The role of leadership in creating growth during the recession
Figures published by the Office for National Statistics earlier this year revealed that the output of workers in the private sector fell by almost 4% in the year to October 2012 – the lowest rate since 2005. Overall, the decline in productivity across the whole economy was 2.4%. This raises the thorny question: with more advanced technology at our fingertips, faster communications and more effective automation than ever before, why is the UK’s productivity falling?
The Bank of England reports that the weakness of Britain’s economy is due, in part, to this fall in productivity, combined with ongoing decreasing demand for products and services across most sectors.
With a triple dip recession on the horizon, it would be logical to assume that business owners and leaders are focusing on ways of making their organizations more efficient, with a corresponding rise in productivity. Not true it seems – or if they are trying, the figures strongly suggest that they are failing.
A triple failing
Working as an executive coach with business leaders from a range of industries gives me an insight into many diverse sectors of the economy. From financial services, through property and the legal sectors to manufacturing, each is facing their own version of the challenges these recessionary times throw at them. My professional experience suggests three clear reasons why productivity is falling:
- there are large pockets of poor leadership;
- there is a lack of long-term business aspirations and vision;
- there is a failure to engage the workforce in that long-term view.
It seems that managers continue to think small, with short-term and risk averse goals. Therefore, it’s inevitable that productivity and enterprise in the workplace is stalling – and will continue to do so.
However, there are answers that businesses can introduce that will reinvigorate staff and their productivity and, more importantly, retain them when the upturn eventually arrives.
The panic response
These three areas need to be put in the context of human behavior in a crisis. When panic, fear or apprehension set in, executives and business owners often go into firefighting mode. Time and again I see short-term expediency supplanting medium and long-term business goals.
Of course, company leaders need to survive; to save jobs and businesses and to have a pragmatic approach to the times. However, having a planned leadership approach will pay tremendous dividends for any business in any sector.
The clients that I work with who are prospering have embraced actions and a clear direction centered around leadership, vision and aspirations, enrolling their teams in this journey. I also meet with many companies who have taken knee jerk, arbitrary actions that leave them trapped, like the proverbial rabbit in the headlights.
How many companies do you know of (maybe even your own) that get the blankets out when the pressure builds – blanket cost cuts of x%, last man in job losses – ultimately blanket short-termism.
Many companies have retained staff whilst imposing demotivating pay freezes, with some even cutting wages in real terms. However, in a significant blow to the economy, as productivity has declined, the labor cost per unit of output for the year to last October has risen by more than 3%. Could it be that the workforces’ tolerance for pay restraint has reached its limit? And if so, what is the alternative?
Follow the leader
Leaders are not appointed; they are leaders because others follow. In fact, many, so-called, leaders are really people with bigger badges than those around them. But when the recession finally ends, these badges will be worthless as the people who should have been enrolled as followers will, very likely, choose to walk off somewhere else?
Senior executives need to ask themselves ‘Am I spending my time doing the managing, or being the leader?’ Of course, management needs to be done, but consider what the people in your organization, if asked, would say they are following? Where is the company going? What plans are in place to make this an even greater place to work?
Having vision and leadership are not the soft or easy options. In fact, I’d argue that those businesses using the ‘blanket’ approach are, in many ways, taking the easy route. This route will sort out short-term cost issues but will not, as the figures suggest, root out inefficiencies in what the company does, what its people are employed to do – and will certainly not produce significant medium to long-term benefits.
Take your time
Effective leadership requires both thought and time to think, to challenge yourself as a leader and be challenged internally or by someone external to your business. Choosing thinking time and then being open to challenges on that thinking, needs to be a deliberate act. Often difficult to achieve given the pressures of modern business life, this can pay dividends far beyond any financial investment.
Many business leaders argue that funding for capital products to aid productivity through technological improvements, to cut costs or to provide desperately needed growth is strictly limited or even non-existent. Whilst this may be true, business leaders would be well advised to look at themselves first and then their human capital to see what can be gained from other routes, rather than just cutting costs and bringing in or forcing cheaper labor. Time after time, clients prove that this route allows for substantial changes and improvements to business outputs – without substantial financial investment.
Asking the right questions
Senior executives who see themselves as leaders in business should take this opportunity to look around them and ask ‘Who are my key players now and what are they enrolled in?’ As a leader, if you don’t know the answer, trouble is inevitable – and imminent. It’s also timely to ask ‘Who will be my key players in 2-5 years’ time, and again, are they enrolled in me as a leader, in this business and its vision?’
Time and time again we come across businesses that are looking for short-term fixes; a tweak here and a tweak there. However, taking the time now to look at your own management style, your leadership standing, your vision and that of your business – plus how you can enroll key people now and in the future in all these elements, will pay handsomely in the medium to long-term.
The most successful leaders take advantage of the situation they find themselves in and use it, even if it’s the worst recession since the 1930s, to the benefit of themselves, their business and most importantly, their people.