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Survival Tips

Sunday, February 1, 2009 - 09:43

A key component to survive an economy on the slide is a strong and focused leadership team. By Georgina Jerums 

You could almost get whiplash from the fast-changing business environment in which we now find ourselves. In just 12 months, the business landscape has morphed from a long boom to a credit squeeze teetering on the edge of a recession.

What is the key to survival? Focusing on teamwork would be a wise move, according to research of 120 top leadership teams tracked for nine years by global management consultancy Hay Group and Harvard University, and by Hay Group's publication, Focus 2009: Growth in uncertain times. Both studies found that the most successful organisations across a range of industries had one business weapon in common: a strong leadership team.

Teamwork becomes even more necessary in tough times, explains Melbourne Director of Hay Group, Henriette Rothschild: "During an economic downturn, a senior team is well-placed to make aligned decisions for an organisation's priorities, business model and strategy."

"By contrast, processes that are unaligned, inefficient or unreliable need decisive corrective action or they will slow down a business and disengage employees," continues Rothschild.

Lone Ranger CEO
"So tough is doing business in the current upheaval that often a CEO cannot work as effectively in isolation, and therefore the so-called 'Lone Ranger CEO' is losing credibility. A leadership team can prove invaluable when making complex decisions in light of share-price meltdowns, profit erosion, inflation and increased public scrutiny on management performance."

Rothschild says this downturn is different from the early 1990s 'recession we had to have'. "While the temptation to cut headcount is a typical reaction in a downturn, don't do it before examining your long-term goals.

"It's important for organisations to recognise the 'fat' that existed in the '80s and '90s is less evident today and, therefore, indiscriminate cuts could have significant long-term implications," she warns.

"Prioritise structure. Focus on making sure the organisation structure is in the best shape possible to maintain business stability.

"Downturns are when inefficiencies and overlapping accountabilities will slow you down," adds Rothschild. "Realigning business strategy and operating models may provide the opportunity to create a leaner structure. What's important is that changes are clearly made in the context of the longer-term business strategy and not in isolation from it."

Australia still has a talent shortage and retaining key talent is critical to ensuring organisations survive this turbulent period. This is why it is important that a crisis management strategy and company priorities are communicated to leadership teams, and, in turn, with the rest of the organisation. It's also critical to give regular updates. For example, the Focus 2009 report quotes Orica's Philippe Etienne, Group General Manager in Corporate Projects, who identified the importance of 'communicating even when you think there is not a lot to communicate'.

Rothschild believes managers must also be open with teams to reduce fear and uncertainty. Employees need reinforcement and acknowledgement about current priorities and the longer-term goals to maintain focus, motivation and engagement.

Likewise, she says, external stakeholders such as key shareholders, customers and suppliers may also require more face time from leader teams to be retained and engaged with your organisation's agenda.

And a final word; boards need to be handled with more care during downturns. "Boards tend to become more active and potentially reactive in critical decision making," says Rothschild.

Team drill
The Hay Group's Focus 2009 survey included the following results:

  • Team size - The most effective senior leadership teams usually have less than 10 members.
  • Merger mayhem - The current economic climate is resulting in dramatic changes, particularly in financial services where mergers and acquisitions are on the rise. The quick timeframe within which some of these decisions are made highlights the findings that 90 per cent of businesses believe they had failed to achieve their original merger/acquisition aims.
  • Do a human audit - While 93 per cent of organisations conducted financial due diligence prior to a merger/acquisition, only 27 per cent formally reviewed cultural compatibility and only 22 per cent undertook a human-capital audit.
  • Corporate reputation - In the past year, the annual total shareholder return of the World's Most Admired Companies was 16.8 per cent against 5.5 per cent for the SP 500 (as researched by Hay Group and Fortune magazine, released in March 2008). Over a 10-year period, the returns of the World's Most Admired Companies was 10.1 per cent against 5.9 per cent for the SP 500. This reinforces the significance of corporate reputation on shareholder return.