If business leaders were to view the state of the U.S. economy through the lens of the popular and successful 12-Step Programs, they undoubtedly would have to come to terms with the “3 A” conditions of the times. They are:
Awareness. The U.S. economy is circling the drain, with staggering deficits in the trillions of dollars threatening not only our economic system and viability as the dominant super power, but also the foundation of the American Dream. Lurking out there are trillions upon trillions of unfunded government pensions, more trillions in bonds coming due, and an overwhelming tens of trillions in upcoming unfunded Medicare expenses for the baby boomer generation. The American public has a responsibility to seek the truth as to what our economic status really is.
Acceptance. Once we know, understand, and digest the facts about the economy, it becomes abundantly clear—the party is over! The economic condition and threat is real, and there’s no way out. If we don’t make fundamental changes in how we operate economically as a government, as a business, as a people, we are inviting, in fact begging for, economic catastrophe! We must accept the new economic reality.
Action. Business leaders and politicians alike must have the courage to lead and do the right thing in face of this new economic reality. We need leaders who have the wisdom and fortitude to deliver bad news, while at the same time inspire us to take positive action.
In the context of the 3A framework, here are some fundamental action steps that business leaders can take to control their financial destinies while weathering the economic storm.
Build a Strong Risk Management Culture. As the world economy moves at warp speed, so too does Murphy’s Law. BP is a stunning example of what can go wrong when a company’s culture becomes complacent and ignores the warning signs of danger and risks lurking in their business practices. BP’s fall from grace is a wake-up call to business leaders to make risk management a top priority. If you don’t, you have only yourself to blame when the unthinkable happens and your company’s reputation goes down the drain in one fell swoop.
Develop a Crisis Communication Plan and Stick to the Script. Again, BP is the poster child of a crisis communication gaffe when CEO Tony Hayward glibly remarked that “he wanted his life back” in response to media queries about the BP Gulf Oil spill. As the spokesperson of your organization, your response and how you respond to a crisis can make or break your leadership. Don’t underestimate the need for a media training program to keep you on your toes at all times, especially when your company is in the media spotlight. Preparation, honesty, and cooperation with the media are key components of an effective communication crisis plan.
Keep Your Eye on Top Performers. At the end of the day, a company is only as good as the people it employs. As a leader, what are you doing to spot, develop, and reward key employees? Ram Charan, the best-selling author of Talent Masters, warns that one of the biggest failures of corporate America is that leaders are not held accountable for developing talent and “drilling down into the organization to know who their best people are and put them in stretch jobs.” Product innovation is not created in a vacuum. Rather, it’s nurtured in the minds and hearts of employees who are inspired to reach their full potential. Apple, Facebook, and Google are examples of companies that are committed to developing and retaining talent. How committed are you?
Cultivate a Work Environment of Shared Sacrifices Across the Board. Nothing hurts morale more than the knowledge that an organization maintains a two-tier class structure: high salaries, raises, and special perks go to top management, while the bottom rungs have to settle for reduced hours, frozen wages and salaries, and fewer benefits. How much more productive and respectful of management will your workforce be when it knows that everyone, from top management to the hourly worker, are making the same shared sacrifices for the overall health and well-being of the company?
Create a Fiscal Vision. The bottom line of every company (no pun intended) is to be financially solvent. In my book, no amount of strategizing is going to help a company gain competitive advantage if its strategy is disconnected from the company’s financial performance. Business leaders who have the courage to face the numbers squarely and develop a growth strategy driven by the financial facts will be tomorrow’s leading companies.
Lead with a Sense of Urgency. Pundits like Thomas Friedman, best-selling author of The World Is Flat, has declared the U.S. economy a state of emergency as he predicts our economic collapse if we don’t take our condition seriously. Leaders don’t have the luxury of pondering the future, waiting out these difficult times, or living in denial. Like generals marching their troops into battle, business leaders must square off with the enemy—the economy—and act with courage, honesty, and finality. Tomorrow is today, and today is the future. Only you can decide your company’s economic fate.