Joseph Grenny: What the Recession Taught Me

Like many of you, my business partners and I approached 2009 with a sense of dread. At this time last year, capital markets were in free fall, the housing markets had collapsed, and personal and corporate balance sheets had evaporated. As our company approached our annual planning exercise, we took a definitively defensive posture. Our primary goal was to survive the predicted apocalypse. Many of our competitors had already announced deep staff cuts. Some of our peers were wrapping up 2008 with reported declines in revenues of 30% to 40%. Convinced that a vanishing tide would most certainly drop all boats, we planned for a variety of negative scenarios. How would we respond, for example, to a 10% decline in revenue? What if we took a 50% hit? It was a nauseating exercise, complete with drawing new organizational charts with far fewer names on them. Because we love the people we work with, we went so far as to talk about how to discharge our ethical duties to our dear friends when ushering them out the door. Before I proceed, let me be clear that I think we would have been foolish not to consider these eventualities. However, in the midst of defensiveness, we whipped ourselves into a funk. Fear-based planning left the more interesting questions not only unanswered, but unasked. That's one of the lessons of 2009 I never want to forget. You see, as we wrapped up our bunker-mentality discussions, a new thought occurred to us. The shift began when one of my colleagues said: "We're not General Motors in 1980 with 45% market share. So who cares if spending across our industry declines? We're not so big that we'll necessarily have to absorb any of that decline." In fact, opportunity was calling usThat got our attention. "The crucial question is," he continued, "do leaders need what we have to offer right now? In fact, do they need it now more than ever?" This was not a hard question to answer. Our company has spent decades perfecting methods that enable leaders to engage their people far more effectively. What better time to worry about the problems we solve than when those problems are most acute? "Even if industry spending dropped from $100 billion to $50 billion, couldn't we get a far bigger share of the smaller market if we do a much better job going after it?" He sat back in his chair and concluded: "The economic problem isn't the end of the discussion. It's the beginning." I can still remember the moment when the new discussion began. A powerful new energy filled the room. It wasn't denial of our grim reality, but a matter of viewing things with fresh clarity. If we had to compete for dollars yesterday, we'd have to compete for them today. And if our services mattered yesterday, they might matter even more tomorrow. The turning point in our discussion came when our focus changed from defending to serving. We concluded that if we could not find a way to compete in 2009, we didn't deserve to lead our company. The real test of influence is not leading when all is sunshine and roses. Real leadership is about influencing an organization to thrive when times are toughest. recession: a terrible thing to wasteWe laid out some principles to guide our strategy in 2009. And now that we've closed the books on a trying, but successful, year, I'm starting off the new year determined to retain these crucial influence lessons. A recession is a terrible thing to waste, because: We were not the only executives on the planet whose peripheral vision was narrowed when our survival instincts kicked in. Others were similarly locked into the tunnel vision of defensive planning—cutting back on marketing, sales, product development, etc. However, we eventually chose to lean into the headwind rather than hunker down. In the process, we made many more friends this year than we could have in happier times. We invested more in research, product development, marketing, and sales than we had in any previous year. Most of those investments paid off. Most important, the influence of a positive vision infused our team with an optimism that enabled members to see and seize opportunities they would have likely missed had they been hiding out and weathering the storm. For example, while many of our peers canceled customer conferences on the assumption that no one would show up, we went ahead with ours—and had 10% more attend than the previous year. It turned out that there were so few conferences to choose among that ours became the obvious pick. The best time to communicate your values is when it costs you the most. We're a privately held company. As we developed our growth plan for 2009, we acknowledged the possibility that our plans could fail. We considered our options if revenues declined substantially. Labor is our largest expense, so it would have been irresponsible to avoid considering how we would respond if we began to run large, sustained losses. However, we also knew we could absorb some significant revenue losses if the major shareholders were willing to do so. With all of them in the room, we said: "We have spent twenty years assembling the finest team possible to execute our mission. We will not lose one team member in an effort to defend short-term profits. We believe keeping the team together is worth more than defending short-term margins." The shareholders overwhelmingly agreed that until sustained losses drove us to it, we would not lay off a single precious team member. The influence of that message on our team was electric. It built a sense of unity and determination. Productivity, morale, and teamwork have never been better. The recession gave us an opportunity to breathe life into the tired slogan, "People are our greatest asset." Bad times offer the best times to communicate your values. A good economy can hide a multitude of sins. While we promised our team we would lay off no one to defend profits, we let them know that our performance expectations would not be relaxed. In fact, we asked all our managers and supervisors to keep the bar high. Furthermore, we challenged them to use the economic sense of urgency as an opportunity to question cost models, challenge productivity assumptions, and deal with performance problems—if there were any they had let slide in the past. As managers measured up to the performance standards they should always have adhered to, we did let a couple of employees go. The recession was a useful impetus for managers to step up to the fiscal and human stewardship they should always hold to. I believe the higher standard will carry forward and am grateful for the nudge the economy gave us to take our responsibilities seriously. Breathe new life into the products and services you offer. A down economy is a terrific time to revisit the value of your company's products and services. Profit is the reward customers give you for solving important problems. If they stop rewarding you during lean times, you've got three choices: 1) Solve their problems better; 2) solve more important problems; or 3) solve their problems cheaper. We benefited from options one and two. My personal belief is that if you do one and two well, you rarely have to do number three. A down economy is the best time to hire. We recruited two new senior executives during the recession who might not have given us the time of day when the economy was rolling along. You may not be able to justify new salaries when times are tough, but if you believe in the work you do, you should invest in grabbing genius when it's available, not when it's easy to justify. We are poised for a tremendous 2010 and beyond because we've added horsepower to our team during the best labor market of the past 30 years. Personally speaking, while I think we did many things right in 2009, I think our results are as much blessing as victory. We've had our most profitable year ever. But the real dividends are far deeper than the P&L. Our team is grateful to have been able to do the work we love, even during a difficult time. We've grown closer as an organization. We've gotten clearer about what we do and why we do it. And we've learned that no matter what the world is doing to you, there is always an opportunity to exert an influence for good.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.