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COMMUNITY UPDATE

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Britain has finally climbed out of recession. After six straight quarters of decline, last quarter saw growth of 0.1 per cent. Although, lower than the 0.4 per cent growth expected, it does signal a return to growth for the nation.

Such a small rise means that recovery will be harder to sustain, meaning that business leaders will need to rally behind staff and their executive team to foster a new sense of optimism. The 18-month recession, the longest in recent history, saw leaders having to get more stuck into the daily workings of the organisation. The renewal of growth means that leaders can now focus on strategy, people and gaining financing.

Our network of leaders provided the following tips for leading a business and its people successfully into a growth period.
  1. Honest, open communication without spin.  Acknowledge what has happened, offer praise and gratitude to those who have got you through it
  2. Talk about the future now – with energy but realism. Reenergise the workforce with a clear view of what is now possible
  3. Ensure that in the new organisation, inevitably smaller and flatter, that everyone understands their roles and responsibilities, if they have changed
  4. Restate the objectives for individuals, teams and the organisation. Reintroduce the performance management and development system to support the new organisation
  5. Engender a team spirit – ‘we’ve been through this together and survived , now we will build the future together’
  6. Don’t make yourself or your team a hostage to your earlier decisions, which were almost certainly fine at the time, but step back and if they are now outdated or the circumstances have changed, acknowledge the change of direction
  7. Pay even more attention to the stakeholder community - employees, customers, suppliers, shareholders.  They hold the keys to what is happening and needs to happen in the business
  8. Use that information to drive business plans – and change those plans when circumstances change and execute with focus and pace
  9. Drive more integration between management processes  by finding ways to share information accurately and consistently with everyone that needs to act on it and empower them to do so

Leaders should be empowering staff:  

  1. Management has to have a vision and is committed to a strategy
  2. Employees must have a clear framework with values and principles within which to work that holds them accountable but rewards them if they do a really good job
  3. Management needs to put its ‘money where its mouth is’ when employees come forward with opportunities and ideas in more cases than not
  4. Treat people with dignity and respect
  5. Encourage people to challenge and listen to diverse points of view
  6. Support decisions others make
  7. Give people choice about how they do their work
  8. Ensure individuals get opportunities to grow
  9. Share successes
  10. If you are a big business and embrace a small company culture with nimble decision- making across different geographies and time zones
“The reality is that the recession has resulted in lots of people losing trust in large institutions such as banks, regulators, governments and corporate. This loss of trust will take some time to recover from and may change the managerial landscape forever. Maybe the future will bring a less short-term focus, and a strong need to really engage the whole organisation through the next phase of its development,” says Brendan Hynes, CEO, Nichols plc.

Last year saw many companies just trying to keep their heads above water. George Yip, Dean, Rotterdam School of Management says that this year is for change. He says: “2010 is the year for leaders to push for strategic transformations and business model changes. Both customers and employees now recognise the need for drastic change and the economic recovery will facilitate new approaches. Leaders should encourage low risk experimentation and strategic initiatives. This means not penalising employees who challenge the status quo.”

It is important to not rely on the leadership style that got organisations through better times, when times are tough a different approach is needed. "Leadership style now needs a more strategic and integrated focus.   It’s all about knowing how your business is performing and where to make changes. A year ago, as the recession was biting, Oracle surveyed 800 large/very large companies in Europe and North America on their level of enterprise performance management – how do they monitor and manage their businesses across their stakeholder environment, market model, business model, business plan, business operations and business results?  The UK came out pretty well, ahead of countries like Germany, Sweden and Spain. But this year, when we redid the survey, the UK performed well below other countries and was slower to spot changing conditions and was slower to react. UK business leaders need to act now to get their whole organisation smart, agile and aligned and, by making sure their management processes are truly integrated, they have the full current picture with which to identify the best opportunities, determine competitive differentiators and ultimately create a competitive advantage," says David Callaghan, Senior Vice President, Oracle UK, Ireland and Israel.

Although we are now officially in a recovery, it is expected that 2010 will still hold its challenges. Gary Kildare, Vice President Human Resources, America, Europe, Asia Pacific, IBM explains: “Some writers and analysts describe the next few years as a new and different phase for business. It's always difficult to change behaviour and styles as a leader (or the culture of your business) - but the issues and outcomes of the last 12-18 months will drive change. There is a growing importance on values - at a personal and company level - for example - integrity, honesty and fairness.  Employees and staff also view the values of their organisation critically and increasingly want to be part of a 'value-based' organisation with leaders who behave in a manner that is consistent with these values. Leaders do need to consider the values they and their companies operate to as the DNA or fabric of the business.”

Even though times were hard and tough decisions had to be taken, it is felt that leaders should not have changed their style. But this may be an ideal, which is impossible to capture.  

David Kneeshaw, Chief Executive Officer, Royal London 360 says: “It is important to look forward in this climate. But leadership style should not be changing. It is true that during the recession CEOs have to get their hands dirty, and stuck in more than usual. But they should, of course, be focusing on strategy, people and money as always. If the business is doing well the leadership style should not be changing, and if it isn’t you may want to consider changing the leader not just the leadership style. Cutting costs does not necessarily mean cutting empowerment. In fact, in tough times you should be empowering managers to get through the crisis, with a clear agreed plan. In the end it is all about people.”

David's four top tips are:
  1. It is all about people – you have to have trust in your management team and they in you. If you don't trust them get rid of them.
  2. The key to cost-cutting is to be decisive. Get lean quickly and then communicate it to the staff. Once that is done, start afresh. If you are only thinking about cost-cutting now you are too late.
  3. In this difficult time you have to make things happen, but also have patience and perseverance. Pick one or two things that can be achieved and get the entire company behind that strategy - do few things, but do them with commitment.
  4. To quote General Patton: "Have a plan, execute it violently, do it now."
Ian Bowles, Chief Executive Officer, Allocate Software plc explains: “Senior managers are often tempted to change management practice and style depending on the nature of the economic cycle. I believe this is wrong. Management styles should not vary depending on the economic environment. Consistent, ethical leadership delivers success regardless of the economy. Great companies perform because they have a consistent vision, strong clear leadership and shared values across all stakeholders. Investors, customers and staff all benefit from appropriate planning and great operational execution.”

Abbas Hussain, President Emerging Markets, GlaxoSmithKline agrees, leaders should be agile enough to deal with hills and troughs. He says: “Effective leaders are the ones who can see the future before people around them and then take the organisation on a journey towards it. One thing that crisis has taught is that your business model should be robust enough that it can weather these blips. End of the day it’s about anticipating change. This does not and will not stop with a recession.
 
“Regardless of a positive or negative environment long-term strategy should be kept and reached for. The environment may cause one to adjust tactics, for example, in bad economic times a company with financial strength can often encourage its employees to take advantage of this to accelerate its growth in market share as others are hampered by financial limitations. In good times, it can actually become more challenging as the market becomes more competitive so one has to reinforce with employees a greater sense of urgency.”

The importance of leadership style should not be forgotten. "Leadership style has been an important determinant of how companies have fared through the downturn. High levels of turbulence and uncertainty meant that many companies had to throw out their established plans and budgets and respond in real time to the evolving market circumstances. Leaders needed to set a clear direction, but simultaneously be highly attuned and responsive to changing customer needs, shifting competitive dynamics, and new rules of engagement. A large amount of focus has necessarily been on cost reduction and cashflow management. As we come out of the downturn, the focus will turn increasingly to growth. However ongoing levels of volatility and uncertainty will continue to reward those companies who are able to respond flexibly to changing circumstances. Thus we expect to see that the style of leadership which has led to success through the downturn will lead to faster growth as the market recovers," says Caroline Firstbrook, Managing Director Strategy EALA, Accenture.

As we claw our way out of recession, it is even more important for leaders to be strong and able to adapt to a changing business world. David Hall, Chief Executive Officer, Zurich Global Capital UK: “I am not so sure that we are out of the economic woods yet, but the role of the leader does become more important during times of uncertainty and change. Leaders today need to be more visible, more confident and express vision to secure employee trust and competence in an ever-changing market environment. They should be strong, bold and balanced in their view of the world.”

“To unravel the centralisation and control which have been key features of the crisis, leaders will need to move to greater autonomy and focus in the recovery phase. They will need to carefully build and invest in management capacity to grow, focus on hiring, deploying, developing, rewarding and recognising growth capability in others. They will also need to drive urgency and engender a true winning spirit to take advantage of opportunities to pull away from weakened competitors,” says Jenny Merry, Head of UK Employee Engagement Practice, Hewitt Associates Ltd.

Gary Browning, Chief Executive Officer, Penna plc: “As the UK emerges from one of the worse recessions in modern history the challenge for leadership is to demonstrate huge versatility, resourcefulness and most importantly dexterity. This recovery is unlikely to be quick or without its setbacks and leaders need to recognise this.

“Leaders will also have to reenergise a tired workforce whilst keeping a steady hand on the rudder. The risk as the economy starts to recover and companies switch back on the recruitment process is that the most talented in your organisation see this as an opportunity to move – having retained these vital people throughout the difficult period this is not what any leader wants. The answer is to ensure that everyone is clear on where the company goes next – everyone is brought into the vision and excited by the future – communication of this promise by the leadership is crucial, but without over promising on the next year. The dexterity required will come from being “cautious visionaries” – a tricky combination.”

Lewis Doyle, former Managing Director, QinetiQ, explains: “We can all spot the great leader, in effect we know one when we see one, but it’s not so easy to define.  As a leader, first impressions are key and long lasting, and whether the economy is booming with optimism in the ascendancy, or when times are uncertain and confidence is under pressure, clear direction supported by visibility and ongoing engagement must be high on the leader’s agenda.”   

Now that change is afoot, leaders need to think holistically, listen to their people and allow them to make decisions. Peter Cheese, consultant and author on talent management and organisational behaviour, says: “Change has to start with a new sense of confidence from leaders – confidence to open up, to let others participate in the decision-making, to invest again in the business through skills building, innovation, and more time for people to connect and share. There is a real need to focus on rebuilding engagement throughout, and aligning the organisation again with a better sense of the common purpose and shared values that have too often become muddied.  We have reduced the support and level of resources in most businesses and we now need to think about how to work smarter not just harder, how to become more agile and adaptable, and that is something all employees can contribute to and will help them to feel more empowered and engaged.”

If you are interested in this week’s topic please take a look at our ‘Insights’ page. In the article The Upsizing of Trust Organisational Edge's Charles Sutton looks at the loss of trust and what leaders of large organisations need to do to get it back. In the Event Write-up From early man to the boardroom looks at how evolutionary psychology can help leaders run their organisations.

Please get in touch if you have any comments about the issues in today's update.
 
I hope to see you soon,
 
Matthew