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MANAGEMENT: Better Leadership and Decision-Making during an Economic Slowdown
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Better Leadership and Decision-Making during an Economic Slowdown

By Marwan Emile Faddoul(Managing Partner,NFG Consulting LLC) & Guillaume Michael Lange( Marketing Analyst, NFG Consulting LLC)


BT 201607 150 06 Management personal 365964Recessions are often a period where the business landscape changes drastically, and in order for companies to surpass it, they have to pull up all their resources together in the right direction. If done efficiently, companies can bounce back from slowdown, while the competition is stagnant and recuperating.


No company can viably survive with bad leadership and by making wrong decisions, especially through hard financial times. This article will share the story of one of our clients, Mr. Li. (Name has been changed for confidentiality)


Our client, the CEO of a high-tech manufacturing company, was having a difficult time competing in the economic downturn. Costs were too high, competition rose, and profit margins were diminishing to an uncomfortable level. When Li first approached us for counsel and guidance, we reminded Mr. Li that taking rash and uncalculated decisions would not remedy the situation. Acting rational and calm were a priority to find a comfortable business position to successfully surpass the economic situation, and prosper once recovery starts.


BT 201607 150 03 Management decisionIt was important for both Mr. Li and us to understand the depth of the current situation, of the market, the economy and the firm. We had to face reality and prepare to meet it in the manner that it came. Once in control of his emotions, and in understanding of the current situation, we began talking not about the importance of leadership, but on how to take advantage of it and allow it to guide the company to safety and then growth.


As mentioned, in times of lower economic growth, good leadership is crucial; but how does it change according to the current state of the economy? It is even more vital in a bad economic climate to ensure high level of security within the company. During a prosperous period in the economy, a CEO will be seen as a competent leader if he is innovative -promoting new ideas and propelling the company forward. The main difference we had to mention to Mr. Li was that during a downturn, the same leader becomes a pillar of stability. Slowdowns are not periods of innovation, and thus the leader must be able to keep staff motivated, and loyal with a clear sense of purpose and goals.


To be the guiding pillar, effective communication needs to take place. The first major advice we gave was simply to communicate to one another within the firm and not allow oneself to be shut off from those who are willing to help. As a CEO of the company, the ability to be charismatic -constantly delegating efficiently -is a skill required to survive the toughest economic situations. This would allow Mr. Li to free his mind and effectively use his time to coordinate the company's efforts.


BT 201607 150 08 Management hl01To do this effectively, Li had to set and communicate the goals to the team. To assess the progress of his team he knew he needed to measure goals. For this first part, Li knew his goals needed to be S.M.A.R.T. (Specific, Measurable, Attainable, Relevant and Timely). The two extra bits of advice we had to give included having a single point of accountability. This meant that by holding a single person responsible for the achievement of a goal, this person takes it upon himself or herself to accomplish it to perfection. Moreover, we shared the importance of following through and motivating members until the end of given tasks. It is human nature to work on the newest and more exiting tasks while forgetting past challenges.


Having clear goals is part of the equation for success for your team, but it remains an incomplete formula. The team must be able to trust the orientation and direction the CEO is taking at all times. We discussed this point with Mr. Li to show the importance of being present, and seen by the office staff to convey calmness within the company. The leader of the company will establish his habits as company culture, which has a huge impact on the atmosphere of the working environment. It is important for Mr. Li to stay calm and composed at all times when in public with his team. We told him, no matter how out of control a situation is, he should not show it within the office, lest his employees become fearful. We were there to reassure him and calm his worries, but this kind of uncertainty and doubt cannot be allowed to reach the rest of the staff. A toxic and thus uncomfortable workplace will ensure the rapid downfall of any great business, whether in an economic slowdown or otherwise.


Once a healthy and positive office atmosphere has been created, it was time to work with Mr. Li on a framework to allow him to take the right decisions, even as stress arises due to uncertainty.


BT 201607 150 07 ManagementAt NFG Consulting, we made it a point to share our reality with Li. The first advice regarding decision-making was on the ethical aspect of his decisions. In hard economic times, where financial pressures are high, it is a requirement to stay purely ethical in every taken decision. A company must operate with no regrets and with full transparency. Big companies like Enron attempted to operate unethically but the truth is that very few can survive in the long run. While some unethical solutions could assure short-term financial stability to the company, it is done at the expense of long-term success of the firm.


During an economic downswing, we had to warn Mr. Li about trying to innovate some of his product lines. In periods of uncertainty, decisions have to be made with survival and long-term viability in mind, compared to pushing new products to increase market shares. We did, however, recommend to Mr. Li the possibility of repositioning the company in order to spring forward and seize opportunities when the economic uncertainty started clearing up.


Our advice on repositioning also included a large topic regarding staffing needs, during economic decline and how to effectively prepare for a prosperous economic comeback. A key point we shared was the need, as a company's leader, to hire the competent staff, even if they are more intelligent, or have a better understanding of certain topics. As mentioned by Steve Jobs, “It doesn't make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.” By having the right labor skills in place for economic upswing, Mr. Li is on the path to gaining market shares compared to pre-economic downturn period.

BT 201607 150 0 Management hl02This was followed by a discussion on cutting staff, the best advice we had was be fair and logical at all times. We quickly spoke of the possibility of extra severance packages to certain loyal staff, as this would have an important impact on the remaining staff in the company. Having a workforce who feels neither loyal nor secure sets up an uncontrollable and unpredictable disaster, something no manager wants to deal with, and it is a difficult situation to settle.


Much of the advice we had offered Li was qualitative, thus such pointers are hard to concretely calculate and use. This is why during our consultation with Mr. Li's company we offered an in-depth lecture to both him and his upper management about the importance of considering ROI when taking any decisions. In general, during a recession, if the value and return of a certain action is unknown or negative it is often worth reconsidering or re-evaluating when more information has been gathered. Resources are scarce and need to be used to create sure-value to ensure optimization and survival.


It can be said that every firm will have its own struggles. These struggles will vary depending on the economic landscape, but a strong adaptable leadership, and good decision making skills will allow the greatest firms to prosper. We look forward in continuing to help in the growth of Mr. Li's fantastic tech company through this economic downturn to achieve and celebrate higher success during the upswing. Every issue has a solution; the question we ask ourselves as consultants is how to optimize these issues and solutions.

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