Corporate leaders have had to climb mountains over the past three years, confronting an alarming number of Himalayan challenges, and, to their credit, mostly succeeding. But here’s some news – those were the foothills.
Without quite realizing it, before the pandemic we had become an economy that had drunk the VC Kool-Aid – growth was everything, even for non-tech companies. Investing was about the potential for market disruption, not out-of-fashion metrics like ROI, market share or margins. Spending, any spending, meant progress. Tech problems? Hire dozens more programmers. Problems with competition? Double the marketing staff.
Take two minutes scanning recent headlines and you can see that the Kool-Aid has gone sour. Growth giants like Google, Meta, Microsoft and Amazon have announced enormous layoffs. Tesla slashed auto prices. Activist investors are attacking Salesforce and Disney. The regulatory climate is far more aggressive, particularly for mergers (Microsoft-Activision Blizzard) and market concentration (Google). Money, once ridiculously cheap, is far more expensive. Once patient capital is suddenly demanding performance over potential or dreamy whims - now, this quarter. No more talk about colonizing Mars. Investors want slingshots, not moonshots.
This is largely true at the big tech companies, but from what I am seeing they are just a petri dish for a trend that is impacting most economic sectors. If your leadership hasn’t dusted off the old KPIs and applied them to highly resilient new strategies and pivoted to a new leadership model based on scarcity and resourcefulness, these dark clouds are going to overwhelm you. We are at a “Y” in the road, which will separate truly resilient leaders who can adjust to the new performance demands from those who simply aren’t going to cut it any longer. All the trends of scarcity and tightening are, for certain, only going to get worse.
I have spent the past twenty-five years advising some of the world’s top CEOs and boards and I have never encountered a set of problems that required not just entirely new skill sets – reinventing supply chains - and entirely new operating models – remote work - but unprecedented levels of resilience. I’m heartened by how well many leaders have coped, but now they are waking up to the fact that leaders are going to need far more range in their thinking, an ability to break old habits and reconsider every solution they used to rely on and an embrace of collaboration rather than top-down management.
First, unlearn. The best leaders will realize that the skills that got them to the top must be adjusted or abandoned. The practices you mastered must be unmastered. Leaders must guide their organizations with more transparency and cross-discipline interactions. Waiting for the atmosphere to get back to “normal” is a prescription for getting fired.
Second, obliterate the silos. Leaders must incentivize their teams to apply a three-dimensional approach to their operations. Yes, team leaders must focus on the outcomes in their lanes, meaning the objectives for their vertically defined teams, but that’s an auxiliary function. Just as important, team leaders need to deliver in operating horizontally with peers and other teams. This requires communication, coordination and sequencing with peers to deliver real outcomes on time. Team leaders also must prioritize and deliver enterprise outcomes, defined and communicated clearly by senior executives. These are the most critical outcomes and require full alignment with the CEO.
Third, incentivize performance. Many companies had created cultures where employees were “activity based” rather than “outcomes based.” Executives became accustomed to continuous recruiting and staffing as the solutions to issues of growth, not squeezing more from the system. Team leaders were often rewarded for activity – meaning spending or creating initiatives - rather than hitting numbers. I worked with a company facing tougher competition that responded by creating 256 new marketing initiatives. Really, you can implement that many plans? What they needed was one initiative that really delivered.
Fourth, get back to the office. Virtual meetings were necessary during the pandemic, but I found that Zoom-type interactions too often stayed on the surface without useful battles over the real challenges. The disagreements, insights and consensus needed to develop effective strategies in a harsh climate happen best during in-person debates. It’s a contact sport that I call “editing,” and the empathy and passion that produce successful plans are enhanced by face-to-face encounters.
Developing these new habits will mean not just thriving but, for many, surviving.
