NZIM: Leaders Must Restore Trust – These are Tough Times

The world may now be cash strapped but the commodity most lacking and which, because of its scarcity, brought us to the brink, is trust. The speed with which both individual and global enterprise recovers will be in some direct relationship to trust’s restoration as the most precious commercial, and social, commodity of all.
The capitalist world has been seriously let down by those it once looked up to. Shattering trust on global scale will take some mending but, bit by inspiring bit, the damage can be repaired and, as recent issue of US magazine Business Week suggested: “In times of turmoil, opportunities abound.”
Recessions do create winners and losers. Unknown for managers contemplating the new future is the time it might take to get the basics in place to re-build the business model, restore confidence, retain and up-skill employees. Business is dealing with banks bent on re-building their balance sheets before concerning themselves with their customers’ needs.
Consumers are heading into survival mode. As unemployment figures climb, so confidence falls. As house values tumble, apprehension heightens. Receivers and liquidators are, for now, the new recruiters.
All this may indeed create climate flush with opportunity, but it also creates enormous organisational uncertainty. Now leaders must lead. The charismatic, overpaid, ego-heroes of recent years are shot. If not, they should be. And management, one of humankind’s most important inventions according to management guru Gary Hamel, must find new and better ways to manage.
According to Ram Charan, business consultant and author of the recently released book, Leadership in the Era of Economic Uncertainty, executives must lead their people “out of psychological funk and at the same time tailor their business to focus on new reality”.
Leadership is performing art, and not simply analytics and working with people, says Charan. “Leaders are able to connect to the change and confront the reality of what it is.” And, he says, leaders are teachers and should “practise teaching in staff meetings”.
Charan also warns that in the current climate leaders should not give false assurances. Leaders need intellectual honesty. “Whatever is coming in from the media or common individual is bound to be confusing because there is no clear combined viewpoint,” he says. “A good leader will sort all this confusion and give an intellectually honest viewpoint.”
Organisations looking to recruit executives in New Zealand’s current climate are obviously mindful of the current economic climate, according to Ian Taylor, senior partner in Auckland-based recruitment consultancy Sheffield. And while the ability to understand economic drivers and implement commercial strategy to ensure survival and success is crucial in any skill set, “most important for any senior executive at this time is the ability to build trust throughout an organisation”.
“Organisational confidence is the top priority,” he adds. Acknowledge [individuals’] contributions and demonstrae an ­understanding of the uncertainty and pressure that individuals are [now] under.”
NZIM’s national chief executive David Chapman concedes that greed has been prime motivator of the world’s current predicament. He advocates better understanding of the principles of servant leadership. “We need leaders out there who sit at the bottom of the triangle and serve the enterprise and ultimately the customer.”
Leaders still need to provide the strategic vision and be prepared to articulate it at every opportunity, but most of all they must “role model good business behaviours that ooze good business practices” he says.
“Leaders today have the job of restoring public confidence in business which looks rather seedy. Productivity and competitiveness are the words the new government wants to hear. And we need innovation everywhere.”
Chapman likes Gary Hamel’s plea: “Make innovation everyone’s job every day and troll the world for new ideas and fully engage the talents of every individual in your organisation.”
The excesses of executives in some global enterprises, particularly in the banking and financial sector, have not manifested themselves in quite the same way in New Zealand – acknowledging always that some “entrepreneurial” individuals have unquestionably ripped off investors. And consequently Taylor sees little evidence that organisations are dropping leaders, effectively blaming them for the state of business.
“I think there is clear understanding by most boards and owners that our business environment is affected more by international ructions that we have control over,” he explains. “But this is time when all an organisation’s resources and capability, particularly at governance and senior management levels, need to work collaboratively and urgently to size their operations and focus on taking advantage of the opportunities that exist now and in the future.”
The advice Marshall Goldsmith, America’s top executive coach, gives managers wanting to get the best from their people in times of crisis is straightforward.
Managers should be less judgemental and realise that any unusual behaviour may have deep causes. Therefore, be more empathetic and tolerant than usual.
Help those who are down, he told Business Week. Some employees are dealing with unusual amounts of stress. Help them now and they will be loyal later. And focus on the future. Forget about what could have been and move on to focusing on what’s ahead.
Finally, managers need to understand their own emotions. Be professional, he says, and don’t take it out on the team.
Wise managers and leaders are already working to capitalise on the opportunities the recession will present. They are battling to get the cash flow right, looking for new sources of capital, managing customer credit and restructuring to carve out unnecessary costs and increase efficiency.
Less competent managers may fall by the wayside because, as super investor Warren Buffet put it: “It is only when the tide goes out that you learn who has been swimming naked.”
Some executives might not have the disposition or the competency to operate effectively right now but, says Taylor, “while boards must deal swiftly with incompetence it would be mistake to contemplate the wholesale dropping of individuals. Organisations need to take responsibility for the up-skilling and development of their senior leaders.
“These times can be dislocating enough for organisations and communities without the sorts of ‘toss the boss’ measures that some commentators propose. Boards need to be particularly proactive in helping organisations through their tough times.”

Reg Birchfield is director of NZIM and director of 3media.

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