What it takes to emerge stronger from the crisis …

by Harald Ackerschott, posted Jun 14, 2009

Representatives of nations and corporations alike envision a future of growth and strength after the current crisis. Are those speeches Think-Positive!-Rhetorics to cheer everyone up, or is this crisis really an opportunity? Will we all come out stronger automatically or is there work to do?

First of all, that phrase “we will come out of this crisis stronger than before” implies, that we (whoever that is, company, nation, continent or individual) were not at our strongest lately, in the good years. If results are easy to accomplish and complete markets are growing, the distinction between success and failure becomes fuzzy.

Second, it helps, as Notker Wolf, the current Abbot Primate of the Benedictine order in Rom reminds us, to reflect on the original meaning of the Greek „Krísis“, which means decision and judgement and relates to a decisive turning point in development.

From the psychological point of view, the pivotal, decisive factor to review in this crisis is fundamental:

Over many years, one could observe a diffusion of interests and goals in most organisations. Individual and personal goals, group interests, minority interests, pressure group needs and multiple not always compatible interests and goals of the organisation itself. Different representatives of companies expressed differing positions, different stakeholders were led by concurring interests. Ecology vs. economy, long term growth vs. quarterly results, shareholder revenue vs. retention of profit, income of numerous individuals of all levels vs. company substance, prestige vs. innovation. But as there was abundant (cash), everybody could voice his claims and get his share.

The most important diffusion of interests lays in the conflict between individual interests and the interests of the company as a whole. In times of high earnings, the abundance of cash incites multiple needs. The Golden parachutes paid to top executives after ruining their businesses are only the tip of the iceberg we read about in the news. The finer lines are for example drawn by the supervisor who, out of desire for comfort, does not confront the regular underperformer in his team, by the chief executive who develops a penchant to spend more of his time with activities he likes than doing what needs to be done or the marketing executive who self-servingly keeps a promising trainee for years in his team, instead of promoting him and so supporting the companies talent management system.

Therefore, the strategic alignment of all those dispersed interests and goals is the real way to come out stronger after the crisis.

    1. Start by reviewing the interests of the company. Ask for the „big goal“. Ask if you define performance according to what really matters, to satisfy your customer’s needs and to consequentially earn in excess of the total cost of all the capital that is in your business. See what needs to be done to secure the achievement of this goal for the future. Which investments in innovations, people, know-how etc. have to be planned now? Question all sideline goals. Of course, respect all prerequisites for that performance (safety, environmental protection etc.). Shed the freeloaders and stowaways claims you deliberately satisfied in the past years of abundance. Define your necessary orientation and focus.
    2. Align the management and compensation system to the “big goals”. Managing employees and paying them is inseparable. To get done what needs to be done is the primordial interest of the company, to get paid is one reason to work for the employee. But the pure power of pay is as often overestimated as it is misaligned. Incentives are often orientated towards short-term results, have the wrong focus. Objectives like cost cutting quotas, sales quotas or reported earnings per share are easy to measure but do not really aim at the essence of the performance. Perhaps even more important, misaligned compensation often hinders people to develop intrinsic motivation and the desire to develop themselves. It turns people into “mercenaries”, who stop to watch out for risks of what they do and, most important, they have a bad influence on the psychological contract between the company and its people. Elaborate pay schemes change the psychological contract. The psychological contract is however the most powerful binding tool between the different interests, if, and this is primordial, the right people are assigned to the right tasks (see 3.). The right people want to do their best. They want to excel and they want to do what is necessary.
    There is an alternative to incentive hunting: pay good money, pay reliable, pay a good comfortable fixed salary, even in sales. Pay for good performance. Don’t let chance or misfortune make the pay volatile. Don’t economise on your best asset and most secure leverage: your people. But monitor their performance, and if they do not perform, you should free them from the work they are not concentrating on and let them go. Leadership in that sense is constant relationship work. And if this year or the next your company delivers great results, share some with your employees. There are no negative side effects of extra money for the joint achievements.
    3. Evaluate your employees thoroughly. Don’t go for the comfort factors which make your life as a leader easier. Start to look for the real performance and performers. Question yourself if you promoted people who were easy to get along with without really delivering. Check if you had an ear for the messenger of the inconvenient truth. Did you look at the originators of the performance in your organisation? Did you define performance according to what really matters? Are your performance indicators focused on value creating performance?
    4. Make sure evaluation matters. Make sure that the results of your evaluations and people’s performance have consequences, both ways. Pay psychological incentives. Praise, recognition, more autonomy, more contact and sharing of success stories are psychological rewards for the high performer. Closer monitoring, questions and additional support are consequences for the low performer. Always be aware of the ultimate consequences, make them part of your repertory: promotion and lay-off.Use thorough evaluation for your new hires as well. Don’t rely on gut feeling and first impression only, use reliable measures of potential and skill, take time and consult different perspectives on applicants, test them and make your decision after listening carefully.
    5. Align your shareholders. If your family owns the company, see to it that they act in unison. Don’t concentrate all family interaction on the business. See that the family has other shared activities and interests. Communicate on a regular basis.If you plan to step back and to pass the business on to your successors, the bad time is a good time. Identify what are the common and concurring interests. Imply your juniors in the crisis management. Have them learn now and make their own experience. You may hand over slowly, but do not clean up everything and leave the company all reorganised and perfect. Now, in the recession, you have a good starting point to align the shareholders, because you can choose and lay the ground for the future in the company’s interest.

    If you are not the company head but a leader within, look at your chain of command and see what you can do to align those guys you are reporting to. In crisis, you can stand up and report your reality and the reality of the people you are responsible for. Your leaders depend on your input, without you they are blind on one eye.

If you look for advice in the process, be critical in choosing your advisors or consultants, check if they really have the know-how and the right approach for you. See if they have the right know-how, experience and brain to deliver, to keep the promises of their superbly designed brochures and presentations. And if you find the right consultant for you, watch out: give him a contract that aligns his interests with the goals of your company!

All the best!

Wirtschaftskrise: Krisenzeiten durch mehr Vertrauen in eigene Stärken überwinden, WIWO.de, 19.06.2009

The Upside of the Downturn by Geoff Colvin, FORTUNE, June 8, 2009, pg. 34

„Oberster Kanzler-Ratgeber: Henning Kagermann. Er soll dafür sorgen, dass Deutschland technologisch stärker aus der Krise kommt.“ von Barbara Gillmann, Handelsblatt.com, 26. Mai 2009

Obama: we will rebuild and emerge stronger than before by Ewen MacAskill, GUARDIAN

Finding a way out of the crisis with renewable energy, RegierungOnline:
„With innovative products Germany has a good chance of coming out of the crisis stronger than it was before.“

Europe will be stronger after crisis, RussiaToday.com

GLOBAL INVESTOR: U.S. Banks Will Only Get Stronger – Once the major American banks survive this period of stagnation intact, they can and will rule the world once again. by Ann Lee, NEWSWEEK

Speech to the 120th Annual General Meeting of AUDI AG, Audi MediaServices:
„Audi is in a good position. We have the opportunity to emerge from this crisis stronger than our competitors.“

Keppel Corporation Report to Shareholders 2008. Interview with CEO:
„We have proven our mettle before, emerging stronger after every crisis, and we plan to do so yet again.“

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