First let me share what I think is the seminal quote on the root cause of the current Economic Crisis. This is from Stephen Green, Group Chairman, HSBC, UK, speaking at the Economic Forum at Davos–
This is about values that have developed in the markets in recent years. We have moved from the old cliché ‘my word is bond’ to a culture and atmosphere where ‘if there’s a transaction, if there’s a market for it, and I have a contract, and it’s legal, that’s it; I don’t need to think about the underlying right or wrong, suitability or unsuitability. The Values behind Market Capitalism • Tony Blair • Stephen Green • Indra Nooyi • Shimon Peres • James J. Schiro • Jim Wallis
Moderated by • Maria Ramos Thursday 29 January 2009
The Chinese Culture has long associated crisis with risks and opportunities and so it is with the current World Economic Crisis. The risks are well known and widely publicized. But, there are opportunities if you are smart enough to look for them.
Business leaders first need to come clean and admit that they failed and then focus on opportunities. For example GE‘s CEO Jeff Immett in his letter to shareowners says –
Let’s face it: our Company’s reputation was tarnished because we weren’t the “safe and reliable” growth company that is our aspiration. I accept responsibility for this. But, I think this environment presents an opportunity of a lifetime. We get a chance to reset the core of GE and focus on what we do best. We can reset expectations for our performance. And we can participate in the changes required in the broader economy.
… The current crisis offers the challenge of our lifetime. I’ve told our leaders at GE that if they are frightened by this concept, they shouldn’t be here. But if they’re energized, and desire to play a part in transforming the Company for the future, then this is going to be a thrilling time to be a part of GE.
GE’s Board seems to have felt the pain and see the need for change. The need for change must start and be embraced from the top.
In the McKinsey Report The crisis: Mobilizing boards for change –
The solution is to explicitly change the way the board interacts. The chairman should insist that members articulate what they have thought but have not had the confidence to express. These conversations will often be more conceptual than rote, and participants will have to take the risk of “saying something stupid.” Chairmen will need to muster up the courage to drive relentlessly the discussions that will take most boards into deep and frightening waters. Long-cherished assumptions, existing plans, or defined ambitions may go down the drain.
Next, crises open up changes that were not possible in “normal times”. There must be a realization that disruptive changes will be needed –
A crisis is a chance to break ingrained structures and behaviors that sap the productivity and effectiveness of many organizations. Such moves aren’t a short-term crisis response—they often take a year or more to pay dividends—but are valuable in any scenario and could help a company survive if hard times persist. Although employees may dislike this approach, most will understand why management aims to make the organization more effective.
This may, for example, be the time to destroy the vertical organizational structures, retrofitted with ad hoc and matrix overlays, that encumber companies large and small. Such structures can burden professionals with several competing bosses. Internecine battles and unclear decisions are common. Turf wars between product, sales, and geographic managers kill promising projects. Searches for information aren’t productive, and countless hours are wasted on pointless e-mails, telephone calls, and meetings.
More resources at – The Crisis A new era for management
The Economic Crisis provides an opportunity for companies who aren’t already, to get serious about Ethics. Now is the time for the Board to set the “Tone at the Top” on Ethics, to establish an Ethics Officer and develop an Ethics based Corporate Culture.
Another opportunity is to improve your Corporate Reporting to stakeholders. Companies need to use their websites to maintain or rebuild their reputations — clearly explain your strategy and how you will accomplish it, improve how you display the Board and the Management Team, and clearly show the risks the company is facing and how it will manage them. More on this in a future post.
Smart leaders will find opportunities in the current Economic Crisis to build the way to an improved future.