It may be jarring to read the word “recession” and “awesome” in the same sentence.
Recessions are bad for most people. I will not make light of how horrible recessions are for the vast majority of companies and their employees, (as well as for not-for-profit organizations, and governments).
For most companies, recessions mean increased stress at work, stalled career progression or even lay-offs, uncertainty, increased board and shareholder pressure, increased financial strain, and they put a feeling of looming danger in the pit of your stomach, which is no fun to wake up to every day!
But for great companies, recessions can be awesome.
What are great companies?
Great companies make great products or deliver great services to customers. They provide a wonderful work culture which attracts and retains talented people. And because they take great care of customers and employees, great companies don’t have a dangerous debt burden, they are profitable, and are able to pay their bills to suppliers and they deliver an attractive return to investors in dividends and equity appreciation.
How are recessions awesome for great companies?
Recessions allow great companies an opportunity to:
- Shake loose the cob webs of “complacency.”
- Take customers and colleagues away from lesser companies, who don’t deserve them.
- Increase the rate of learning of your leaders.
Shake loose the cob webs of “complacency.”
“Success breeds complacency.” Andy Grove, the legendary CEO of Intel, wrote that. And while I’m not here to suggest everybody embrace full-on “paranoia” in the work place (eg. Only the Paranoid Survive), I am here to suggest that great companies have to keep hustling to stay great.
A recession provides an opportunity for a wake-up call to great companies that may start to coast on past greatness, and help them get back on track.
I was at a strategic off-site of a company two years ago (during a bull market) which had just started winning national awards for excellence. The “vibe” at the event was overconfidence, resting on laurels, back-slapping for past achievements, and not paying much attention to a growing rigor mortis of stagnation in some metrics. Lacking was an intense focus on how to take great care of customers and colleagues now and in the future. So the CEO delivered a wake-up call speech. The moment reminded me of Matt Damon’s character in the movie “Green Zone” when his colleagues were sort of milling around. Damon steps up to a group of them and says “Get your game face on. Let’s go to work.” It is harder to shake loose the cob webs of complacency in a bull market when people start to coast, than it is in a bear market, when people are naturally more alert.
Take customers and colleagues away from lesser companies, who don’t deserve them.
I’m not sure why customers buy products or services from lesser companies. And I’m not sure why talented people work at lesser companies. Maybe it’s due to convenience, or connections, or just habit. In any case, as lesser companies stumble during recession (e.g. shutting locations, letting service and quality drop, highlighting dysfunction in the culture, etc.), it’s a great time for great companies to pick up more customers and talented people.
I remember when a successful business services company with 70 locations around North America entered the ’08 recession. Lesser competitors were closing branches and laying off people, and service was slipping. But the CEO of the successful company was not fearful about the recession. Instead, his mouth was watering with anticipation, as he sensed the opportunity to win more customers with better service, and poach some top talent away from the struggling competitors. Recession allowed this great company to gain market share and build a stronger leadership talent pipeline.
Increase the rate of learning of your leaders.
I don’t know about you, but time seems to move more quickly for me during harder times than during easy times. This can enhance the learning curve of your up-and-coming leaders. Just remember to not make too many decisions for them; that will stunt their growth. Allow your leaders to come to you with problems and solutions, and coach and support them. Let them test and learn various approaches to leading through uncertain times.
If you want to use this recession to enhance the learning of your leaders, perhaps give them a framework—a recession preparation toolkit.
2 frameworks for leading during recessions
Here are two frameworks which I think you will find useful in the next recession.
The firm where I work, ghSMART, has gathered a ton of research on successful and unsuccessful leaders over our 24 years of existence. These frameworks are based on the largest database of leader success and failure in the world. So it’s not one person’s opinion, these tips are based on insights my colleagues have spotted in data from over 17,000 careers, analyzed by 3rd party university researchers.
Our “Power Score” framework is as simple as asking your leadership team three questions, to help coach them to run at full power during a recession. Just remember the P, the W, and the R.
“To successfully weather the next recession…”
- Do we have the right priorities? (Priorities)
- Do we have the right people who are in our organization? (Who)
- Do we have the right relationships? (Relationships).”
We found that leaders who are good at all three (PWR) are twenty times more likely to be successful than leaders who are not.
And to double-click on those of you who are either CEOs, grooming future CEOs, or want to become CEO, here is another framework we hope you find useful. One of our most recent research efforts was led by my colleagues Elena Botelho and Kim Powell, and supported by our broader team of consultants and staff. It is called the “CEO Genome” project, which turned into the New York Times bestselling book The CEO Next Door: The Four Behaviors that Transform Ordinary People into World-Class Leaders.
What struck me recently is how the 4 behaviors that drive CEO success appear to be even more important in times of recession. Recession vs. non-recession has not been formally analyzed yet, but just look how extra relevant these behaviors are in times of trouble.
Perhaps help your leaders do a self-assessment, (click here to take a 5-minute diagnostic), and help them improve in the areas that matter most:
- How decisive are your leaders? Making fast decisions is even more important when the economic landscape is shifting from good to bad. Leaders have to decide what are the new priorities (as they relate to strategy, customers, and budget) and you have to decide who you need on your team to best weather the recession. We have found that faster and more frequent decisions are better than slow and infrequent decisions.
- How well do your leaders adapt to changing conditions? That’s even more important when conditions are changing faster, as they do during recessions. Don’t just follow the same routines out of habit, challenge your habits and adapt to changing conditions.
- How reliable are your leaders? It’s even harder to deliver reliable operating and financial performance in a recession, so the skills that lead to reliable performance are extra important (e.g. hiring a great team, developing people, managing with an operating cadence of problem solving and follow-up, etc.).
- How well do your leaders engage with impact?You have to communicate persuasively even better in a recession. Do you think a CEO’s board is easier or harder to deal with when times are tough? Harder! Same goes for interpersonal relationships with peers, subordinates, customers, and suppliers when nerves are frayed and the stakes are high. So recessions give an extra challenging opportunity to build persuasive communication skills in all directions.
Elena did a great job summarizing these four behaviors in her new TED talk.
Click here to watch: https://www.youtube.com/watch?v=YO1ypvAEL4g
In summary, if you buy from a lesser company or work at one, the next recession is likely to be a bummer for a couple of years. But if you work at a great company, fear not. This will be an awesome opportunity to shake loose some cobwebs of complacency, take customers and colleagues away from lesser companies, and increase the rate of learning of your leaders.
Dr. Geoff Smart is Chairman & Founder of ghSMART, the leadership advisory firm. The firm exists to help leaders amplify their positive impact on the world. Clients include CEOs, investors, and heads of state. ghSMART was ranked #1 on the 2020 Vault study of “Best Consulting Firms To Work For” in the areas of overall satisfaction, challenging work, and client interaction, and was named to the Forbes list of “America’s Best Management Consulting Firms” three years in a row. ghSMART published three bestselling leadership books: Who, Power Score, and The CEO Next Door. Geoff can be reached at firstname.lastname@example.org.