Who’s got time to worry about building a stronger organisation in a downturn? Surely executives can’t focus on internal issues when they face so many other pressing matters?
But this is exactly the time when leaders need to ensure their organisations are performing well, so that important decisions get made and executed quickly and effectively.
Turbulence offers a rare chance to bring in new talent and improve the way that organisations function.
The trouble is that companies under duress often lack the organisational capabilities to meet mounting challenges. Some make snap decisions. Others stall, unable to decide. Yet others badly need new people to bring fresh perspectives or help them overhaul dysfunctional cultures.
Strengthening the organisation is one of the most powerful levers any company can pull to improve its performance in a downturn. It starts by asking a series of questions:
- What are the critical decisions in this downturn?
- Do we need to adjust our organisational structure to address them effectively?
- How should our roles and processes change?
- Will our most experienced people be able to make and execute key decisions?
- Which aspects of our culture reinforce decision effectiveness, and which don’t?
Adopting this “decision lens” is the single most important step that a company can take to improve its performance.
It helps leaders focus their efforts where they will have the most impact during a downturn and accelerate growth when the economy improves.
1) Identifying the critical decisions
Every company has its critical decisions. If your business is in relatively good shape, those decisions may not have changed much. Some will be the big choices, like whether to acquire a competitor or invest in a new product. Others may be everyday frontline decisions.
Toyota, for example, achieved its leading position partly through its reputation for manufacturing quality. To maintain that quality, the carmaker ensures that workers in every plant know how to make and execute the right quality-related decisions.
These decisions are as important now as when Toyota was growing rapidly.
If you are in survival mode, your critical decisions will be different, such as whether to sell a stake or overhaul the business model.
2) Testing the structure
Sometimes structure is a serious obstacle to making and executing a business’ critical decisions.
In that case, structure must change.
Previously, Hewlett-Packard’s sales force was organised by customers while its manufacturing units were organised by products. With stalled decisions and people working at cross purposes, performance suffered.
The IT firm then moved to a product-based structure across the entire company, with accountabilities for decisions clearly defined. That created the conditions for better decision-making and execution, which in turn generated higher profits.
3) Clarifying roles and processes
Whatever a company’s structure, decision roles need to be clear. Unless people know who is responsible for making and executing critical decisions, stress on an organisation will only increase.
The individual or team responsible for a Recommendation gathers relevant information and proposes a course of action.
- People with Input responsibilities help shape a recommendation so it is operationally practical and financially feasible.
- An executive who must Agree is anyone who needs to sign off, often a legal or regulatory compliance officer.
- Eventually, one person will Decide. Assigning the “D” to one individual ensures single-point accountability.
- The final role in the process involves the people who will Perform or execute the decision.
Clear decision roles are essential amid turbulence. They can boost performance by unclogging bottlenecks and cutting the organisation’s cycle time.
4) Right people in right roles
In good times, companies focus on managing growing organisations. In a recession, the logic changes. Many companies cut costs through layoffs and attrition.
But the people who leave are not always the poorest performers. Those who stay may not have the skills to make and execute decisions. And companies often fail to consider who they might hire to bolster their capabilities.
In a downturn, no company can afford to have the wrong people in key decision roles.
At one IT company, we found that more than 40% of the managers identified as high performers were in non-critical positions. Meanwhile, fewer than 40% in mission-critical roles were top performers. The senior team quickly corrected the mismatch, and business performance immediately improved.
The key to making the best use of people is a robust, effective, performance-management system that has real consequences.
5) Actively managing the culture
Culture underpins an organisation’s decisions. But cultures change and are particularly susceptible to change when an organisation is in crisis.
In a downturn, leaders need to take action to keep a strong culture from deteriorating – or to transform a culture that hinders good decisions.
Understanding that its culture is a competitive advantage, Southwest Airlines reinforces it in hard times.
In the early stages of the current recession, it maintained staff loyalty (through no involuntary job cuts) and invested in upgrading customer service. The carrier continues to be one of the US leaders for on-time performance, an aspect of the business that customers care deeply about.
A strong organisation is not optional, something to worry about after the crisis. Your organisation’s strength will greatly affect how well your company weathers the storm.
It will also strongly improve your chances for growth once the storm passes.