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Brain circuits

Avoid these traps some CEOs fall into during tough times

Published 6 December 2022 in Brain circuits • 2 min read

Pressure on the markets translates to more pressure on CEOs. A company’s top executive is expected to act like the captain of a ship, steering through turbulent waters while keeping the passengers calm. Nervous shareholders want reassurance, which can make falling into one of these traps all too easy.

Do not retrench.

It’s tempting to fall into a protection mindset when times are tough, but this is the exact opposite of what needs to be done. Scaling back as a reaction to a tough market means you will lose key capabilities in the future. Instead, focus on heading in a direction that will provide growth.

Do not cut back on R&D and capability building.

Often, executives look at research and development as an area to scale back on when the company is struggling – but the new innovations coming out of this area could be what the company needs to survive. Rather than protecting a company, cuts in this area could make you more vulnerable.

Don’t lose focus on the future.

It may not feel that way initially, but when times get tough it is a good time to evaluate what could give your company an edge in the future. Now is the time to see if you need to pivot to a new strategy or product line. Have you considered the growing trends towards ESG and DEI? This is a great time to look for opportunities.

Don’t be afraid to learn from your peers.

You’re not going to get everything correct all the time. Sometimes your peers will come up with an idea that you missed. Don’t be afraid to study their business models and see where it can be applied, possibly more effectively, to your company.

Don’t forget to communicate your vision of opportunities with shareholders.

Shareholders are understandably nervous when markets are in turmoil. As you plan to pivot to what’s next, it’s important to communicate what you see as the capabilities that will drive the company in the future. When you redefine your KPIs, make sure both internal and external shareholders understand the vision. Build your message around your new KPIs and give shareholders solid evidence that the company is on track.

Authors

Howard Yu - IMD Professor

Howard H. Yu

LEGO® Chair Professor of Management and Innovation at IMD

Howard H Yu is the LEGO® Chair Professor of Management and Innovation at IMD and the Director of IMD’s Center for Future Readiness. He is the author of the award-winning book LEAP: How to Thrive in a World Where Everything Can Be Copied. Howard directs our Future Readiness Strategy and Business Growth Strategies programs.

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