None of us could have predicted Covid-19 and its impact across the globe, but there is a proven approach to a global recession that has a high probability of success. In his March 2010 article for the Harvard Business Review, Roaring out of Recession, Ranjay Gulati evidenced how leaders and organisations that take a progressive approach to managing their way through a recession, have a 37% higher probability of outperforming their competitors post-recession. Not just with marginal gains, but significantly outperforming by at least 10% in revenue growth and 10% on the bottom line.
Ranjay summarised his evidence-based research (across the previous 3 recessions of; 1980 to 1982, 1990 to 1991, and 2000 to 2002) of 4,700 public companies with, "Few progressive business leaders have a master plan when they enter a recession. They encourage their organizations to discover what works and combine those findings in a portfolio of initiatives that improve efficiency along with market and asset development. This agility, even as leaders hold the course toward long-term growth and profitability, serves organizations well during a recession. An analysis of the stock market performance of companies that use progressive strategies reveals that they can also ride the momentum after a recession is over. Their approach doesn’t just combat a downturn; it can lay the foundation for continued success once the downturn ends."
So, what is it that these ‘progressive’ leaders and organisations are doing that sets them apart from the crowd?
- They stay close to their customers – and gain deep insights on the needs of their current and future customers. This provides them with a powerful lens to view their future investment and improvement opportunities. Decision making can be made with the knowledge that they are aligned with today’s and the future market conditions.
- They improve operational efficiency – by using the space created to re-examine their entire systems and processes to remove inefficiency, so when they emerge from the downturn, they have a lower operating cost. This is not achieved by lowering the head count, but by encouraging employees to discover new innovative ways of working.
- They invest in both existing and new businesses – by taking advantage of lower property, plant and equipment prices to enlarge their asset base. This places them in a strong position post-recession as their asset costs are lower than their non-investing competitors.
- They increase spend on R&D and marketing – by utilising the resources freed up by the improved operational efficiency. These gains finance this expenditure, that in most cases doesn’t provide an immediate return, but provides a springboard to launch from as the market returns.
- They have leaders with balanced thinking – that are capable of spotting opportunities that will provide a viable return on investment, while at the same time exercise cost disciplines that don’t restrict the business. This is often a balance between the fact behind hard data and intuition drawn from high levels of emotional intelligence.
There is a balancing act to contend with throughout any recession, that also applies to the effects of the Covid-19 pandemic. You can’t just build a plan and force this through the organisation with rigour and discipline. You also can’t just let people react to every shift and turn changing direction every day. Progressive businesses have strong leaders that remain balanced in their approach. They listen to the voice of the customer, work with the facts and engage and motivate their people in remaining aligned with the needs of the business.
3 questions to reflect on to help you become more progressive in your approach
- What is your current strategy to lead your business sustainably through the pandemic?
- How is your leadership style influencing this? (Strengths & Weaknesses)
- What could you change based on the ‘progressive’ approach, that would strengthen your strategy for the better?
Do not try and do this alone. Engage your leadership team and your employees. As is states in the original HBR article, “Progressive leaders encourage their organizations to discover what works and combine those findings in a portfolio of initiatives that improve efficiency along with market and asset development.”
Good luck and all the best in your journey to becoming a more progressive leader.
This article was written by the Founder & Managing Director of the Manufacturers Alliance, Gary Sheader. Gary is keen to really push the boundaries in the manufacturing sector and ensure the sector survives and thrives throughout the 21st century. He sees great leadership as key to this and loves to develop innovative services to help manufacturing leaders become the best leader they can be.