Leading corporate transformations has become harder than ever. The unpredictability of the direction and the speed of change, particularly regarding international trade tensions and tariffs, has created additional planning uncertainty for businesses. Business investment choices like production diversification or relocation follow very different timelines and rationales than political decisions. For many organizations, this magnifies lingering anxiety, fuelled by negativity bias, while the long-term ripples of the pandemic and the war in Ukraine continue to take their toll.
But, as best-selling management author Jim Collins says, whether you prevail or fail does not depend on what the world does to you; it depends on what you do to yourself. So, what can leaders do? How do they prevent organizational temperatures from rising too high, conflicts from worsening along divisional fault lines, and colleagues from retreating into survival mode?
A typical reflex in periods of consistent external threat is to reduce outward exposure and turn inward: reducing footprint, streamlining operations, and cutting costs often form the prevailing defense strategy in a crisis. However, losing sight of an organization’s outward orientation can reduce its ability to respond or anticipate customer needs. This will prove detrimental in the mid-term.
Counterintuitively, in times such as these, companies must increase their transformational capacity and invest in the range of resources needed to create, deliver, and capture performance. This will help to emerge from the storm with tailwinds. In essence, leaders need to run two change trajectories at the same time: one to navigate near-term turbulence and ensure continued performance. The other transformation is focused on the long term, finding new ways of doing business for future success. Both change trajectories have very different dynamics and require almost opposite leadership capabilities.
Let’s explore these two change dynamics and what balancing them effectively looks like in practice.
Reactive change is characterized by an urgent need to address sudden gaps stemming from unforeseen disruptions. For example, if a product is faulty or a service is substandard, the company must act to stay in business.
Reactive change brings high levels of stress. The urge to respond fast to current economic turmoil can feel equally compelling. However, executives should pause and reflect to avoid damaging hasty reactions. A responsive rather than reactive approach allows firms to navigate crises while keeping their operations robust and adaptable. As chaotic as the world might feel, leaders have a chance to make the changes that will drive their companies forward and add value, rather than leave them exposed to additional and unnecessary risk. For example, ask yourself how disruptive measures, such as strategic reorganizations, might be leveraged to maintain performance and ensure continuity.
Acknowledging the instinct to turn inward when times get tough is important. It’s no surprise that many companies are looking to reduce their workforce, delay projects, and postpone investments. However, simply “shedding weight” risks missing the next upswing and derailing your transformation journey.
Many companies learned this lesson the hard way after the COVID-19 pandemic. For example, the CHRO of a large Middle Eastern airline released a large part of its core workforce, including flight attendants and security personnel. When the crisis passed, the company had to rehire talent at huge opportunity cost, a task made more difficult because HR staff had been made redundant too. Security personnel and technical staff are not fast hires, given all the required background checks. Any Airbus 380 that could not take off due to a lack of personnel represented a missed opportunity.
Leaders need to transform their organizations continuously to create new pathways for long-term success. They pilot these transformations to develop market opportunities, anticipating changes and translating customer needs into new business models. Anticipatory change unfolds at a slower pace than reactive change. It is characterized by deliberate, strategic planning and intentional execution.
Anticipatory change aims for long-term growth and innovation rather than immediate fixes. The process is nonlinear and calls for enduring adaptability. For example, advancements in artificial intelligence have been ongoing for a long time, but only recently accelerated across various industries. By employing a forward-thinking approach, leaders can navigate uncertainty and position their organizations to capitalize on future opportunities.
Finding the right balance between strategies that maintain or increase performance amid short-term turbulence and long-term transformational strategies is daunting. Managing these two dynamics simultaneously is a challenge for organizations, leaders, and their teams.
Organizations tend to layer complexity over time by adding new initiatives on top of each other. A crisis can present a chance to reduce this complexity and gather and refocus resources for future growth. After all, strategy is a choice about what to do and what not to do. The second half of that management maxim is easily forgotten, especially in times of crisis.
Pruning the structure of your organization for growth could mean shaving off hierarchical layers or removing leadership levels. To do this strategically, leaders might take inspiration from their peers in Scandinavian countries. In Sweden and Finland, organizations must present proposed changes to organizational structures to trade unions before any decisions are taken. This might feel time-consuming, but it will avoid hasty decisions and increase the likelihood that the new structure delivers the desired results.
Any pruning process must include abandoning unproductive processes and non-strategic initiatives and tasks. Merely redistributing existing workloads to the shoulders of fewer people will lead to burnout and a loss of productivity. Done well, however, this “systematic abandonment” will free resources to target growth.
Take the example of a global machine manufacturer: After the supply chain crunch caused by the pandemic, they embraced “smart simplicity.” Due to shortages in essential machine components, they rearranged the assembly lines modularly. These lines can be recalibrated within hours to produce different machines, enabling the company to respond to circumstances and keep output steady. Running agile production lines is not easy: routines and procedures need to switch swiftly and constantly, requiring well-trained personnel and sophisticated education programs. However, this investment in people pays off fast.
A high-performance culture is often associated with high task output. It’s hardly a surprise, therefore, that leaders under stress might be tempted to prioritize task output in an effort to secure performance. However, relational, affective leadership skills that prioritize people and culture over tasks are more effective in a crisis and will yield higher performance.
Uncertainty and volatility trigger anxiety and stress. At first, personal connections and experiences within a team might override political or national divisions, but eventually, geopolitical tensions can exacerbate fault lines in organizations. Physical distance across an organization and remote working further erode the vital human connections that keep those fault lines in check.
To manage this risk, leaders should openly address the uncertainty in which the organization operates. Embed any “tough message” in a cushion of seven to 10 positive messages, such as sharing the first successes of new initiatives or good customer feedback. Linking the short-term response with the company’s long-term vision helps widen the aperture, lifting perspectives beyond today’s challenges. Embracing this visionary leadership style creates a positive, engaging work environment, even in difficult times.
A shared belief in psychological safety is crucial here as it enables colleagues to be constructively candid while addressing critical challenges, and it gives employees the space to express their anxieties and ideas. Such openness must be paired with accountability, however. As Amy Edmondson and Michaela Kerrissey point out in a recent Harvard Business Review article, psychological safety does not mean job security or that everyone gets what they want. Accountability for outcomes must be maintained in a high-performance culture.
More than ever, the alignment of top leadership teams is paramount. Heightened anxiety and negativity bias during crises can make even minor disagreements within a top team damaging. When transmitted down the hierarchy, this misalignment is amplified and can be perceived as significant discord. Nonetheless, it remains crucial for top teams to engage in productive conversations and “mine for conflict” to uncover underlying issues. Once discussions conclude, however, the team must align on what and how to communicate precisely and consistently.
High-performing organizations require high-performing leaders. In a crisis, everyone has to be at their very best. Yet, the anxiety and negativity of uncertainty can rub off even on the sturdiest individuals.
John Davison, former CEO of Zuellig Pharma, said: “As CEO, I have to absorb the chaos and transmit clarity to my team.” This means an enormous conversion of negative into positive energy. Leaders always need to manage their energy, not their time. In a crisis, effective recharge mechanisms for mental and physical health become even more vital. Meditation has been proven to be an excellent method to tackle negativity, calm the mind, and bring back positive energy. Another helpful tool is the “office hours for thoughts” concept, a form of expressive writing that works like this:
Recharging your batteries could also mean something as simple as visiting a museum or having dinner with family and friends. Keeping negativity at bay might mean writing down three good things that happen each day. Whatever works for you, managing your energy and attitude is an important part of leading through uncertainty.
Observing, analysing, and discerning your ecosystem of stakeholders is key. Be it your competitors, customers, or nonmarket players such as regulators or activist groups, retaining an outward focus is essential to keep the long-term transformations on track.
For this analysis, leaders should move beyond the traditional influencing grid (attitude versus power and influence) and ask themselves:
Your company’s customers and their position in the wider network should be central to this analysis. To orchestrate the necessary internal transformation required in these critical times, leaders can ask the same questions about their internal stakeholder network. A discerning view of an organization’s sources of power and influence only adds to its transformational capacity.
A leader must have a clear understanding of the capabilities necessary to capture longer-term growth opportunities. Such capabilities need to be built, often through experimentation. This requires discipline, skill, and a culture of psychological safety and accountability.
Leaders should inspire their teams to adopt a more scientific mindset by conducting experiments to test a hypothesis. Data should be considered a valuable learning opportunity, not to confirm biases or assumptions.
This requires a highly competent and disciplined team (and leader). Everyone can learn how to do this. Start with micro-experiments: small, inconspicuous, but intentional changes in the (working) environment that are observed, and whose data points are analysed. This trains the “experimentation muscle” and develops transformational capacity.
Leaders should use today’s turbulence as their own learning opportunity. Reflect on what can be learned and how it feeds into your long-term professional or private plans. Ask yourself:
The leaders who see chaos as an opportunity to analyse and grow their capabilities will strengthen their competitive advantage to succeed in the future. As Nelson Mandela said: “I never lose; either I win, or I learn.”
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