through deep personal development can you acquire ground-level intelligence, share and discuss it with your team, and act with the speed that is required in a volatile environment.

6. Boldness in building for the future. It will take imagination and guts to place strategic bets with no guaranteed payoffs when there’s so little money available and so much uncertainty about the assumptions your plan is based on.

What CEOs and Business Unit and Country Managers Must Do

To meet those daunting responsibilities, there are several things that can and must be done:

RECOGNIZE REALITY. Looking in the rearview mirror at how things used to be serves no purpose and will distract you from the challenges ahead. An equally dangerous form of denial is wishful thinking, the tendency among many of us to say to ourselves, “This will end soon, and we will be back to normal.” Don’t believe it.

CHANGE YOUR COMPANY’S PSYCHOLOGY. You need to present a compelling argument and a credible plan to show that the problems the company faces can be solved and that the company can emerge from the troubled times in even better shape.

BE BOLD. Your actions have to be bold, not tentative, if you’re going to convey confidence. You also should be transparent, explaining how you reached your decision, why you think it is the best decision, and how your actions will move the company toward your vision of what it needs to become.

REALLOCATE YOUR TIME. Entrust some tasks to proven subordinates who, within the parameters in which they can make decisions, are able to work quickly and skillfully.

PROTECT THE CORE. In every business there is a central set of invaluable assets, including certain customers; people who know technology, operations, or logistics; and in many companies a brand identity that is solid and established. You need to identify what is at the core of your company – constituents, for instance – and protect it from loss or damage during the crisis.

REASSESS YOUR TOP TEAM. Your job is to evaluate your top people with a new lens and under a different light. Do they have the skills and mind-set to lead under current circumstances?

BE TRANSPARENT. You have two major responsibilities that must be met through communication: information flow and motivation. The message is seldom heard the first time. It is essential to repeat it time and again to be sure everyone gets it.

BE VISIBLE. You can inspire everyone in the company by doing something as simple as being visible to the troops, encouraging them with a smile or nod, or noting a recent accomplishment. This means of course that you have to get out of the office and walk the corridors and visit the factories.

KNOW THE DAILY NUMBERS. It is critical that you have a firm picture of the company’s financial position on a real-time basis.

MANAGE FOR CASH. This means that you almost certainly will be required to give up some customers or products. Be careful though, when you think about ways to conserve cash.

REDUCE THE COMPANY’S CASH BREAK-EVEN POINT. In determining the actions you must take, think about whether you may be creating potential obstacles to refinancing or reducing your debt rating. Then decide what the cash break-even point is.

PARE YOUR CUSTOMER AND SUPPLIER BASE. A key part of your comprehensive plan is the determination of which customers to keep. Even in a downturn, not every customer is worth having. Customers can put demands on your cash when, for instance, they require you to carry a lot of inventory.

KNOW WHEN TO CHANGE YOUR STRATEGY. CEOs call the shots on strategy, with the board’s approval. Yet they also should be alert to where sudden opportunities may appear. They need to have a finger on the pulse of the external environment, seek input from other people about what is happening, and develop a point of view about it.

SET SHORTER-TERM MILESTONES. You’re going to have to work within a much shorter time horizon, demonstrating flexibility and agility by setting targets on a quarterly, monthly, or even weekly basis.

Mind Over Money: The Chief Financial Officer

First, you will need to exclude the honest conviction that the company will come through the storm successfully.

Second, you will need to present facts and details of the company’s financial health under different scenarios of future demand and market conditions in a format people can comprehend.

Third, you must be constructive and very specific in demonstrating how resources have to be redeployed.

Fourth, just as you will be interacting much more closely with leaders in other areas, you need to train your people to do the same thing at lower levels of the company.

Human Resources

HR will bear the brunt of the transition to crisis management in the early stages because so much of that transition will affect people at every level of the organization. There are several areas in which you will be tested, and here are some measures you can elect to take to respond to these challenges:

HEAD COUNT REDUCTION. You know that head count has to come down and come down fast, but you can’t eliminate people willy-nilly or you’ll wind up dismissing the wrong ones and have to struggle to replace them later.

COMPENSATION. As the HR leader, you must ensure that people have a clear understanding of their individual goals and the company’s overall goals and how they will be compensated relative to those goals.

SUCCESSION AND TALENT PLANNING. As challenging as a downturn can be for a company, it also is a great opportunity to make sure the right people are in the right jobs.

TRAINING. Make it a point to examine the relevance of leadership training programs and how to use those dollars in the best way over the next two or three years.

MORALE. Do not underestimate the need to keep up morale during tough times. In relation to this, you need to be sure that employees are getting accurate and timely information about the company’s efforts to survive and thrive in the new environment.

Moving Forward

If you’re a capable leader, you will have a stronger business after the downturn than you did before. If you’re a leader with vision, you are already wondering what comes next. It may be one year, it may be three or more, but there unquestionably will be a Phase Two. Being a leader in tough and uncertain times means always anticipating the next challenge and building the fortitude and skills to face it.

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