The Importance of Upgrading Talent in an Economic Downturn
Are we headed for a recession? According to a recent poll by the World Economic Forum, we are. While it likely will not be akin to the brutal recession following the Fed’s steep rate hikes in the 1980s, it could be more impactful than the pandemic blip of 2020. Regardless of the severity or duration, early warning signs suggest the economy is going to have a difficult 2023.
How a management team prepares for and responds to economic conditions can make or break a business. Now is the right time to take stock and make sure the right leaders with the right skills are sitting in the right seats. Here’s why.
Results Can Mask a Myriad of Issues
These organizational issues can make matters worse when the economy slows. When a company is performing and delivering financial results, it is all too easy to overlook how the CEO and their management teams are communicating and interacting with the organization, driving accountability, and contributing to the culture. We were recently called to assess the management team of a business services company that, until a few months ago, had been delivering on financial targets. What our assessment uncovered was a CEO who could not establish direction or align his management team. There was a clear “in” group (i.e., a divisive COO and abusive CHRO who were the CEO’s spokespeople) and an “out” group (i.e., everyone else). There was no plan to get ahead of changing market conditions, and the old plan was no longer working. After presenting our findings to the Board, they made the courageous decision to remove the three leaders. An independent advisor who has been involved for the past six months stepped in as interim CEO to mitigate any further risk, and the board quickly went to search for a new CHRO. Another finding our assessment revealed was a strong leader in Operations who was on her way out the door. Rather than replacing the COO, the Board opted to elevate her into an acting role with the option to make it permanent based on her performance. While it is too soon to tell how these changes impact financial performance, early reports suggest the climate is more positive, people are re-engaged in the mission, and customers are providing positive feedback.
Different Talent Needs in Times of Uncertainty
Another key reason to do this work is the talent you have for growth is not necessarily the same talent that can create certainty or stability. Driving growth requires thoughtful planning for scaling the business, discernment about which strategic bets to place (with concomitant plans for execution), opportunistic action with precision, and innovation. This often requires CEOs and their management teams to be collaborative, consensus-building, and enthusiastically engage the broader organization. Leading through uncertainty requires the ability to deftly navigate circumstances that can change on the hour, a willingness to make decisions with incomplete information, and the financial know-how to cut costs. Leading in these circumstances requires CEOs and their management teams to be decisive and directive, to divide and conquer with clarity on who owns what, and to adapt and adjust quickly. They also must stay much closer to people at all levels to ensure they receive accurate, real-time information. This helps to address any potential engagement/retention issues.
One thing is almost certain: What goes down, must come back up. The key is how well-equipped a CEO and their management team are to bounce back and pivot. If you are unsure, now is the time to find out and make any needed changes.