In this Issue: September 2009

Events:
    - Sydney Whiskey Night

Articles:
    - Feature: Leadership - Managing in a (Permanent) Crisis
    - The Definitive Guide to Recruiting in Good Times and Bad
    - The End of Rational Economics
    
Top Candidates
    - Administrator
    - Senior Java Developer
    - Operations Manager / Supply Chain - Logistics
    

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

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