lead by getting out of the way

There is no doubt we are in the midst of a serious economic downturn. Its impact is being felt by every kind of organization, large and small, high tech and low tech, government and not-for-profit. We can expect this year and most of 2010 to be a severe and painful time for people who’ve lost their jobs. Likewise, it is not easy for managers who have to make the decision to cut. No matter how you look at it people’s lives have changed.

We’ve had recessions before and will have them again. In his book, “Managing in Turbulent Times,” Peter Drucker wrote that after every boom there’s a bust, and in the bust period are new opportunities for growth.

“During the 1950s and 1960s, it was believed that everything has to grow and that there are no limits to growth. In the 1970s, it became popular to believe that growth is over forever. Both beliefs are fallacious.
Nothing can grow forever, let alone at an exponential rate. Yet every fifty years or so, since the early eighteenth century, the developed countries of the world economy have experienced a “go-go decade,” during which growth was everything and everything was supposed to be growing forever.
Every one of these “go-go” periods was followed by a massive hangover, during which everybody believed that growth had stopped for good. It never did and there is no reason to believe it has stopped now.
But in every such period, growth shifts to new foundations. It then becomes important for a business to think through where the growth areas are for its specific strengths, and to shift its resources out of areas of in which results can no longer be achieved into those areas where the new opportunities can be found.”

The main (and, in many cases, perhaps the only) source of information managers use to make decisions about the future is from accounting; a five hundred year old system that doesn’t tell us anything about the growth opportunities that exist for the organization. This system presents costs only, and in a recession reducing total cost of labour becomes an irresistible temptation.

Doing this is commonly viewed as a necessary step to restoring profitability – an understandable but dangerous illusion built on the assumption that all our products, services and programs will uniformly continue to produce the same (or better) results – only now will less staff.

While they can be forgiven for making cuts this way in the short term, the long-term effects will do more harm than good if managers continue to avoid the unpleasant task of selectively sloughing off products, services and programs that no longer produce results. Every enterprise whether for profit business, government and social has products and services and programs that no longer contribute.

And so, where to cut staff, is the wrong question. The question managers must ask is “What do we need to do differently today to achieve our purpose tomorrow?”

A policy of systematic abandonment – putting every product and service, every service, process and activity on trial by asking “Would we get into this product/service/program/activity, based on what we now know about it?” And if the answer is no, then “How do we get out of it?” Or, at least, stop putting more resources into it.

It is the concentration of resources on opportunities that creates growth. The best time to do this is during the boom years. A recession reveals the things are slowing us down, the activities that only consume resources but fail to produce results that achieve our organization’s mission.

Recessions are a fact of developed societies; they are the economic equivalent of a hurricane. We can’t control them any more than we can control the weather. And, as any good sailor knows, there’s no escape from the weather. As Peter Drucker tells us, the best we can do is keep our organizations “lean and muscular, capable of taking strain but capable also of moving fast and availing itself of opportunity.”