It’s 13th December 2022 and unfortunately, we’re not beyond the economic turbulence we’ve been experiencing for the past 2 ½ years. We have political unease, the war in Ukraine, a cost-of-living crisis, a lack of vital skills and a planet being destroyed. These are just some of the major factors affecting the economy, our businesses, and our communities.
If there is one thing that we can take away from the challenges we have all faced throughout the pandemic, it is, focus on what you can control. It is easy to forget this but is priority number one for progressive business leaders that are feeling the effects of the current crisis. Letting the tides of change push and pull you around and losing focus of what you can control induces anxiety and can lead to you feeling lost and out of control. So, what I would like to share are things that you can control, that will make a positive difference to you, your team, and your business.
This is not just my opinion, there is a proven approach to leading during 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 helps them to emerge stronger from a crisis?
- They get close to their customers – Progressive leaders gain deep insights on the needs of their current and future customers. Even the leaders that feel that they have a good grasp of what their customers’ needs are, they prioritise the time to reach out and gather intelligence. This provides them with a powerful lens to view their future investment and improvement opportunities. It’s not gut feel and it’s certainly not based on assumptions. Decision making is made intelligently with the knowledge that they are aligned with todays and the future customer need and market conditions.
- They improve operational efficiency – Progressive leaders use the time and 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 cutting back and lowering the head count, but by encouraging employees to discover new innovative ways of working. Opening the door to make investments in technology and changes to the business that need headspace to plan and implement. The daily pressures and limitations of time are removed, and people are made to feel comfortable that their improvements efforts are futureproofing the business and will help to accelerate the business out of the crisis, ahead of the competition.
- They invest in both existing and new businesses – Progressive leaders take advantage of lower property, plant, and equipment prices to enlarge their asset base. While some take a short-term view and hold back on investments, progressive leaders see the dip as temporary and take the opportunity to strengthen the business. 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 – Progressive leaders utilise the resources freed up by the improved operational efficiency to understand the future needs of the business and invest in product and service development. 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. Another strong reason to get closer to customers and help to protect their businesses for the future.
- They have leaders with balanced thinking – Progressive leaders are balanced thinkers that have the capacity to analyse risk/reward scenarios objectively. They 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. They often strike a balance between understanding the insights behind hard data and intuition drawn from high levels of emotional intelligence.
There is a balancing act to contend with throughout any recession or economic downturn. You can’t build a plan and force this through the organisation with rigour and discipline. You can’t 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 plan of action and is it clear to everyone in the business how they can support delivering the key business objectives?
- What could you change based on the 5 points from the ‘progressive’ approach above, that would strengthen your strategy for the better?
- How could your leadership team adopt a balanced thinking approach in influencing your plan?
If you are a leader of a business reading this, do not try and do this alone. Engage your leadership team and your employees. A simple SWOT analysis is a simple tool that everyone can engage with. Your team need you to show leadership and pull a plan together. As it 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 leading your business in a progressive way through these challenging times. And do reach out if you feel we can help you in any way. We have a reputation for helping leaders break through the boundaries of possibility.
This article was written by the Founder & Managing Director of the Manufacturers Alliance, Gary Sheader. Gary is keen to really push the boundaries of how 21st Century businesses should be run and sees progressive leadership as key to a sustainable future. He loves to develop innovative services to help modern leaders and their teams become the best they can be.