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Leading Through Catastrophe

By STEPHEN C. SOPKO, Founding Director, Cedar Key Ventures, LLC
March 22, 2001

The year is 1914.  France and Germany have prepared for the Great War for decades.  The day comes, and France is wrong, dead wrong.  Wrong guns, wrong strategy, wrong training, and wrong technology.  Even wrong generals up to the very highest level.

From the very first minute, the fact that France is wrong and Germany is right (militarily, not morally) is obvious.  The French misinterpret the German advance.  The Belgians try to warn them, but the French Generals are so enamored of their plans that the warnings fall on deaf ears.  Battles start, and the advantages of German industry, technology, training, manpower and strategy are obvious, to all but the French.

And so, for weeks, the French lose.  Battle after battle, mile after mile of ground.  They retreat, defeated, ever closer to their capital city.  Generals are replaced, and still the French lose.  Plans are altered, and nothing works.  Allies arrive, and still the relentless error of the French causes them to lose miles of ground and tens of thousands of lives.

At the center of it all stands one man, General Joffre, leader of the French forces since the first days of the war.  This is the wrong man, in the wrong place, at the wrong time.  Or is he?

Joffre’s greatest weakness is his steadfastness, his refusal to change plans until disaster is upon the French army.  But this steadfastness, wrong though it was during the opening days of the War, is exactly what is needed to give the French a chance to turn debacle into survival.

This is the concept that today's executives must realize.  The steady, focused, calm leader of people is exactly the type who tends to thrive during crisis.  They were not the right managers for a year ago, and many companies passed them over for glossier, sexier, ‘new-economy’ managers.  In the new-economy, leadership was mostly about form over substance.  The ability to motivate, cajole, recruit and spin was paramount.  Investors and analysts were blind to execution, they wanted hype, and new-economy managers delivered, in spades.

Leaders who focused on long-term vision, team-building, interpersonal skills, and fostering a sense of loyalty were portrayed as dinosaurs.  Meanwhile, the selfish, ‘me-first’ style of manager was absolutely the right individual for the bubble.

In case anyone missed it, the bubble has burst.  The Huns are pouring over the border, and the new-economy is in full retreat before the forces of reality.  Managers who were successful at spin and shuffling projects are panicked.  Message boards are full of employees wanting vision, empathy, open communication, and focus – in short, they want leadership, and the successful new-economy managers are not delivering.

What does work now is focus.  General Joffre went to bed at 10pm every night, he relied upon his staff, and he admonished subordinate commanders for losing their nerve.  Many misinterpreted his imperturbability as stupidity, believing that he had no idea of the magnitude of the disaster.  Again, during the opening days of the War this may have been true.  But, as the full scope of the disaster unfolded, Joffre was the calm, steady, focused hand that the officers responsible for the troops needed.

This is a critical point.  Senior executives very rarely connect with ‘the troops.’  They connect with senior and line managers on a daily basis, and tend to see front-line workers only at awards ceremonies.  Line managers are in far more frequent contact, and they magnify the mood of the managers above them in the hierarchy.  If the big boss is panicked, the first-tier managers will amplify that panic and scare the hell out of the front-line people delivering value to the Customers.  By the same token, new-economy managers who try the same seat-of-the-pants spin control that worked during the boom will communicate that paucity of ideas through the line-managers to the troops.

That’s when the network printers start spewing resumes.

Senior executives in this business climate must reconnect with the people.  Executives must put aside that Rolodex of analysts, spin doctors, coaches and gurus – and call their direct reports.  The topic?  Self assessment.  Everyone who manages in this environment must ask, "Are we the type of new-economy managers who have valued form over substance?  Have we engaged in ‘business development’ and ‘brand management’ while the core competencies of our business suffered?"  Managers who succeeded during the bubble will usually find that to some degree they had to be new-economy form over substance managers.  The question then becomes, "Are we the right people to lead now?"

The old adage "Ask yourself before the Board asks you" is even more true today.

So, what to do with the new-economy risk takers?  First and foremost, do not fire them!  These people will be critical when the economy booms again.  They are also the risk takers who will explore new lines of business and form new alliances.  While they might not be right for COO or CFO posts, they need to be put aside for the future.  Create a post-recovery team, with conditions under which they will shine.  The new-economy was all about personal success, find ways to motivate these people, and they will become a secret weapon during the inevitable upturn. 

Whatever the outcome of the self assessment, there are common-sense things that leaders are doing right now:

These projects are usually obvious:  acronym laden, analysis heavy, b-school exercises that always include the word ‘Customer’ but are more about charts and graphs than delivery.  Kill all of them today, drive a stake through their hearts and bury them at the crossroads.  Use the time and energy these initiatives absorb to improve execution, morale, and Customer contact.

Customers are going through this same self-examination.  As a result, project leaders who are the best and brightest with a great pedigree are no longer the right people to impress the Customer.  These were the spin-doctors who amazed the Customers when times were good.  Amaze Customers now with execution focused project leaders that enable Customers to survive and thrive.

It takes courage to lay off 10% across the board, but it takes more courage to kill an entire product.  Too often, executives reduce all divisions by a flat rate, or focus the pain on ‘back-office’ functions that don’t seem to generate revenue.  Often, however, there is an entire division that is under performing, obstructionist, or does not fit with the future direction of the company.  This division has to go, through layoff, outsourcing, or sale.  It takes real courage to lop off an arm, but sometimes that is the only way out of the trap – losing a few pounds just won’t do the trick.

General Joffre couldn’t have held the line without a relentless focus on the fundamentals – by his subordinates.  This is critical, and often overlooked when leaders are under pressure.  A senior executive must ensure that the business can be stabilized, albeit at a lower level than optimal, then leave execution to able subordinates.  The executive first ensures the company will survive the moment, then focuses relentlessly on the future.

During a crisis, one temptation is to short staff before taking other measures.  The theory is that they are the least likely to take action, because the employer can always hold their jobs over them.  What the finance experts who advocate these cuts forget is that if the company is to survive, it must have the goodwill of Customers and employees.  When employees feel cheated, they communicate this fact to the Customers, immediately and directly.  Morale was often not a concern of new-economy managers, but in a crisis, true leaders take it very seriously.

Most companies have already slashed support and ‘back-room’ staff and functions – there is usually very little room left for reductions.  Unfortunately, a knee-jerk reaction for executives is to cut these departments again when trouble threatens.  Then, when Customers are enraged at shoddy invoicing and failure to comply with contracts, the morale of any remaining support staff plummets.  Administrative overhead is difficult to compress or ‘optimize’ – even with high technology, a clerk can still only process so many invoices in a day.

Generals always plan for the last war, and HR departments always staff for the last boom.  Look at the job descriptions that the HR department is using; they will probably have very little relationship to what front-line people are actually doing.  Also, realize that after any lay-off, the Great Workload Shuffle begins.  Mid-level managers who made assumptions that workload would move to other departments cut too deeply in the wrong areas.  This is where all of that business process engineering navel gazing can be put to good use.  Always try to make a change for the better, which incidentally involves fewer people.  

The news is full of arrogant dot-coms having lavish parties during layoffs, or paying millions of dollars to executives who have manifestly failed to meet expectations.  A leader thinks carefully about the perception that investors, workers, and their community will form around actions during a crisis.  Give people time to adjust to new roles or responsibilities.  Recognize that none of the rules of human interaction disappear during tough business times, in fact they become far more important.  A leader puts their personal stress aside, and focuses on others.  Finally, remember that what was 'quirky' but appropriate during the boom is front-page news during the bust.

The worst thing a leader can do is hide.  Every employee needs to have a sense that the people at the top have a plan.  If those top people disappear, it is hard for the front-line people to build that confidence in a vacuum.  Hiding behind inspiring emails sent through administrative assistants is the absolute worst.  Some consultants advise that the senior executives be invisible around layoffs, and this may be good advice.  Do not, however, fly to Switzerland, go skiing, or participate in some other highly visible activity.  Either be totally visible, or disappear without a trace – never let the employees believe that executives are partying while they are worried about their jobs.

This is a hard pill for most executives to swallow.  It implies that retention and promotion decisions made during the bubble were wrong.  They weren’t, but failing to change the team to meet the times is the worst error an executive can make.  Communicate that these are different times, and different leaders can achieve better results.  Change a few of the executive team at the same time, and eliminate the ‘hangers on’ to executive management.  All of those high-potential individuals belong in the trenches, saving the business – not holding the coats of executives.

Stay relentlessly focused on rebuilding.  If the management team has a short attention span, it will not survive.  In the bubble, it was possible to pursue a dozen different initiatives and hope that the long shots would pay off.  Now that the bubble has burst, it is time to look at return on investment, and make the hard choices that will enable the business to survive.  Trying to balance too many initiatives is even more damaging than pursuing too few.

Finally, realize that the leaders who will survive the hard times are not the ones to lead during the next upturn.  General Joffre did not win the war; he bought time for the French and their allies to learn the hard lessons.  When the time came, he was replaced by a successful, optimistic risk-taker.  This is the way leadership works, no one person is right for every time and circumstance.  If the risk-takers were encouraged and kept with the company, this is their time to re-emerge.

The trick for senior leaders is always to put the right people, in the right place, at the right time.  It is amazing how often we forget that.

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