How to lead in lean times

Australia‘s business leaders are about to face the biggest test of their careers – the worst recession in 20 years. And after a decade-long boom, weak leaders are already being exposed.  

“Unfortunately companies got into a position of not looking at the business and their return on investment in good times,” JB Hi-Fi chief executive officer Richard Uechtritz says. “In a downturn, they have to find things they can do without. That’s just laziness and bad management in boom times.”

But not every leader is floundering.

Already we have seen a number of chief executives drive their companies to defy the downturn by growing revenue and profit. Their leadership revolves around clear and honest communication, tight cost control and an ability to see through the gloom to better times ahead. 

What are the other strategies of the downturn chiefs?

We asked business leaders and corporate experts to share 10 secrets with SmartCompany.

Keep staff onside

Gary Cohen is the chief executive of software provider IBA Health, which is doing reasonably well in the downturn and posted a profit of $10.3 million in the six months to 31 December. This is in contrast to losses in the previous corresponding period.

He says communication is critical for ensuring staff maintain their faith in their leadership.

“I always believe it’s very important to be honest with your staff, and let the staff trust you. If staff doesn’t trust you, then if things aren’t going well, they will always think the worst,” Cohen says.

“Obviously, you can’t share everything that is going on in your mind, but you have to give enough visibility that you are looking after their long-term interests and that you are looking after the business’s long-term interests. If staff think you are out for yourself or looking after somebody else’s interests, they won’t trust you.”

Australian Human Resources Institute national president Peter Wilson says employees expect candour these days. They want the boss to tell it as it is, without any frills.

“People will be very inventive if they are given an opportunity to understand the situation and be part of something that might save their job. The companies that understand that are going a long way.”

Susan Heron, chief executive officer of the Australian Institute of Management, agrees and says it is important not to underestimate employees.

“You can’t fool staff. The staff will know. They have all the evidence of the downturn around them. They see it in their lives, they see it in the media, they see it if the business is faltering.”

Keeping up morale

Bakers Delight general manager Chris Caldwell says keeping staff spirits high is a priority. It’s a strategy underpinned by Bakers Delight stepping up its advertising and marketing in the downturn.

Bakers Delight is on track to post global revenues of around $570 million, with growth of 6% in the Australian market. With a proportion of its turnover automatically channelled into marketing, its profile has increased with the downturn – and that is an important way of keeping 740 retail outlets and 15,000 employees upbeat.

“Our staff across our network are seeing the Bakers Delight brand name and the presence of Bakers Delight in TV and radio or any media,” Caldwell says. “They are seeing it more prevalently than they did in the past. That boosts morale no doubt.”

Apart from marketing, experts emphasise increasing conversations between management and employees. The best leaders get out and mix with staff, and take time out to try and make work as enjoyable as possible and continue with (modest) get-togethers and functions.

Improving productivity

Twenty years ago, methods to increase productivity were crude and brutal. Times have changed.

“Productivity comes down to output or reducing costs to service that output,” Peter Wilson says.

“In the past, you had knee-jerk layoffs applied peanut-butter style across the organisation. That doesn’t work so well anymore.”

Smart companies are now looking at different ways at cost management, from pay freezes and hiring freezes to more radical measures, such as four day weeks and nine day fortnights. Caldwell says the Bakers Delight maxim is about identifying areas for improvement.

“There are so many things that we as a business look at. It doesn’t mater what’s happening outside Bakers Delight, there are still plenty of things we can do better ourselves.  And it’s a matter of being disciplined enough to keep finding those things to improve and keep improving day-in and day-out.”

That, business leaders say, is the test of management.

Cohen says: “In a lot of ways it starts from the top. If there is low productivity, there is poor management and poor leaders.  If your management team aren’t the right people and they are not giving the right messages, then you are going to have problems with productivity.”