How to Stop Leading in a Downturn

Batten down the hatches. Stick to your knitting. Trim the fat; trim some more. With no end in sight for the recession, you must embrace new ways of leading if you want to compete in a downturn…

STOP! You and your team have heard the mind-numbing drumbeat of endless how-tos “in a downturn” for the past 24 months. And it has wrought the following:

Cultural fear
Postponed innovation
Reduced client service
Quality breakdowns
Tepid marketing activity
Endless excuses about the economy from the rainmakers (and everyone else)
Defeatism

Now that the end of the Great Recession is here, services firms must renew hustle, passion, intensity, and competitiveness. It’s time to roll out words we haven’t used for a while: innovation, opportunity, and progress.

As always, it’s up to leaders to make sure they happen. This four-step process will help them stop leading in a downturn, and start leading in an upturn.

1. Prepare Yourself to Lead Again

Leaders have spent a while now focusing on leading in a downturn. Whether they realize it or not, this affects the psyche profoundly.

At staff meetings at our company, Wellesley Hills Group, we invariably ask each other the question, “Where are your headlights pointing?”

When business is going well, headlights always seem to be pointing up. When headlights are up, everything seems possible: financial projections are good and going to get better. The new product launches will all succeed. Your strategy to best the competition will most definitely work.

When business is not going so well, headlights are generally pointing down. We see another quarter of losses with no end in sight and sales reports that inspire much cringing. Are we winning the race? Heck, we’re just trying to keep from drowning.

Every business experiences down times. But in normal economic periods when headlights are pointing down there’s a silver lining: the knowledge that every business can pick itself up by the bootstraps and create themselves anew. For the last two years not only have everyone’s headlights been pointing down-way-down, every consultant and business pundit has advised us to keep pointing them down. There is no way out. No exit.

That kind of thinking needs to stop, and the stopping starts with you, the leader. You might think, “That goes without saying. Of course the leader needs to get back on the horse first. What comes after that?”

This thought reminds me of people who have started diets without first giving enough consideration to the question, “Am I ready to do this?” They start the diet regimen enthusiastically enough, but enthusiasm and sticktoitiveness wane in favor of the all-too-easy-to-grab brownie sundae. It’s tempting to move too quickly onto the next step, but often leaders, like dieters, are not ready.

Believing in the success and competitiveness of the business yourself is priority number one for you as a leader. Don’t move on to step 2 until you believe deeply that you’re ready to jump back in to take the company to new heights.

Relieving a company of the inertia of believing that “things are terrible” requires leader intensity and boldness. After all, the team has spent 24 months with heads down, watching their steps. You need to get them to look up again.

Assuming you are ready to pilot the ship to a new destination, the next question is this: what’s the destination? The answer to that depends on the answer to the question: “What just happened?”

2. Answer the Question, “What Just Happened?”

Some saw the storm coming, and some got caught in it unaware. Regardless, when the storm was here, company after company battened down the hatches and held on for dear life. Now that the wind has died down, the sun is coming up, and Dorothy’s safely back in bed, it’s time to look around and take stock of what changed.

Has your industry fundamentally changed, or was there just an extended lull?

Has your competitive environment changed, or is it the same players with the same tools getting ready for a new round in the ring?

Has your organization’s ability to compete changed?

For all of this, you need to create a viewpoint, a fundamental statement of beliefs about the reality of what just happened. Without first having a firm grip on the reality unique to your business, you won’t be able to create a path to a new destination.

Your next step is to share your viewpoint with everyone and help face the new day with new understanding and optimism. And to do this, you need to define (and maybe redefine) the value that your company brings to market.

3. Reassess Your Value Proposition

Do you need to innovate to compete? What can you do to dominate your field? How do you achieve above-average profit and growth? During the recession many businesses lost focus on these fundamental questions as they put their heads in the sand and turned on the survival afterburners.

Now it’s time to get back to business fundamentals. You’re ready to lead (step 1) and you have a firm grip on “what just happened” (step 2). Next comes taking that knowledge and developing a new vision for competing in the market.

The best way to do that: define the value you deliver (or need to deliver) to the market.

The concept of a value proposition is over-complicated by many. In fact, it’s relatively simple. A value proposition is the collection of reasons why a person or company buys something.

Given your answer to step 2 (What just happened?), you now have a context to develop and deliver value to the market, answering questions such as:

Are our offerings resonating with the market? How can we improve and innovate so demand for our products and services is as strong as it can be? For many companies the services that resonated with the market five years ago changed radically during the recession. Now that we’re coming out the other side, leaders must get a firm grip on how needs, desires, and tastes evolved through the recession and will continue to evolve as the bad times disappear in the rear view mirror.

Are our company and offerings differentiated, or does the market perceive that companies and offerings like ours can be easily substituted? Maybe competitors have left your space, and you’re the last one standing. Or maybe new companies have sprung up, and you now face intense challenges from new entrants.

Can we substantiate our messages, inspiring trust and confidence in the market? During the recession I’ve spoken to firm after firm that lamented losing to better branded players and thought leaders during the recession. They only wished that they had the funds and resources to build their brand, but the recession squeezed resources out. It behooves companies to take advantage of this new opportunity to build their brands and improve their reputations.

Find answers to these questions for your company. They’re critical for defining your post-recession competitive strategy.

4. Mobilize the Team

Open to page one of any annual report and you’ll find the obligatory, “Our greatest strength is our people.” While you don’t see it in the annual report, there’s a follow up to that sentence that leaders say in their heads. “…but morale is low, their ranks have been decimated, they’re licking their wounds, and their eyes are not on the prize.”

As a leader, it’s your responsibility to create change that will allow the company to succeed. With everyone on the team still in their recession mindsets, this might seem like a daunting task. Daunting though it may be, it’s doable.

In 1993 IBM was on the fast path to bankruptcy. In his book Who Says Elephants Can’t Dance? Lou Gerstner, who took over as CEO in April 1993, described an IBM that was on the brink of insolvency, pursuing strategies and products (e.g. OS/2) that weren’t resonating in the market, and were crippled by silos, consensus-based decision making, and “studying things to death.”

Sound familiar?

Gerstner famously changed the IBM strategic direction to focus on services and solutions over products, and changed the culture to focus on fast, efficient execution and results. He was ready to lead when he accepted the job (step 1), knew what just happened to land the company in its predicament (step 2), redefined the value proposition of the company and offerings (step 3), and mobilized the team (step 4) to realize a new vision for the company.

IBM now employs just under 400,000 people. If Gerstner and his team can mobilize hundreds of thousands of disheartened staff members at a company on the brink of insolvency, you can too. Just like with IBM in 1993, the opportunity to flourish is all around you just waiting to be discovered.

All you have to do is stop leading in a downturn.