Against the backdrop of the worldwide financial crisis, Madrid ExpoManagement, the largest conference for European managers, took place at the end of May. Organized by management training firm HSM, the event offered business leaders and experts in human resources, marketing, finance, psychology and politics the opportunity to discuss strategies for managing companies and personnel during the ongoing global recession. High on the list of priorities, they said, is developing executives who are flexible and able to bring people together around a common goal.
Anders Knutsen, former chief executive of Bang & Olufsen, who is considered one of the top twenty business leaders of the twentieth century, assumed his role at the company during a time when the electronics firm was undergoing a serious crisis that had brought it to the brink of bankruptcy. “It is consumers who define the market,” Knutsen told the forum audience. “They constantly choose between low prices and high quality, depending on the importance they give to the particular service. Companies have to choose: Either compete for the lowest price, or look for solid value, good design and markets where people can make an effort.” When it is time to think up a new campaign, Knutsen offers the following advice: “Be brave! If you have nothing important to say, that’s unfortunate. But if you have something [to say], say it. Be distinctive. Let yourself look and be accessible; maintain contact with your customers to establish solid relationships and alliances.”
According to Knutsen, “Customers show themselves to be more open during periods of crisis. They look for alternatives to previous styles of consumption. This brings a significant opportunity for those companies that can offer something unique, and which support the worldwide interest in protecting the environment in the future. Although I would like to think that [such] values are universal, there are many different ways to capture the attention of customers. I don’t believe that the geographical component is as important as the common values shared by cultures.” He added: “Marketing is based on the presentation of values, and the stimulation of [other people]. The more enthusiastic your messages are, the more you will impress people. Everything involves innovating and deciding how to proceed and how to guarantee that everyone moves in the same direction. The more, the better!”
Leadership Challenges
According to Paul Schoemaker, a strategy specialist and research director of Wharton’s Mack Center for Technological Innovation, “Managers must develop a capacity to move toward those changes that will occur in the future, and introduce an element of flexibility in their strategies. This is the only way to move forward in times of uncertainty. It is also necessary to have organizational skill and to control external changes in real time.” In his view, “uncertainty is an opportunity for those who are prepared. Managers tend to be protective about what they have, and they hope that over time, uncertainty will end and things will work out. A better strategy is to take advantage of uncertainty. The best opportunities arrive in times of crisis, not in times of stability.” What is the key to making the most of those opportunities? “Except in the case of historic fluctuations, managers must resort to their imaginations, paying attention to indicators of weakness, and making comparisons with other sectors, while listening to outside experts and those within their own company.”
Schoemaker noted that if companies re-think their strategies, they can also avoid suffering the avalanche of layoffs that is occurring everywhere. “A better strategy would be to promote growth and, as a result, new business. However, too frequently, managers focus on what worked in the past, and they don’t succeed in adapting their strategy to the new reality. Companies are dynamic by nature. Nowadays, for example, we are witnessing a process of creative destruction while in other times, we’ve seen the ability of big and small companies to reinvent themselves.” In addition, he said, “leaders can learn from their mistakes in this crisis. Some are excessively confident. Others ignore relevant facts, and some feel insecure and uncomfortable in a situation rife with confusion. The role of the leader becomes more relevant in times of crisis. A leader must be capable of tolerating mistakes, both his own and those made by others. He must learn from them and overcome them. When all is said and done, what doesn’t kill you makes you stronger.” According to Schoemaker, the qualities that make a true leader include “having curiosity; skill at anticipating events and changes; the ability to face the unknown; and personal charisma when managing other people and gaining their trust.”
Bill George, former chief executive of Medtronic and a professor of management practice at Harvard Business School, offered similar views. “The crisis puts true leaders to the test. This is when you know where they are and who are the good ones, and when they demonstrate their bravery, intelligence and capacity to bring together on a single team those people who are going to support their leadership. I believe that the keys to being a real leader in times of uncertainty are to be genuine, authentic and capable of confronting real situations and adapting to them. [Leaders] should face problems and recognize that they are in a crisis and change direction in order to adapt to conditions. If they don’t act that way, they will certainly fail.”
How can a manager take advantage of the opportunities that the current global crisis presents? According to George, “First, we need to know what caused the current global crisis. I believe that it was the focus on short-term results rather than on the long term. We took on too much debt, both consumers and institutions. And we were not conservative in our financial behavior, to the point that we lost sight of what was important for companies: creating lasting value for our customers, employees and shareholders. I believe that we now recognize that [focusing on] the short term is a mistake, and that these are the times to choose intelligent leaders who can guide us when conditions are difficult. I believe that companies with this class of manager will have the opportunity to overcome the crisis, and will wind up being the winners. Many people believe that markets will return to what they were once the recession ends. Nevertheless, [I believe] that’s not going to happen; the companies that succeed will be those companies that know have to deal with the needs of their customers and consumers.”
Jeffrey Immelt of General Electric and Indra Nooyiof PepsiCo are two examples of chief executives who have done an extraordinary job in recent years, he noted. “The chief executives who are acting with the same mindset as in the twentieth century – by exercising absolute control without being transparent – probably should be replaced,” George said. “We have seen big changes after the baby boomer generation: Now, there is a new generation of leaders who are less than 45 years old. These new leaders are more aware of the needs of people, and they have figured out how to cast aside the old hierarchies. I am optimistic. I believe that this new group will do an excellent job if it focuses on creating value over the long term for shareholders, employees and customers.” But is it easy to pursue that path? “Many leaders wind up losing the basics of their beliefs; their values and their principals. I believe that when they stop being motivated, it is because they feel pressured. They cast aside their beliefs and they are seduced by money and recognition. If you manage to become aware of this, and admit your mistakes, and face reality, and recognize that these habits have led to an awful lot of problems, then you will be able to re-take the right road and recover your motivation. If you don’t do that, the best thing that can happen is that you resign your position.”
George has been considered one of the 25 most influential business leaders because of the way he managed the medical technology firm Medtronic for the past two decades. According to George, “We must have leaders who know who they are, who have a high level of knowledge of themselves, and are faithful to their beliefs. This means an authentic person who knows how to delegate to others so that they, too, can evolve and wind up being leaders. These are the qualities that I believe we need in the leaders of the twenty-first century. They must know how to work with their partners toward a common mission, and must establish [corporate] values. They should also recognize that their task consists in serving their customers and employees to create a spirit of collaboration within their organizations. I believe that if leaders are autocratic and dictatorial or if they show themselves to be too worried about their own status, then they cannot do a good job of leading.”
According to George Kohlrieser, a professor at the IMD business school in Switzerland and an expert in leadership, “We are living in a propitious time for change. We have to understand that nowadays many people are thinking only about their survival, which limits their creativity and their search for opportunities. Survival is always the most important goal for the brain, so the leader and employees look for a way to defend themselves and do not look at external opportunities. Few conditions are more destructive than this sort of mental and emotional impotence. Leaders have to be resistant and positive, and they must focus on opportunities. They should put a limit to complaining, since that only leads to despondency. This is the time to learn, to develop one’s talent for finding innovative and creative ways to do things. Leaders should focus on positive factors and on opportunities that exist in any time of crisis, because this is when employees can become more resistant and more determined to find ways to make progress.”
Kohlrieser adds, “Those leaders who let themselves be overcome by panic, who have closed minds, little resistance and poor communications skills; those who are distant and not inspiring — those leaders don’t work out. The world will never go back to being the same, so we need chief executives who understand how to benefit from globalization, and how to tackle the crisis of capitalism [as well as how to tackle] sustainability, climate change, [the emergence of] a different type of capitalism [and] the battle for talent; how to manage financial value; and how to guide people toward common goals. The leadership skills of the future will require the greatest possible degree of collaboration for effectively overcoming limitations. This change in leadership skills will help employees adopt a more activist attitude about risk-taking and tackling change. Other challenges include creating efficient teams in different countries, who have access to virtual communication; using influence without resorting to authority; searching for innovation; coaching; developing skills at adaptation; appreciating complexity from various points of view; rapidly learning through dialogue; and gaining the confidence to take action even in cases of ambiguity. This is where two true opposites exist, such as the search for growth and the quest for cost reduction. Communications skills are more important than ever, especially in the case of virtual leadership. Leaders need to be more and more effective when it comes to making themselves understood.”
Psychological Efforts
Amidst so much uncertainty, ExpoManagement also looked at how to manage the crisis not only from the corporate point of view, but from the personal perspective. According to Mario Alonso Puig, professor of surgery at Harvard University and a member of the New York Academy of Sciences, people need exercises for controlling their anxiety so they can relax during the recession. In his view, “Any decision we make is closely related to the way we perceive things. So it is critical to focus our minds on what we want and what we have. It does not make any sense to wear ourselves out by dealing with things that we cannot change. You have to move from ‘that’s the way it is’ to ‘it must be’ that way, because that means moving from being a victim to becoming the main figure.”
According to Alonso Puig, “In a crisis, you can distinguish with special clarity those leaders who believe in people and call for commitment, from those leaders who are not able to create that feeling of belonging and confidence in the possibility of emerging stronger from the crisis.” He adds, “The great ideas emerge from passion or from necessity. In a crisis, people urgently need to find a way out. However, many people give up when they face adversity. Especially when times are hard, a leader feels a profound loneliness so it is essential for him to depend on people who have his total confidence; who permit him to express his emotions; and who enable him to feel as if people are listening to him. When a person shares his feelings with others, he has a clear perspective when it is time for him to make decisions.”
