Well, that was a good run.
The Bull Market celebrated its 10th anniversary on March 9, 2019. It didn’t make it to year 11 – in fact, the market was already on its way down on March 9, 2020.
There is hope. We will rebuild and improve our businesses and economy – leaning into the learning that needs to be done.
There is also a need for hard work and hard decisions. Every reset for a mid-sized and larger business requires making room for that work to happen.
By now, the worst kept secret is that COVID-19 has had a profound impact on the economy and businesses across the globe.
I have the privilege of serving mid-sized and larger business as a strategist, and what I’m hearing from clients right now, is that many of them were individual contributors the last time the world had a recessionary shock.
Many of their questions center around “what happens next?” and “how do we find our new normal?”
Spoiler alert: There are common patterns and I’ll share them with you – but each of your journeys will be different and unique. There will be successes and deep setbacks and you’ll really long for the “good old days.”
I can also share from experience that teams that embrace this challenge and get it done will come out tight-knit and cite this as some of the most developmentally beneficial work they’ve ever done. Having a map will help you stay engaged.
The bottom line is this: You and your business will get through this crisis, and many will be contributing in a different way than they had before.
The Model
Qualifier: This article is for leaders in “complex” businesses with large scale product/services development, operations, and distribution that have achieved maturity, and have well-developed processes.
There are five steps that firms traditionally take during times of crisis. Not every firm will make it all the way through: some will get stuck and wind up becoming part of a new firm and others will sell off assets and join the economy in a new way.
Following this path may seem optional, but every firm that grows through this crisis will need to form their own version of this journey. In all cases, you’ll find firms that moved decisively to create runway, worked diligently to reposition value, and remained alert to their clients’ needs will find their feet more quickly than those that took a “duck and cover” approach.
Done well, these steps set a firm up for geometric growth and honestly skillful leadership that can achieve decades worth of change in a year. This overview is high-level and is intended to provide a roadmap for my client leaders to know the journey that lies ahead.
Step 1: The Shock
We are still close enough to the fork in the road to recall January 2020. Unemployment was historically low, and in fact we had a talent shortage. We were making new highs in the stock market, and it appeared that economic growth was an unstoppable force.
Then it hit – a tremor at first that wasn’t even hitting the news feeds – then suddenly all at once: we went from mild concern to massive pandemic.
Larger businesses are built on annual plans, budgets and goals and objectives. When something like this happens, those plans and controls are suddenly rendered obsolete. This is not just an inconvenience: compensation is built around these plans. Capital spending is based on these plans. Hiring is based on these plans. Long-term contracts are negotiated with partners and distributors. And it all happens on one massive flywheel.
Suddenly, the plan we had is no longer useful.
This realization washes the controls out of our firms like sand beneath our feet.
The only things that remain are the values of our firm and the tactical action at the front line. Everything else is untethered, if only for a brief time.
This blast pushes our business backward, and for the complex systems-based firm, it results in reduced responsiveness just when an adaptive solution is required.
When the individual functions and roles are unclear on their larger objectives, they revert back to their functional identity, become protective and double down. This creates a cloud of risk averse, conservative actions. For example, let’s say each leader takes ten decisions per day – this easily creates 100’s of unaligned directional actions. The implications? Gridlock.
Step 2: The Macro Response
The C-Suite meets quickly and specifically to develop the first-level response. The best firms secure human safety first. Secondly, they build a plan to support their core customers in every way possible.
The very next thing they turn their efforts toward is conservation of all assets. They want to make sure that they quickly get on top of cash, capital and expense budgets, supply chain and distribution commitments.
If you’ve never been in this room before, you’ll be amazed at the speed at which massive decisions are made – and the level of granularity will scare you. Big budget cuts will be decided on with almost no ability to do a detailed analysis.
Why is this?
Because time is of the essence. A firm that does $1B per year is doing $2.7M of business per day, 365 days of the year. Dithering for 10 days is a massive investment, and the truth is that 10 days is simply not enough time and will not improve the quality of decisions that need to be made.
The good news is that by taking these actions swiftly, the runway is established to do the detailed work that is needed to help the firm find its feet.
The bad news is that the outcome of these sessions usually results in three phases of changes for people resources – and the pace of those changes can leave people stunned.
These will include a budget reduction number at a percentage level. For this kind of shock, leaders will ask for plans ranging from 10-20% (in specific cases even deeper) depending on the firm and their best assessment of how ongoing demand looks. This will be translated into hiring freezes, voluntary retirement plans, and finally, involuntary reductions.
Why this is important: It creates breathing room and sets the stage for recovery.
Why this is hard: It is very hard on you and your teammates to see colleagues on the bench or move on. It also takes a comparatively long time for the personnel actions to play out.
The cure: Constant and clear values-based communication. Your best leaders are watching carefully and you need to elevate your mission to ensure they stay engaged.
How you can help: If you are asked to participate or give input, do your very best to remain clinical and client centered. These decisions are very hard emotionally – it’s important to carry your share of the load by remaining analytical and doing your own emotional health work.
Step 3: The Inertia
This is a very challenging time. The teams come back and the organization is set up in the same way – with the same systems – and attempts to do the work with the same rigor. The issue is that even with the team’s best effort, the firm has a very hard time running at anywhere near its normal capacity.
There are three reasons for this: First, a historically long bull run (and cheap capital) like we have had has allowed many unproductive products and processes to take root in the firm. These products consume more than their fair share of talent, and now that we have a reduced amount of talent in the firm, they remove a lot of energy. Second, we have systems that were built for a larger labor force. When we remove people, we rarely scale the expectations for quality, conformance, and process compliance. Finally, we have just come through reductions, and no one wants to offer up their role as not valuable, so streamlining activity grinds to a halt.
Why this is important: The pain points the way to how the firm needs to evolve.
Why this is hard: The above three reasons make inertia a really tough part of the recovery process to live through. It is easy for functional leaders to become protective of their turf and miss opportunities.
The cure: Prioritization work and alignment. Leadership needs to model being ruthlessly constructive about only doing work that is delivering client value.
How you can help: Every leader needs to keep careful notes on how their team could streamline and help drive value improvement in the firm. Again, being unemotional is key here, and if the C-Suite has done the right thing in Phase 2, people will feel secure enough to offer up their best thinking.
Note: Some firms will get stuck here. They never quite get on top of these issues and get crushed by the weight of their own bureaucracy.
Step 4: First Wave Renewal
As my mentor and colleague Les McKeown has spoken about (see webinar here), this work is all about the tension between vision and process.
To truly “get a leg up,” we need to have a specific leadership style emerge that can “pop up” and help reverse the bureaucratic momentum by raising up current and emerging client demands. These visionary/architect leaders need to be found and nurtured, either through organic development or hiring to objectively elevate and shift the firm’s talent, processes, and investments into alignment with where the client demand is.
This work will allow the fresh voice of the customer to be (re)established, and allow the firm to get back into a client pull, versus a product push, alignment.
Why this is important: This work moves the firm from survival to a path it can thrive on.
Why this is hard: The process-centered leaders will resist this work, not because they are “bad people,” but simply because they see risk in this work. The process leaders have sweat blood to get this far and see risk as potential waste. The flip side is placing internally driven “big bets” that have internal logic and lack client buy in.
The cure: Leadership needs to model constant conversations with clients and the market. Every internal communication needs to be “right side up” and client centered.
How you can help: Inevitably this work is done by a cross-functional team. You can be one of the leaders that self nominates for a team. When on the team you can help interpret and support the visionary work that needs to be done. By buffering, harmonizing and interpreting this work for your team, you can accelerate the recovery process. Co-development with the right voices from the emerging market is the key.
Step 5: Ripples & Echo’s
It is nearly impossible to get all this work done in one pass. The corporate team will need to continue to go through cycles of surgical resource adjustments, both adding and reducing as demand returns. Some portions of the firm may well need to be divested to make room for growing elements and some new pieces may need to be acquired.
This work needs to be done with dispatch, and not allow the firm to slide into complacency, but rather to target higher performance than it had pre-COVID-19.
Why this is important: Increasing the performance of the firm sets the stage for geometric gains in share and profitability.
Why this is hard: It is very hard to sustain the momentum. Many category leaders never quite recover to regain their momentum.
How you can help: Do your very best to get your firm balanced between entrepreneurial vision and high-performance process. Look for balanced leadership styles on all teams to help you sustain it.
Finally…
I can also share from personal experience that teams that embrace this challenge and get it done, come out tight knit and cite this as some of the most developmentally beneficial work they’ve ever done.
If you’d like to connect with me about how to move down the most efficient path for your personal growth, team performance or organizational response to this challenge, please reach out to me at my direct line 847-651-1014 or use this link to put a call directly on the book.
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