Rhiannon McKinnon says three strategies can help good leaders not only weather the current downturn, but emerge with more powerful companies than before. Photo / NZME
Rhiannon McKinnon says three strategies can help good leaders not only weather the current downturn, but emerge with more powerful companies than before. Photo / NZME
Opinion
KEY FACTS
New Zealand’s GDP fell 0.2% in the June 2024 quarter.
While datapoints earlier this year shone light into New Zealand’s dark economic tunnel, the way out remains uncertain, the timing is guesswork, and geopolitical clouds could well darken.
It’s a testing time for all CEOs, from the newly minted and mid-career leaders I advise through to battle-scarred titans who weathered the 2007-2008 Global Financial Crisis.
Recessionary environments favour the brave. It’s well chronicled that downturns have led to extraordinary success stories.
There is a laundry list of companies born or built in recession – from Microsoft, Fedex, Disney, Target and Costco to (closer to home) the likes of Mainfreight, Xero and Icebreaker.
A great CEO not only survives a recession but brings their company out on top.
Climbing out of economic adversity is really about the leader’s mindset and how it is applied to the current context.
Here are some helpful ways to think about it.
Look to the horizon
The short term might look dicey but keep your eyes on the long-term prize.
According to the McKinsey Corporate Horizon Index, “from 2001 to 2014, the revenue of long-term [thinking] firms cumulatively grew on average 47% more than the revenue of other firms, and with less volatility.”
The CEO’s job is to leave the organisation stronger than when they arrived. The best way is to think what that future state should be in advance.
Here are some ways to engage in long-term thinking.
First, try your hand at strategic foresight. Imagine long-term future scenarios then model them out, attribute probabilities and prepare.
This helps to bring the theoretical future back into the present day and identify one or two short-term metrics that can steer your organisation in the right direction.
Second, leverage your organisation’s purpose. In the short term, trade-offs are inevitable but using purpose as your compass will set you up for long-term sustainability.
In the words of Blackrock CEO Larry Fink: putting your company’s purpose at the foundation of your relationships with stakeholders is critical to long-term success.
Place your bets
Downturns are Darwinian, so factors like controlling costs, customer and talent retention, prioritising liquidity, lean staffing and communication frequency are vital – but that’s a given.
As well as a holding pattern, you need a growth pattern driving through the downward cycle.
The CEO must back themself and make some bold calls. The CEO is there to decide, not to prevaricate.
Make some brave but measured, well-timed, appropriately scaled bets on the future. Without some outsized bets you are unlikely to get some outsized returns.
You might invest in technology, expand core products, move into an adjacency or consider M&A. As a new CEO, I divested a corporate startup and delivered make-or-break technology projects.
It’s a balance of leaning in, but not betting the farm.
Amazon founder Jeff Bezos says one of his jobs is to encourage people to be bold. Photo / Getty Images
Amazon is constantly iterating while connecting the pieces into a whole – online retail, movies, cloud computing, content creation, groceries, and more.
As Jeff Bezos puts it: “One of my jobs is to encourage people to be bold.” Toy company Zuru, a continuous improver, now sees itself as a robotics and automation company.
Re-align and simplify
I’ve seen CEOs come up with impressive strategies and then forget the next vital step: align your people and your resources.
Make sure your team believes in the strategy and is contributing to its success.
If they are not aligned, what needs to change? Diverse viewpoints are important to create the strategy but once it’s set, it’s time to come together to deliver.
Alignment at the top is vital to bring the rest of the organisation with you. Same too with resources. You have to put your money where your mouth is, otherwise you haven’t placed any bets at all.
With the heavy thinking and lifting done, now make it easy for others to follow your lead.
Simplify as much as possible so everyone is clear on what matters and what doesn’t. If your vision, goals and strategies can fit on a page, all the better.
Long-term thinking, bold bet-taking and clear leadership will enable you to lead your organisation out of recession in even better shape than before.
