Dr. Marc Sniukas is a leading strategy advisor helping CEOs and business owners design and execute winning strategies in a smart and fresh way so that they lead with clarity and confidence and achieve profitable results, even in times of uncertainty and turbulence. Over the past 20+ years, he has helped CEOs, senior leaders, and executive teams of companies such as Accenture, ArcelorMittal, BMW, DeBeers, HP, HSBC, Lufthansa, McDonald’s to create strategies that double their revenue and profits, drive innovation that sets them apart from their competition, and create lasting transformation and increased performance. Today, he helps CEOs and business owners of start-ups and small and medium-sized businesses create a refreshingly simple approach to strategy that leads to powerful results even during a recessionary climate. Fast, without months of analysis and planning, and taking too much time and resources away from daily business. And without the pains of the traditional, old-school approaches. Next to his corporate work, Marc is a professor of management & innovation at the Luxembourg School of Business, and an executive education faculty member with Duke, Emeritus, and Hult.
In an ever-evolving global business landscape punctuated by unexpected crises such as pandemics, inflation, recessions, and political upheavals, CxOs find themselves at a crossroads.
The challenge facing these leaders is profound: How to effectively balance the immediate need for dealing with the crisis with the long-term imperative of fostering new growth. This complex balancing act, often under immense pressure, defines the essence of leadership in turbulent times. This article explores the emotional dynamics experienced by CxOs during such periods, their typical responses, the pitfalls of conventional reactions, and, most importantly, a strategic approach to navigating this paradox.
The Emotional Landscape of CxOs in Turbulent Times
Leading an organization through crises is an emotionally fraught journey for any CxO. During periods like pandemics or economic downturns, the weight of making critical decisions under uncertainty often leads to stress, anxiety, and a looming sense of responsibility toward employees, shareholders, stakeholders, and the broader community.
There’s a palpable tension between the pressure to safeguard the present and the need to prepare for the future. Many CxOs find themselves grappling with overwhelm and doubt, constantly weighing each decision’s risks and potential repercussions.
The unpredictability of these times can foster a defensive mindset, focusing more on survival and less on growth or innovation. This emotional turmoil impacts decision-making and the overall morale and direction of the organization. More often than not, the result is feeling and being stuck.
Typical Reactions During Crises
In response to crises, CxOs often default to immediate, visible measures to stabilize their organizations. This typically includes significant cost-cutting strategies such as downsizing the workforce, reducing operational expenses, and halting or scaling back on projects with no immediate, short-term benefit. We have all been there: training programs get canceled, travel halted, marketing cut and innovation initiatives scraped.
The rationale behind these decisions is straightforward: to preserve cash flow, maintain liquidity, and ensure the company’s short-term survival.
However, while these measures may offer temporary relief, they often come at a cost to the organization’s long-term health and growth potential. The focus on short-term survival can inadvertently lead to a neglect of long-term strategy, stunting the company’s ability to innovate and grow in a post-crisis world.
A number of studies challenge the conventional wisdom of aggressive cost-cutting during crises. A study by McKinsey, for example, demonstrated that companies that maintained, or even increased, their investment in innovation during the 2008/2009 downturn outperformed their peers, not only during the crisis but even more so, up to 30% in market capitalization, in post-crisis years. This data is a wake-up call, highlighting that cutting costs can be counterproductive. Instead, maintaining investment in these areas can be a critical differentiator in a company’s post-crisis performance.
This is not to suggest that cost management is unimportant; instead, it emphasizes the need for a more nuanced approach. Strategic cost-cutting, wherein non-essential and inefficient expenditures are targeted while preserving investment in key growth areas, emerges as a more sustainable model. This approach allows companies to remain agile and responsive to changing market dynamics, preserving their ability to innovate and capitalize on new opportunities.
How to Lead During Challenging Times
Adopting a balanced approach involves making thoughtful cuts without impairing the organization’s core capabilities or growth prospects. This approach is multifaceted and requires a deep understanding of the business’s essential strengths and potential growth areas.
How can CxOs achieve that?
First, you need a strategy.
Now, you might be thinking: “We tried creating a strategy in the past, and I’m frustrated at the lack of results.” Maybe you feel strategy:
- Takes too much time and effort, which you might not have, especially during times of crisis,
- It won’t get implemented anyhow, so what’s the point,
- Your business is too dynamic, and the current environment is too unpredictable for a long-term strategy.
This may be true if you approach strategy the traditional, old-school way, thinking about strategy as long-term planning. But the old-school way will not shift the needle in recessionary times.
You need to shift how you think about strategy and adopt a challenged-based view.
Think of strategy as the response to the challenges that keep you from reaching your ambitions.
Your ambitions can be about the future, even longer-term. Zoom out to that future, and think about where you want your company to be after the crisis. Outline objectives for growth, profitability, and the impact you’d like to make.
Then, instead of thinking about the long-term plan that takes you there, zoom back into the immediate challenges that keep you from reaching your ambitions that need to be solved in the next 12-18 months.
Taking such a challenged-based approach, combining the longer-term with the current realities, will allow you to see the bigger picture while addressing today’s issues and make better strategic decisions about what costs to cut because they don’t add value today and won’t be needed to reach your ambitions in the future, or what opportunities to seize because they align with your ambitions.
Second, you must involve your team and relevant stakeholders in making that strategy.
Conventional wisdom says that during times of crisis, top-down decision-making is most effective. In my experience, this only works if the roof is on fire, and everybody agrees and sees it that way.
Think of strategy as an exercise of sense-making. Making sense of what is going on, the impact it will have on your organization, and what needs to be done in response. Involving more people and their perspectives in this thinking process will first enhance the quality of your decisions, addressing some of the emotional challenges outlined above.
As a joint exercise, it will create a shared consciousness throughout the organization about what is essential right now and what needs to be done about it. This shared consciousness will allow for a culture of “aligned autonomy” in which decisions are made on the spot and throughout the ranks much faster than if they have to be imposed from the top. Because everybody has the same perception of what is required, these decisions and actions will be aligned with your strategy.
Third, rethink how you think about your role as a leader.
This culture of “shared consciousness” and “aligned autonomy” will free you as a leader to be all-knowing. You can trust your team to make the decisions and take the required actions without needing top-down micro-management.
Instead, as a leader, you can focus on the bigger picture, provide overall direction, enable your team, and remove the barriers that keep them from doing their best work.
Weathering the crisis thus becomes a shared responsibility. And CxOs will lead with clarity and confidence.
Navigating the paradox of leading during challenging times is not about choosing between hard cuts and new growth; it’s about strategically integrating both aspects. CxOs who successfully manage this balance will guide their organizations not only through the immediate crisis but also towards a stronger, more innovative future. The key lies in understanding that short-term survival tactics, when skillfully balanced with long-term growth strategies, can lead to sustained success and resilience.