White Paper on a Recession's Role in Transforming Leadership Development

A Recession's Role in Transforming Leadership Development (Reissued) [Sep 2008]

Executive Summary
Cost cutting in a recession usually includes strategic HR and leadership development initiatives and expenses. Recessions often also lead to negative perceptions of HR since they are made responsible for cutting people and programs in line with company directives. The CEO and board are usually so preoccupied with company survival and the need to significantly cut expenses that they often have no sympathy or time left for strategic leadership development initiatives.

However, unconscious financial behaviors of many CEOs and senior management result in more than just costs being cut. Margins are often unwittingly chopped in the race for aesthetically-pleasing expense line items. Falls in margins are usually the consequence of reducing value-adding expense items, which reduces the medium and long-term competitive edge of the company. Executives need to be aware of these behavioral biases so that they can reduce costs without threatening the long term sustainability of the company.

This White Paper shows that a recession is actually an opportunity for HR and leadership development to increase its credibility by promoting programs to modify financial behaviors that directly support the CEO and board's agenda to cut expenses while increasing margins. By adopting such approaches, HR can put in place programs and behaviors that not only rapidly improve short-term financial outcomes, but also put in place a framework for longer-term increases in profit quality and financial performance.

In order to do this, HR and leadership development need to take a number of initiatives:

1. De-emphasize traditional personality and competency-based approaches - while useful in the right environment, these approaches do not build business credibility for HR in times of hardship.

2. Focus on programs that will have fast behavioral impact on costs and margins - the CEO and senior management will only have an ear for fast impact programs.

3. Introduce into all programs the concepts of an ownership culture - focus the minds of employees and management on their responsibility for the financial outcomes of their actions and decisions.

4. Implement programs to develop business acumen - show employees and management the linkages between their behavior and financial outcomes so that they can modify their behaviors appropriately.

5. Integrate business acumen programs with traditional programs - build business acumen components into current curriculums to support and enhance existing methodologies.

6. Map business acumen to traditional personality and competency approaches - use current employee data from traditional approaches to identify the existing business acumen potential of your human capital.

7. Emphasize the financial and hard side of programs in internal public relations - set up fast, hard-hitting practical programs to build the business credibility of HR, and overcome stereotypes of leadership development being 'soft'.

8. Train HR and leadership development professionals in business acumen approaches - empower HR and leadership development professionals to build their credibility and confidence as recession change agents in the organization.

9. Position HR and leadership development as being business-focused innovators in their own area - show the rest of the organization that HR and leadership development are no exceptions when it comes to financial behavior-based change.

10. Introduce programs to develop high leverage innovation approaches - as studies have shown, breakthrough innovation is not correlated to high R&D spend; and given the right environment, low budgets and times of need can stimulate highly creative thinking.

11. Stress approaches to increase leadership agility and organizational learning - enable those with less natural business acumen to contribute to profitability by improving their financial behavior through leadership agility.

12. Integrate business acumen approaches into talent management and succession planning - move beyond development initiatives and assist HR to choose the right people who need to leave and the right people to stay, and identify potential future leaders.

13. View the recession as an unparalleled opportunity, not as a problem - leverage a recession to force a reassessment of internal priorities, and throw up opportunities for HR to innovative and show its value from a business perspective.