Leading in Hard Times

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Seldom has being an effective leader been so important -- and so difficult. An economic downturn that began earlier this year has been compounded by the attacks of September 11th and the ensuing war against terrorism. Layoffs and cost-cutting are the order of the day. Morale and productivity are suffering.

So how can company leaders improve employee morale in uncertain times? How do you keep employees feeling relatively secure when you can't guarantee that business will get better soon or that there won't be more layoffs?

To find some answers, we spoke with 10 CEOs across the country about how they are leading their companies. All of them offered the same two pieces of advice: Be a straight shooter and be visible. Their opinions on other issues varied. We culled their best advice to come up with these 10 suggestions for how to be a leader today.

1. Practice open book management.
If you don't practice open book management at your company, now may be the time to start. Many of the CEOs we talked to espoused the value of open book management during uncertain times or downturns. The theory: if employees understand the business and its finances, they better understand their impact on the company's bottom line. Lanny Goodman, a business consultant and president of Management Technologies, Inc, has worked with CEOs nationwide for over 20 years. He's seen time and time again that "the best antidote to fear is communication, openness, and information," he says. That means opening up the books and giving people the lowdown on the company's financials. "If you have to have a layoff, people will understand better if they understand why it had to happen. Show them the fixed costs, the profit numbers, how when volume falls below a certain point, the company starts hemorrhaging cash. Give them the hard numbers in the form of simple charts and graphs - and make it simple to understand. If there's no mystery, people won't sense that they are victims," he says.

Deborah Clifton, CEO of The Integrity Group, a content development company based in Houston, shares her company's numbers with employees in an internal newsletter. She often charts the numbers in a graph, and explains what employees are looking at. "I make myself accountable to them by sharing the numbers," she says. "I show them what's going on, what the numbers mean. If the numbers aren't good news, I explain what I'm going to do to fix things - whether it's cut costs, increase sales efforts, whatever it is. And then I give a status report a few months later to share the steps I've taken and what has improved or changed as a result." To make sure that all her employees understand what the numbers mean, she keeps the graphs and explanations simple, and ensures that group managers understand the figures well enough to answer questions from their staff.

2. Focus on one or two key metrics.
Alex Mann, CEO of Mann Consulting, an IT consulting firm in San Francisco, has seen his share of tough times in 2001. The Bay Area has been hard hit all year, especially in the IT sector. After a round of layoffs, this summer, he and his business partner (and brother), Harold, looked for a key metric that, if hit, would ensure that everything else fell into place. The Manns discovered that their essential metric was billable hours. As a result, Mann now publicizes weekly billable hours goals for the entire staff. And it's working.

"The staff was fighting against uncertainty after the downsizing this summer. They were wondering, 'am I going to be next?" Mann recalls. "It's when you're in the dark that you assume the worst. Now they're not in the dark - they know if they make the numbers, they are contributing to making sure the business is doing OK. Consistent, predictable results are the best antidote to tough economic times." Since focusing on billable hours, employees are less worried about the economy and downsizing. And there's been a bonus benefit, too: "We're a far more efficient firm now then we were six months ago," Mann says.

3. Be a straight shooter.
All of the CEOs we spoke with said that it's essential to explain the rationale for changes (e.g. layoffs), to convey the facts simply and clearly, and not to gloss over things or make them sound less serious than they are. "Employees have extraordinarily good 'crap detectors," laughs Goodman. "You've got to cut though the crap and tell them exactly what's happening, why, and what you're doing about it. Then genuinely ask for suggestions from them."

Mann agrees, and cites info found on the Web site F***edCompany.com as a prime example of how not to communicate. "You know how F***edCompany prints all of those CEO e-mails about layoffs -- and they all sound like jokes?" Mann asks. "You have to avoid sounding 'CEO-like.' Instead, you must convey sincerity, and avoid communication that creates divisiveness and insecurity."

Mark Shane, CEO of Lastar, a networking services provider in Dayton, Ohio, has laid off more than half of his staff in the past year, taking the company from 235 employees to 93. Lastar then cut all remaining employees' wages to try to avoid further layoffs. Shane says that being direct was the only way to go. "We communicated to people the direness of the situation, reiterated the challenges ahead, and told them straight-up what was going on. No false promises, no assurances."

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