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Leadership - Managing
in a (Permanent) Crisis
It would be profoundly
reassuring to view the current economic crisis as simply another
rough spell that we need to get through. Unfortunately, though,
today's mix of urgency, high stakes, and uncertainty will continue
as the norm even after the recession ends. Economies cannot erect
a firewall against intensifying global competition, energy constraints,
climate change, and political instability. The immediate crisis-which
we will get through, with the help of policy makers' expert technical
adjustments-merely sets the stage for a sustained or even permanent
crisis of serious and unfamiliar challenges.
Consider the heart
attack that strikes in the middle of the night. EMTs rush the victim
to the hospital, where expert trauma and surgical teams-executing
established procedures because there is little time for creative
improvisation-stabilize the patient and then provide new vessels
for the heart. The emergency has passed, but a high-stakes, if somewhat
less urgent, set of challenges remains. Having recovered from the
surgery, how does the patient prevent another attack? Having survived,
how does he adapt to the uncertainties of a new reality in order
to thrive? The crisis is far from over.
The task of leading
during a sustained crisis-whether you are the CEO of a major corporation
or a manager heading up an impromptu company initiative-is treacherous.
Crisis leadership has two distinct phases. First is that emergency
phase, when your task is to stabilize the situation and buy time.
Second is the adaptive phase, when you tackle the underlying causes
of the crisis and build the capacity to thrive in a new reality.
The adaptive phase is especially tricky: People put enormous pressure
on you to respond to their anxieties with authoritative certainty,
even if doing so means overselling what you know and discounting
what you don't. As you ask them to make necessary but uncomfortable
adaptive changes in their behaviour or work, they may try to bring
you down. People clamor for direction, while you are faced with
a way forward that isn't at all obvious. Twists and turns are the
only certainty.
Yet you still have
to lead.
Source: Harvard Business Review, July-August 2009
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The Definitive Guide
to Recruiting in Good Times and Bad
When economic crisis
hits and companies focus on cutting costs-or on their very survival-they
slash hiring. But if history is any guide, in the first few months
after the upheaval subsides, hiring quickly becomes a front-burner
issue.
Consider the period
following the terrorist attacks of September 11, 2001, when the
economic outlook appeared dire. In rapid succession, the U.S. initiated
the war in Afghanistan, Enron's house of cards fell, other corporate
scandals ensued, the SARS scare struck Asia, and the Iraq War began.
The economy was in recession, and struggling firms retained only
their strongest people. But even before things turned a corner in
2003, the smarter and abler companies-having cleaned house and discovered
what was missing from their talent pools-took advantage of the buyer's
market and began staffing for the future. By June 2003, the war
for talent was on again in full force, and companies hired aggressively
until the economy went into a tailspin in 2008.
History will again
repeat itself. Even now, before the recession lifts, our research
suggests that most global companies are running into staffing problems
in emerging markets, and they are also having a difficult time finding
talented younger managers to replace baby boom retirees. These problems
will be made all the worse because, we've found, current hiring
practices are haphazard at best and ineffective at worst. And even
when companies find the right people, they have difficulty retaining
them.
This article offers
our best thinking about the most effective way to hire top-level
managers, based on a combination of our own and established research
about the relationship between recruiting and long-term corporate
performance (see the research sidebar). The following is, to our
knowledge, the first time that an end-to-end set of best practices
has been put forward in one place. Our compendium comprises seven
steps, which cover the full recruitment spectrum: anticipating the
need for new hires, specifying the job, developing a pool of candidates,
assessing the candidates, closing the deal, integrating the newcomer,
and reviewing the effectiveness of the hiring process.
Source:
Harvard Business Review, May 2009
The End of Rational
Economics
In 2008, a massive earthquake
reduced the financial world to rubble. Standing in the smoke and
ash, Alan Greenspan, the former chairman of the U.S. Federal Reserve
once hailed as "the greatest banker who ever lived," confessed to
Congress that he was "shocked" that the markets did not operate
according to his lifelong expectations. He had "made a mistake in
presuming that the self-interest of organizations, specifically
banks and others, was such that they were best capable of protecting
their own shareholders."
We are now paying
a terrible price for our unblinking faith in the power of the invisible
hand. We're painfully blinking awake to the falsity of standard
economic theory-that human beings are capable of always making rational
decisions and that markets and institutions, in the aggregate, are
healthily self-regulating. If assumptions about the way things are
supposed to work have failed us in the hyper rational world of Wall
Street, what damage have they done in other institutions and organizations
that are also made up of fallible, less-than-logical people? And
where do corporate managers, schooled in rational assumptions but
who run messy, often unpredictable businesses, go from here?
We are finally beginning
to understand that irrationality is the real invisible hand that
drives human decision making. It's been a painful lesson, but the
silver lining may be that companies now see how important it is
to safeguard against bad assumptions. Armed with the knowledge that
human beings are motivated by cognitive biases of which they are
largely unaware (a true invisible hand if there ever was one), businesses
can start to better defend against foolishness and waste.
The emerging field
of behavioural economics offers a radically different view of how
people and organizations operate. In this article I will examine
a small set of long-held business assumptions through a behavioural
economics lens. In doing so I hope to show not only that companies
can do a better job of making their products and services more effective,
their customers happier, and their employees more productive but
that they can also avoid catastrophic mistakes.
Source:
Harvard Business Review, July-August 2009-08-12
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