Seen through the lens of the current pandemic, life looks pretty bleak right now—especially for businesses. The vast economic engine of the United States has ground to a halt. Global stock markets have plummeted. And early reports hint that the next recession will be a doozy. The odds of a swift recovery aren’t great.
Yet, despite the gloomy financial forecast and daily horror stories of death and contagion, we also see examples to inspire and provide hope. Sportswear brands are producing personal protective equipment. Major hotels have donated accommodations for healthcare workers. Hundreds of distilleries have shifted their focus from spirits to hand sanitizer.
The fact remains that crisis creates opportunity. People—and organizations—rise to meet the challenge. Pulitzer Prize-winning historian Will Durant believed that adverse situations created heroes, that “demand . . . brings out the exceptional qualities of a man.”
The same principle applies to organizations. Crises tend to magnify both the ill effects of bad habits and the positive benefits of good ones.
As the above examples illustrate, you can’t continue to pursue business as usual when the entire world has changed. Companies that adapt quickly will not only survive the economic turbulence ahead, but they’ll also thrive in the aftermath.
Don’t Get Too Defensive
In 2010, the Harvard Business Review published the findings of a project that examined the performance of 4,700 public companies during the three previous global recessions: the energy crisis of the 1980s, the 1990 Gulf War recession, and the 2000 recession. Seventeen percent of the organizations studied didn’t survive. Only 9% emerged from the crisis in a stronger position than before. This minority successfully balanced defensive moves (i.e., those designed to minimize loss) with offensive moves (i.e., investments in the future).
While these outliers—which the researchers dubbed “progressive” companies—also reduced their workforces, for instance, they focused on cutting costs through operational efficiency.
Such improvements produced an immediate effect that continued to pay off after the recession ended. Organizations that slashed headcount, by contrast, faced increased hiring and training costs during the recovery—provided they even survived the downturn.
The other half of the equation involved making the right investments during the recession. Progressive organizations used resources freed by efficiency gains to purchase assets at lower prices, while supporting R&D and marketing. Even though these moves might have limited benefits during a downturn, they positioned the firms to surpass the competition when the economy recovered.
So how does an organization create a strategy for success in the midst of a crisis that changes from day to day?
Get back to basics.
Recognize These Familiar Foes?
Periods of economic boom, when businesses are flush with cash, downplay the impact of inefficiencies. People don’t complain as loudly when shareholders are happy and the numbers keep going up.
But when customers start scrutinizing every invoice for opportunities to cut expenses, operational missteps are magnified. Tolerance for error—both internally and in the marketplace—plunges to the basement, typically taking morale with it.
The result: A self-perpetuating cycle of declining performance.
Take, for example, the common challenge known as “silo syndrome,” in which different divisions or functions doggedly pursue their respective targets, often at the expense of the larger organization. Each group independently creates and implements a plan that rarely integrates with the actions of colleagues in other areas, even when working toward common goals.
Forming cross-functional teams can help address the problem, but only if team members set aside allegiance to their home departments and work for the greater good of the business.
Unfortunately, research suggests that employees tend to collaborate less during an economic downturn, when working together becomes even more critical.
Similarly, the negative effects of authoritarian management styles become more pronounced when times are tough. Facing increased pressure to perform, managers often respond by micromanaging their team members.
The current situation has stoked the instinctive desire for control as many organizations manage a remote work force for the first time. Under normal conditions, employees naturally disengage from their work activities, following instructions but little more. Add in fear for their health and safety and the stress of juggling childcare with work, and you have the recipe for a rebellion.
Blame-based accountability systems also sabotage organizational effectiveness. Too often, people deflect decision-making responsibility lest their choice haunt them in a future round of the blame game. Such defensive corporate cultures kill employees’ best contributions. They invest far more energy in avoiding accountability than in solving problems and serving customers. These toxic environments cripple organizations when times are good; they can prove ruinous in hard times.
Unite for a Common Cause
What do the above challenges have in common?
Every one involves an “us vs. them” mentality, pitting departments against each another, management against employees, and individuals against the system. The good news is that they can all be overcome.
The bad news? Overcoming these issues requires a mental shift—not an easy task.
Gallup surveys on workforce engagement have found that managers influence 70% of the factors that drive employee engagement. Put another way, managers have an extraordinary opportunity to lead their teams through the current crisis. Their actions during this critical time can not only help their organizations weather this storm, but they can also position their companies to leapfrog the competition.
Foster a culture of trust.
To start, leaders need to build strong relationships with employees, listening to their concerns, their fears, their challenges. Recent years have seen a lot of talk about “employee-centric cultures.”
Now is the time to prove that commitment to the men and women who carry out the organization’s mission. Creating a safe space where employees can talk about the issues they’re facing will help build trust and loyalty, invaluable assets in any economic climate.
But, offering an empathetic ear is only one part of the equation.
Managers must also communicate candidly with their team members. Let them know what challenges the organization is facing, and solicit their suggestions. Encourage employees to bring issues to light. Promoting open dialogue sends the clear message that people are valued and respected, and it connects them to the organization, creating the opportunity for a whole that exceeds the sum of its parts.
To harness this collective creativity, leaders need to encourage employee contributions through collaboration.
Collecting feedback, as described above, is important, but trusting people to make decisions and to propose solutions generates the best results. Successful companies support these efforts by training managers and teams to solve challenges on their own. Managers learn to shift their role from “boss” to “coach,” while team members acquire new tools and techniques for collaboration.
Increased employee engagement and participation can help organizations in good times and bad, but the benefits seem to be more pronounced during the latter. A 2017 study found that decentralized organizations tended to fare better in an uncertain economic climate. The authors attribute the improved performance to increased agility. In such organizations, managers could quickly adapt to their local market conditions.
Connect the dots.
Too often, information in organizations is doled out, crumb by crumb, on a “need to know” basis. When leaders take the time to help people see the bigger picture—specifically, how their individual actions affect larger company goals—this transparency improves engagement.
This is especially true for purpose-driven organizations, where employees share an emotional connection with the underlying “why.” In such organizations, the central purpose not only builds loyalty among team members, but it also provides a true north against which they can evaluate decisions and make recommendations.
At the team level, taking the time to identify interdependencies improves processes that span multiple departments. Most issues occur at handoff points, when one group passes the baton to another. Rarely do the groups consult with one another when developing schedules and plans, and the lack of communication manifests in bottlenecks and delays.
Facilitating frank conversations helps keep everyone on track, as individuals recognize how their personal contributions affect others.
Take the First Step
As the country prepares to reopen, businesses will face a host of new challenges—from ensuring the safety of employees and customers and evaluating sick leave policies to addressing lack of childcare and facing resistance from employees who prefer working remotely.
Navigating these issues won’t be easy, but including employees in the recovery process will make the path smoother, while also increasing overall support.
Companies that don’t already have a collaborative culture can start the shift through leadership training. Specifically, human resources and organizational development professionals should look for programs that help managers transition to coaches and facilitators. Some training programs allow companies to tailor the course to their unique needs, with custom case studies and coaching options to promote implementation of new skills and tools.
The change will be gradual at first, but adopting this more flexible—and empowering—approach to leadership will show employees that the organization respects and values them and their contributions. Greater engagement and collaboration will create a more agile organization, improving its ability to weather the economic turbulence ahead. Even though many questions remain concerning the current crisis, one common theme that has emerged is that of strength in unity.