Thought leader : Leading In An Economic Downturn

What is the secret to maintaining motivation in downturn? How do you stop talent walking when the going gets tough? By providing clarity of direction, leading well and setting an example from the top.
Businesses that win in downturn are the ones that engage with their employees, providing reassurance when necessary and clear direction to all.
Sure, it feels better when markets are rising and everything is buoyant. But economic cycles are fact of life and from what we are seeing and hearing it appears that New Zealand is in the full grip of downturn.
In global management consulting firm Hay Group’s experience globally, the really successful organisations and leaders in times like these will be those that treat the downturn as an opportunity.
In preparing to survive economic uncertainty, effective leaders will be clear about who is accountable for what and their governance models will promote speed, agility and better decision-making.
What it comes down to is employees who are engaged by the right kind of leadership, who have clear goals and feel recognised for their efforts, give more discretionary effort (give beyond what their job demands) and this effort flows through to the bottom line.
Hay Group has shown that climate improvement programmes can translate into up to 30 percent increase in the amount of discretionary effort individuals are prepared to give, which in turn translates into increased organisational results and profitability.
Hay Group is making case for unconventional wisdom – and encouraging you to take the road less travelled during an economic downturn. That is to think twice before you decide to slash staff numbers, cut HR budgets and stop investing in the development of your people.
We argue that clarity of direction, sharpened focus on employee engagement, and not just focusing on the balance sheet, will both improve your organisational climate and stem the loss of key people that often happens during these tougher times.
Improving an organisation’s climate can have huge impact on performance of your people and in turn the results of your organisation. Improving an organisation’s climate means creating an environment where everyone is able to perform to the best of their abilities.
Climate is even more important in downturn as in the good times the financial results (and the resulting rewards) can be motivation enough. But when the results are uninspiring employees need higher sense of purpose.
Demonstrating and living clear set of values, whatever the economic conditions, will build an organisation’s credibility in its employees’ eyes. After all, who wants long-term future with company that forgets its values and simply goes into survival mode when the going gets tough?
This may sound like major task and it is true that improving an organisation’s climate does require high degree of commitment but it doesn’t require major capital investment.
Many organisations think the answer is to cut HR budgets and slash staff numbers as way to survive the downturn. Of course there will often need to be redundancies, but there is temptation to panic – and many organisations forget life beyond the downturn.
Businesses that keep their cool and manage talent perceptively are the ones that survive and get toughened by the experience. The best CEOs see every downturn as an opportunity to strengthen their organisations, so that when the recovery comes around they’re in good position.
Such leaders do not, in our experience, go for across-the-board headcount cuts.
So, in summary, the best companies deal with their talent in tough economic situations by:
1. Thinking beyond the recession – you need to be positioned for success on the upward cycle.
2. Use the downturn to prepare for recovery – by investing in leadership that creates good climate.
3. Invest in the right leadership capabilities within and outside the company – and develop the skills of your individuals and leadership teams.
4. Run compelling consistent programmes – that make sure leadership teams are aligned on strategy and communicating consistently.
And see how effective leadership in an economic downturn can provide world of opportunity for the savvy organisation.

Gill Hopkins is the director of leadership and capability at global management consulting firm Hay Group.

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