Growth is wonderful, but the reality is that business is cyclical and markets are sometimes in decline. What can businesses do when sales are slowing and revenues are shrinking? The first reaction may be to cut costs, with staff reductions often the standard go-to cost-cutting measures. All too often, this is the primary or even only response a business will make to weather a downturn.
It’s unfortunate because it ignores other possible strategies. Remember, business cycles are not exactly a new development, so others have been through tough situations and have tried various strategies. While retrenching is a natural response, it can leave your business vulnerable to the competition, especially when a competitor seizes the opportunity to be more proactive. For example, staff reductions can be very demoralizing to remaining employees, who will often start looking to leave (and who may even join a competitor).
In addition, those cutbacks can also weaken customer relationships, prompting more lost business and leading to a vicious cycle of decline.
So, what are some alternative responses to tough times?
It may seem like a strong leader will be clear in communicating the problems a company is facing, but simply sharing bad news is not nearly enough. The wiser course is to be honest about the bad news but also to share the vision of what the company is trying to achieve. Take the opportunity to reiterate that, while the downturn is real, your belief is still strong that it will be possible to weather the storm and reach those goals. Most people know that setbacks are part of life. They also respond to inspirational messages—rooted in facts, of course—that, with perseverance and dedication, the tough times can be overcome.
It’s tempting to take a safe and largely silent attitude of “not throwing any more fuel on the fire,” rather than showing leadership by being open and proactive during all communications. Especially if your competitors are retrenching, seizing the opportunity to come out in front during the lean period can make your company stand out and pay dividends down the line.
With a strong management system and positive, proactive leaders at the helm, even the toughest economic downturns can be overcome. Great leaders also know when to admit they may have made a mistake and are willing to correct course. Even the most successful, smartest, and hardest-working people fail sometimes. Those same people will often confirm that failure is a wonderful teacher.
So, just because your initial response may have led to a demoralized staff and a lost customers, it is not too late to declare it’s time to change the current path. Don’t fall victim to an ego-driven trap that doesn’t let you change an incorrect approach for fear of appearing weak or indecisive.
Look at the world’s longest-lived companies and you’ll notice their products and business models have changed over the decades or even centuries. No business exists in stasis—change is part of survival. There’s a word for companies that are very quick to respond to changing markets and latch on to the opportunities others miss: the word is innovative.
Of course, the trick of being truly innovative and open to change is to do it intelligently. Simply being different for its own sake will not work, but stubbornly refusing to change is a recipe for disaster. It goes without saying that, during a period of declining revenues, every dollar spent matters that much more. It is therefore a good time to assess what has been working well and what has not. The areas of weakness may simply need to be updated and infused with fresh approaches.
Let’s assume you have identified some strengths along with some areas where the return on investment is poor. Now is the time to compare these areas with your business plan and business objectives. What needs to be done in order to put the weak area back on course to achieving relevant business objectives? Or, alternately, is it possible that the business objectives themselves must be altered and updated and the weaker areas will follow suit?
Some leadership styles are best suited to periods of stability while other leaders are change leaders. To be a change leader, one must have both the capability and confidence to change course when it makes sense. Listening to employees, including the rank-and-file line members (who are often the most directly in touch with customers), and being open to making changes as a result of the insights you may gain takes boldness. But boldness is exactly what can be required during tumultuous periods.
Change management requires a particular skill set, and communication is a foundational principle when it comes to change management. Whenever a leader sets about on a course of change, it is critical to keep everyone fully up to date of what is changing, why it’s changing, and what the goals are for that change. Clear and open communication is important to keeping everyone on board. Now is not the time to share information on a need to know basis, which can be especially risky during an atmosphere of anxiety, which is often the prevailing atmosphere during tough times. Keep in mind, too, that truly open communication is a two-way street. Great change leaders listen as well as talk.
Strong leaders are self-aware and humble enough to staff to their weaknesses. No one person has exceptional skills in every area. If you’ve done the work to assemble a team of individuals with excellence in various areas, trust those individuals to demonstrate that excellence in the areas that are their strong suites. A great leader is willing to support and shield subordinates when he or she believes they are on the right track, even when the popular winds are blowing against them.
Most employees are surprisingly sensitive to the current conditions at their company and in the marketplace as a whole, even if they have never looked at a quarterly earnings report. After all, they talk to customers and colleagues, so they may even be aware of trouble before it’s reflected in the numbers. During downturns, it’s natural for employees to fear losing their job and that is often when the best and brightest will jump ship at the first opportunity. That is all the more reason to work to keep your best on board by avoiding the atmosphere of secrecy and suspicion that normally accompanies bad news and layoffs.
An empowered employee is willing to take some risks if it means innovation can result. They need to be confident that trying something new and promising that results in failure is an opportunity to figure out what works, not to have punishment meted out. Especially during a downturn, it is easy to become paralyzed by fear. Thinking your job may be next on the chopping block is not a recipe for coming forth with creative new ideas and expressing a positive attitude that the current climate will end soon enough and here are some ideas to hasten a turnaround.
As a leader, part of your job is providing encouragement and supporting new ideas and promising new approaches just when enthusiasm appears to be flagging.
The rewards of doing this during difficult times can be both short-term and long-term. In the short-term, you will reduce the risk that talented staff members will leave, especially if they are being recruited by a competitor that is taking advantage of the downturn to strengthen staffing. Empowered people tend to be loyal to those who have empowered them, and most people think twice before leaving a great leader for what may be an unknown quantity at a different employer.
Over the longer-term, the trust you place in your people and the encouragement you give them in handling their own projects and coming forward with new ideas can pay off in accelerated learning and development for all of them. Your team will be that much stronger and more skilled heading into the next growth phase.