Managing During the Downturn

We recently conducted a developmental assessment of an executive who is clearly a victim of the current economic crisis. We began by gathering 360-degree feedback, and when the results came in, they were dismal in every way. To sum up his observers’ perceptions, he had “checked out” and seemed completely disengaged from his leadership responsibilities.

We met with him to present the findings and worried about how he would take the tough news. At the end of our presentation, we asked how he was feeling. He simply replied, “Not good.” After a period of silence, he went on, “Look, let me describe a terrific day at work: I drive in early, get to the building before everyone else, go into my office and close the door. If I am really lucky, by the time I leave at the end of the day, they’re all already gone!”

Knee deep in the recession and unclear about what to say or do, this executive has chosen to retreat. Unfortunately, he is not alone.

Nothing has prepared today’s leaders for the current economic situation. Stories of the Great Depression and other similar periods remain just that: stories. In this demanding and turbulent environment, organizations tend to become increasingly irrational places, and leaders cast very long shadows. New conflicts are likely to emerge, ordinary concerns can blow up into significant events, and productivity often takes a back seat to distraction.

As a result, managers who were once balanced and poised are being knocked off their feet, with their teams feeling the brunt of their increasingly ineffective behavior. Most feel enormous responsibility to step up and deliver, and yet very few actually know what they should do.

These pressures are what forced our executive to go radio silent and declare, “A good day is a day in hiding.” But it doesn’t have to be that way. Leaders can learn to recognize the effect the downturn is having on people, and then take some practical steps to steady the state of their organizations.

We see four basic threats to the productivity of a business and to the well-being of the people who work there, and offer four specific sets of management actions that can help leaders address them. The threats are:

1. Worry and fear of unemployment
2. The fragmenting of the workplace into competing groups of “us vs. them”
3. Pervasive uncertainty, which paralyzes thinking and invites distracting speculation
4. High levels of personal stress that can turn into serious distress

Worry and fear of unemployment
Let’s begin with the toughest leadership challenge: the worry and fear that can occur when one’s livelihood is threatened. Let’s remind ourselves of what’s at stake.

For a young person, the loss of a job derails an important start in life—the major life task of separating from home and becoming independent. Early career dreams and ambitions are derailed. The loss erodes self-esteem and plants self-doubt.

Things are no easier for midcareer people. Many people have others who depend on them, so the prospect of losing a job and going through a long search, only to take a position that may not pay as well, is both a financial worry and a psychological blow.

For people in the later stages of a career, seeing their savings erode, the prospect of losing a job and especially losing health benefits is particularly distressing. “Catastrophic” is a word one hears when people talk about the potential effects of a job loss at this stage of life.

What to do in response: manage priorities
The tools needed to respond to worry and fear are near at hand. What a business leader can do is to make the workplace so focused that worry and fear are displaced, if at least temporarily. The principle here is simple—you can’t be focused and distracted at the same time. More to the point, you cannot be adrift in worry and fear if you are fully engaged in your work. Leaders should:

• Generate a sense of constructive urgency. A keenly felt sense of urgency, directed toward the task at hand, is perhaps the leader’s best defense against worry and fear in the workplace. Employees caught up in a substantive effort to improve quality, reduce costs, improve customer satisfaction or generate innovative products and services are, by definition, more fully engaged. They feel in control, and, in this crisis, any control is better than feeling helpless.

• Set achievable near-term goals. The value of a near-term goal is that it creates focus for workplace energies. Built into a project-management framework, employees acquire a structure of time and task, which will make them better able to withstand the intrusion of bad news from the economy.

• Celebrate small victories. This is the feedback that connects the individual or the team to a measure of progress within the business. It is the answer to a person’s unspoken or half-spoken questions: “Are my efforts valuable?” “Am I making a difference?” “Am I contributing to the business in a significant way?”

Us vs. them
Stress fragments organizations, all of which have fault lines that reflect the inescapable tension between having a cohesive identity as a group (us) and working closely with others who also have a well-established identity (them). This can happen anywhere from shop floors to the halls of academe. Some classic fault lines include: engineering vs. manufacturing, long-timers vs. newly hired and, in today’s context, executives vs. everyone else. The best organizations know how to minimize the tension of us vs. them and some even manage to co-opt the dynamic into productive competition.

However, as stress mounts, the tendency for unproductive conflict increases. Information may be hoarded and differences made more explicit. Problems are met by efforts to shift blame. The motivations of the other group become suspect, and productivity is sacrificed on the altar of self-interest. Managers are expected to “protect us” from the increasingly treacherous politics of “the bad guys” down the hall.

What to do in response: manage the organization
If ever there were an occasion for an ounce of prevention, it is here. “Us vs. them” dynamics in an organization are easier to nip in the bud than they are to weed out later. No business in today’s environment can afford to be weakened internally. The recommended actions apply whether the problems are mild or severe. If severe, leaders must assume a notably higher profile in tackling the problem aggressively. They should:

• Explicitly call out unhealthy conflict and highlight cooperation. The leader is encouraged to carry good news, letting one group know how another has helped the business, especially if the groups are related operationally. Embed cooperation as a value in the organization by talking about it and including it in performance appraisals and promotion decisions.

• Handle mistakes and misunderstandings with respect. This is especially important at the top of the organization. It is essential that leaders visibly work well with their peers. Cut one another some slack, assume positive intent and clarify expectations.

• Acknowledge the “loyal opposition.” Some metrics that measure group against group or person against person can spur unhealthy competition in this environment. Rethink the metrics to make sure they spark cooperation or healthy competition.

• Declare a win for one as a win for all. When one part of the organization succeeds, it should be trumpeted to all. Simple notes, e-mails or hosting a celebration are examples of ways to signal that we are all in this together.

Uncertainty
Psychologists make an important distinction between fear and anxiety. Fear has an object: One is afraid of something. Consequently, fear can be confronted and managed. Anxiety, sometimes called “free-floating anxiety,” has no object and is often more disabling. Uncertainty about our economic future carries that quality. Because the future of the economy is hard to predict, and because it is hard to know for sure what has created our present difficulties, we are plunged into collective uncertainty. It’s at times like these we look to our leaders—nationally, locally and in our workplaces.

Employees know it is unreasonable to expect their leadership to dispel every uncertainty. What they hope to hear is a well-reasoned vision—a way forward. As employees listen to their leaders, they focus on their words and the tone of the message. The tone is determined by two factors: the leader’s reputation and the subtle nuances of the message.

A leader’s reputation is already established for better or for worse. A leader who has a history of being candid in times of crisis will receive the benefit of the doubt. A leader with a poor reputation is handicapped, but may have an opportunity to build trust anew. Still, reputation alone will not win the day.

What to do in response: manage information
Managing the flow of information is a key to offsetting uncertainty and keeping the workforce focused. The leader must become the authoritative source for information and, in turn, be more visible, accessible and “on message” than ever before. By communicating a thoughtful analysis of the facts in a timely fashion, employees will come to view the leader as the reliable source, instead of resorting to news reports, bloggers or the whirlwind of rumors circulating around them.

The leader’s role in managing information must be based on respect for employees, and the belief that people who are dealt with honestly will do their best. In the long run, this respectful approach enhances the leader’s credibility and helps the workforce develop resilience. Leaders should:

• Provide regular updates. These could include information on key business indicators, such as layoffs at a competitor, changes in leadership within the company or news about the industry or key clients. Do not cancel or move these updates ahead in response to “emergencies.” Structure and rhythm are reassuring. Explain how the business is doing—both its challenges and its hopes—supported by facts. Lay out what the organization is doing to position itself for the future.

• Handle setbacks directly. Of course, setbacks will occur. The question is how the business will respond. Present the facts followed by the business response. When possible, take the conversation to the team or individual level, and outline how each part of the organization can be part of the solution. Use work as a cure for worry. A focused and aligned workforce can withstand bad news.

• Manage rumors. The grapevine will aggressively grow in a business that is under duress. Identify people who have the pulse of the organization and stay alert through them. Don’t be caught off guard. In an interconnected world, speed matters. Some silly rumors can be ignored or summarily dismissed via the Web. Disruptive rumors that are being taken seriously warrant a well-crafted message from senior management via e-mail, video or personal communication.

Personal stress
Most people are resourceful and can handle a surprising level of stress without losing their ability to function, but all of us have our limits. When people are stressed beyond reason, their performance does not gradually taper off. It drops off a cliff.

Still, it is important to remember that the workplace is not a counseling center. Most leaders do not have these skills or the time to support people in crisis with armchair psychiatry. But it is naive to think the economic crisis is not taking a significant toll on people, and some will require serious help. Today’s manager should be alert to:

• Simple differences of opinion that flare into anger or outbursts
• Misunderstandings that escalate into harsh accusations
• People subject to depression or anxiety who begin to experience more severe symptoms
• Benign personality “quirks” that become exaggerated and extreme

What to do in response: manage the person
The possibilities for dysfunction are as varied as the people in the workforce. And leadership is not immune to these problems. The most serious cases are likely to occur where the individual is experiencing multiple problems at once. They are juggling more than they can handle, and work is going to suffer noticeably.

Many organizations—if not all—espouse the belief that “our people are our greatest resource.” And rightly so. Caring for the individual is how that value is put into action during this demanding time. Leaders should:

• Ask, “How are you doing?” And then actually listen for the answer. The simple act of asking acknowledges the stress and is often all many people need to stay focused and committed. If the inquiry sparks conversation, the key is to listen carefully. It may or may not be possible to solve the problem, but it’s always possible to demonstrate a sincere interest.

• Consider each person individually. The economic crisis can create a personal crisis in any number of areas, such as health, housing, marriage, children, aging parents or neighbors in need. Employees may be facing circumstances that have been very rare in the past. Management should be prepared to consider what can be done in light of each person’s unique situation.

• Step in quickly if a person’s productivity falls off, and be prepared to offer a referral for help. Sometimes a person’s struggles will force them to a tipping point. Leaders should review the range of services and referrals they have at their disposal before a crisis emerges. It is easier to step in and discuss a problem if leadership knows their resources, just in case they are needed.

Looking ahead
No one knows for sure if we are at the beginning, middle or nearing the end of the recession. Moreover, there are a multitude of factors affecting how—or even whether—a given business will survive, and many of these are outside the control of most managers. What is clear, however, is that the leader who successfully emerges from this period will necessarily address both the financial and human realities.

Those gifted with a temperament for this sort of thing do, of course, hold a big advantage over the rest of us. Still, effective leadership during this downturn is not magic. It will be molded from a fundamental sense of optimism, poise, an ethical value system, the courage to confront the big issues and the stamina to slog it out, regardless of whether there is light at the end of the tunnel. These characteristics are within the reach of most leaders if they extend themselves. Their passive, cynical or weak-kneed counterparts are likely to compound their own problems and add to their organization’s woes.

This over-arching question: “What do you want others to say of your leadership during the economic crisis of 2008 to 20__?” will be answered for better or worse in the coming months. We challenge you to get back into the game. Respond to worry and fear by managing priorities. Minimize internal tensions by managing the organization. Counterbalance uncertainty by managing information and address extreme stress by managing the person. We hope these guidelines have provided you with useful tools to strengthen your management skills during this economic crisis and in the future.