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How To Lead In Tough Times

Leading an organization through hard times is challenging by definition. It requires a deliberate focus and extra attention to a few critical areas that can make the difference between a quick rebound followed by sustained improvement in performance--or by a downward spiral that may become irreversible.

And it's in facing headwinds, of course, that the captain of the ship proves his or her mettle.

So what does it take to out-race peers, keep customers in the boat and motivate employees to pull harder on the oars? Here are five essentials for leadership through difficulty, and how to bring them to bear:

Communicate continually and honestly. Even though you're not running for president of the United States as John McCain is, launch your own Straight Talk Express. Authenticity and frequency in communications should be your constant goal.

Explain your company's current circumstances and also how it got there. If there are things you as a leadership team could have done better, come clean and talk about them. Share what you plan to do about the fix you're in. And, of course, solicit and respect the input of directors, peers and staff members. Also listen intently to employees' descriptions and perceptions of the problem--and their own suggestions about what might be done.

One of the most important attributes that you as a leader must demonstrate is to see the situation as it is and not as you hope it to be--and to help the company's constituencies do the same thing. Bringing this reality before the organization is critical so that everyone has a common understanding of the magnitude of the challenge and shares a vision for what must be done together to improve matters.

This approach reduces the number of disruptive surprises. It also helps your company become more agile in the long run, because employees see the big picture and can understand how what they do fits into it. It helps them connect the dots on their own.

Make sure you take the same approach with other constituencies, including customers, suppliers and other external parties. If they feel you aren't tuned in, and you aren't effectively identifying and articulating the issues your company faces based on cold, hard realities, they won't have confidence in your ability to turn things around. Take their concerns into account too.

Hatch a plan based in reality. Come up with a definitive strategy that addresses the crucial issues, whether they stem from the marketplace, from cost problems, management missteps, investment errors, the supply chain or the macroeconomy.

You may not be able to overcome these challenges completely, especially in the short term. But you and your employees can make things better by taking certain actions right away, which may include redoubling efforts in areas with customers, trimming costs, expanding markets, making internal sacrifices, stepping up your training, forging new alliances and even restructuring the company.

Don't overlook the achievable by reaching for the possible. Searching for a big fix is fine, but in the meantime, stimulate small improvements across the board. Their cumulative effect can be significant. Richard Wallman, chief financial officer of Honeywell International a few years ago, was a master at this: He was relentless in helping division presidents continually find and develop opportunities that would offset difficulties elsewhere in their divisions.

But don't make promises you and the company can't keep. Be a realist above all else. That includes providing a time frame--one that you might be able to beat, not one that you likely will fail to fulfill.

Ideally, you should use this period as a time not just for existential gambits but also for actually making the organization better. Great cultures foster continuous improvement that improves the corporation from within even during good times. But hard times provide a context for positive change that every leader and every company can take advantage of.

Engage your people in the challenge and stress the importance of their changing their approach and behaviors. Levy their loyalty so they'll work more productively. Among other things, this creates ownership among the ranks of not only the problems you're facing but also of the solutions they're helping to implement.

Hang on to your best talent. Even though the U.S. economy has stalled out and employment pressures have eased somewhat, the long-term reality is that there is still an underlying dearth of executive and managerial talent. This overall shortage will reassert itself once the economy begins recovering.

But in the meantime, your competition--or needy companies in other industries--will be inclined to take advantage of your difficulties to try to poach some of your talent, with an eye toward the future. In these circumstances, the best people usually go first.

Stop this threat in its tracks. Reach out to your most important or highest-potential employees and emphasize that you want to hold on to them. Unabashedly remind them of their importance to the organization for the long haul. Describe what their career paths might actually look like. Harness them as a crucial part of creating the solutions that will help put your company back on the right track.

The financial-services business, for example, could learn from what Goldman Sachs accomplished in the 80s and 90s during previous shakeouts in the industry. The company did a great job of systematically building its bench and the company's future leadership--in strong contrast with many of its competitors --despite turmoil in its sector. Goldman Sachs is still reaping the rewards of that focus.

Act decisively. This means taking definitive actions that comprehensively address the company's problems and that bid to turn the tide once and for all--rather than to settle for a series of "baby steps," each of which isn't quite ambitious enough to make a decisive difference.

And as captain of a ship in troubled waters, you've got to be visibly and steadily at the helm. But you also must be engaged in the struggle everywhere on the vessel.

That may mean, for example, demonstrating ways of cutting costs if you have decided that is an important tactic under the circumstances. Or it may be a matter of becoming more proactive in helping the leaders of your business units identify opportunities.

Former PepsiCo CEO Roger Enrico was great at that. When he was running beverages, for example, if sales volume declined in a particular market for a time--due, say, to a competitive product launch or a flood of generic products-- he nevertheless kept the focus on creating opportunities to generate more sales in some other way. At the same time, he directed his leadership team to strive for continuous improvement in other areas including manufacturing and supply-chain efficiency. And Enrico always emphasized the importance of continuing to develop the organization's human capital no matter what the circumstantial backdrop.

Alter your perspective. At the risk of stretching the nautical analogy too far, hard times require you as the captain to add new perspectives. If you haven't been on the mast for awhile, clamber up there. And how about going below deck where much of your company's day-to-day work gets done?

Moving around like this will help you gain valuable insights about what really might be afflicting the organization and likely will inspire ideas for improvement that otherwise never would have occurred to you. Just as important, your employees at every level will see and hear you being engaged in the struggle, and it will reassure them.

Add to your sole perspective as well. Adversity demands that you bring members of your team even more closely into your counsel, so they can help become integral to the solution.

Above all, as the CEO, you must maintain a balanced perspective on the situation--and the way out.

If you seriously pursue and conscientiously execute these five tactics, you'll not only create the best opportunity for effectively leading your company through and out of a crisis, you'll also greatly enhance the organization's readiness for the long-term competitive opportunities that will surely emerge from today's economic doldrums.

Dennis Zeleny is a regular contributor to Forbes.com and a veteran HR consultant. He has headed human resources for some of the world's largest companies, including Honeywell and DuPont, and most recently served as executive vice president of administration and services for Caremark Rx, until its merger with CVS.

He can be reached at Zeleny-D@comcast.net.

Retaining and developing key executives has never been more important. Here, Dennis Zeleny begins a series of articles to help your company do so more successfully.


assistant: The key to success is to command your situation in a way that is resolute and transparent.