When Times are Tough, the Tough Become Better Leaders - Four Lessons for Tough Times
By Carl Robinson, Ph.D., © 2008
It's Deja Vu all over again. We're into another down turn of the economic cycle. The operative word is "cycle." Unfortunately, many business people forget that and either panic and begin to take rash actions or act like deer in head lights (frozen with fear). I published my very first executive briefing shortly after the big internet bubble burst in 2001. I'm pleased to say that my business took off and prospered even during that major downturn. Thanks to the wonders of computing, I kept a copy of that first executive briefing titled, When Times are Tough, the Tough Become Better Leaders - Four Lessons for Tough Times. I only needed to make two minor updates to make it current! The following is my updated version.
Icarus, of Greek Mythology, with his glued-on feathered wings, flew too close to the sun and plunged to earth. He forgot he was human. Many business people, like Icarus, flew too high during the Real Estate bubble of 2007 unaware that they were suffering a delusion of invincibility and have since plunged back to earth. Now, those same business people and investors are stunned by this collective fall to earth and are understandably afraid to take perhaps 50% of the risks they eagerly took 2 years ago. The pendulum of risk taking has swung over to the side of fear to what seems to be the same degree it had previously swung to the side of no-fear. Below are four lessons that can be taken away from this rise and economic plunge to earth that business people can use to recover from the impact and get back to business.
- Human psychology will always influence the economy and cause economic cycles by our natural inability to remain in a steady state of normalcy – we’re a creative species. We are not complacent. We’ll recover from this plunge, discover something else that will rev up our psyches and the economy and there will be another “bubble” somewhere down the line…it’s inevitable. The upward swing creates innovations and wealth and we are lucky for it. The plunge sobers us and can help us be more realistic about what can and should be produced, etc.
Lesson 1: Since this is a cyclical thing we are experiencing, those who take risks now will be able to “buy low” and hopefully, ”sell high” as the economy improves. Look at what Warren Buffet is doing.
- Leaders lead. Now is the time that you’ll see who is really made of the “right stuff.” Hunkering down, the new buzz word, is what followers do because they are strapped to the pendulum on its swing to the other side. There is a difference between belt tightening and hunkering down. Yes, now is the time to be prudent but not to hunker down.
Lesson 2: Those of you who take prudent risks now – who lead – will be ahead of the pack as the economy builds up again.
- We got lazy and complacent about developing people during the upward swing. It seemed that many people thought that they had the Midas touch for picking leaders. All you had to do was hire bright people and let them loose and they would figure things out. Wrong! Just look at the banking and mortgage industry and what happened (please read, The Talent Myth, Are Smart People Overrated? by Malcolm Gladwell in The New Yorker, 7/22/02). Research shows that managing people well is a learned skill, not something that most of us are born with. Trained managers will lead more effectively, achieve better results, and have lower turnover of their best employees. Remember the number one reason for people quitting a job still is, “I hate my boss.” The very best people will not tolerate a bad boss for long because they know they can find a new job and a better boss somewhere else even when times are tough. Unfortunately, those who stay behind with bad bosses are usually your least skilled and least productive people or those who are the most afraid…not a recipe for building a successful company.
Lesson 3: Put time and money into developing your people…it will pay off.
- The very best leaders respond with clearer heads under pressure. They have higher EQs (emotional intelligence) than less effective leaders. Emotional intelligence is the capacity to "manage" ourselves and our relationships effectively and consists of four fundamental capabilities: self-awareness, self-management, social awareness and social skill.” Effective leaders use, for example, varying leadership styles depending on the business situation and the people they manage. They are not prisoners to a one-size fits all approach to leadership. David McClelland of Harvard found that executives who were rated high in “emotional intelligence” competencies by their peers and subordinates outperformed those rated lower by 15 – 20 % on yearly revenue targets. During difficult stressful times, “emotional intelligent” people manage their emotions better and react with clearer more rational minds and make better decisions.
Lesson 4: Improving your “emotional intelligence” (EQ) can help you achieve better bottom line results and be a better leader.
If you want to learn more about developing emotional intelligence, drop me a line.