Summary: 'Leadership in the Era of Economic Uncertainty'
Review by By Rolf Dobelli, chairman, getAbstract
In the midst of an economic downturn, monitoring and managing cash are among a company's most important responsibilities. CEOs and business unit managers know that the buck stops on their desks, and hard times test even the best leaders. Seeing things realistically is always difficult, but never more so than when circumstances are frightening. Denial is as dangerous as the paralysis of fear.
The challenge for top managers is to impress upon their organizations the severity of the crisis while still providing a vision that justifies hope. Short-term survival takes top priority in a recession. Crisis management may require stepping away from existing long-term strategies and instituting shorter business cycles.
This short, pointed book by one of America's leading management thinkers offers a checklist of to-do steps for managers who are coping with the global slump that began in 2007. Ram Charan covers all the bases: the board of directors, chief officers, operations, sales, research and development, and more. He offers direct, unambiguous, actionable advice for leaders at each level, including managing for cash, watching the numbers, knowing which customers are not worthwhile and recognizing that annual targets make no sense when demand is unpredictable.
Charan emphasizes a number of essential leadership traits managers must display in hard times, including honesty and credibility, and the ability to inspire a team and the organization at large. Leaders need a concrete connection with reality, including the willingness to learn new facts and perspectives. However, they must temper realism with optimism by focusing on possibilities and opportunities. Leaders should manage employees with intensity and invest appropriately in the future to prepare the company for the next upturn in the economy.
Top managers must identify and protect their core businesses, customers and assets. They must focus on the operational details of their businesses, cutting back on outside activities and public events, and spending more time with the suppliers, customers and managers they rely on most. Being visible within the company and holding staff meetings at least once a week is crucial in a crisis.
Beyond outlining crisis leadership techniques, Charan also covers the role chief financial officers and directors play in an economic downturn. CFOs routinely convey their companies' financial condition both internally and externally, but the task is hardly routine in a recession. As the voice of the company in the external financial world, the CFO must communicate clearly, honestly and repeatedly to keep investors and lenders apprised of the company's condition, including its rate of cash accumulation or dissipation. Internally, Charan underscores, the CFO must tell the corporate managers exactly what is happening with cash and what needs to happen. CFOs guide boards of directors through crises by demonstrating what changes are needed and delivering progress reports frequently.
According to Charan, directors also should pay close attention to risk factors and how they are managed. Boards need to use new performance metrics because so many older ones no longer apply. The economic situation is so fluid that no targets are likely to hold firm for long. Nevertheless, if management fails to achieve a target, the board must know why. Directors need contact with their companies' middle managers to know what they are thinking and feeling. That type of feedback can guide the board's decisions about the position of CEO, now and in the future. The board should stand behind a CEO as long as he or she has what it takes to steer the company through an extraordinarily difficult period. At the same time, having a CEO succession plan in place is imperative.
Charan's record as a coach to CEOs and as an author of best-selling business books (Know-How, Boards that Deliver) speaks for itself. In this book, getAbstract finds that he more than lives up to his reputation, avoiding jargon, generalizations and lofty theoretical pronouncements to focus on what managers must do now for their companies to survive as they lead them through the recession.
Visit getAbstract for a free 2,500-word summary of this book, available only to Washington Post On Leadership readers.
The comments to this entry are closed.