Wow, what a year!

2009 has come and gone, and many of us are taking a huge sigh of relief. Going through one of the worst recessions in U.S. history will certainly take the wind out of your sails. But we appear to have weathered the worst of the storm. And while the economy might not rebound with the speed and vigor we would like, it at least appears to be heading in the right direction again.

So what did we learn from the trials and tribulations of the past year? And how can we apply those lessons going forward? Here are 10 things I believe that leaders need to do differently to position their businesses for success in 2010.

1. Get used to the likelihood there will be no normal anymore. The old business world that most of us knew and loved went away with the recession, and it’s not coming back. To adapt to today’s business realities, question all your beliefs and assumptions, get comfortable with uncertainty, and adjust your expectations. For most, the new ‘normal’ will be slow and sustained growth rather than a hockey-stick curve and it will continue to surprise us.
2. Break the rules. If you’re not breaking rules on a regular basis, your customers and markets have probably already left you behind. The new rule for today’s chaotic markets is to constantly challenge the status quo. Don’t automatically assume that what made you successful in the past will continue to make you successful in the future.
3. Recognize and minimize your “MSUs.” We all constantly MSU (make stuff up) about our company, industry, and markets. During the strategic planning process, put everyone’s beliefs and assumptions out on the table and ask, “What do we think we know to be absolutely true about our customers, competitors and markets? Is it still true? If not, what has changed and how do we need to respond to that change?” Get data and question your long standing beliefs constantly.
4. Embrace social media. Embracing social media can be a real competitive advantage. In addition to instantly connecting you with customers, social media enables you to “mindshare” with industry peers, demonstrate thought leadership, recruit talent and more. Study the social media habits of your customers, and use the appropriate tools to make them part of your community.
5. Expect more transparency. With the advent of social media, you can no longer control public perception by limiting information about your company and products. When you withhold information, today’s bloggers, twitterers and forum posters will make it up for you. The next generation of market leaders will excel at using social media to create transparency and build trust with their key stakeholders.
6. Communicate to fill the void. Today’s employees are beset with doubts, uncertainties and fears about their jobs. If you don’t tell them what is going on, they will fill the void with rumors and misinformation, usually negative. Constantly let employees know where the organization is going and what your plan for winning is. In today’s world, you can’t over-communicate.
7. Encourage strategic thinking. Strategic planning involves a formal process whereby senior management peers into the future and charts a course of action for the organization. Strategic thinking occurs when the entire organization begins to act in concert with the strategic plan. Teach your people to anticipate opportunities and threats while managing the day-to-day tasks that fall within their scope of responsibilities.
8. Make innovation a way of life. Innovation needs to become an integral part of the way you do business, not just a one-time event. Constantly challenge the way you do things, even when they have always worked well. Strive to create new products, services and ideas that have real value for stakeholders. Look for different and novel ways to deal with ongoing challenges. Constantly seek to implement new and better ways of achieving results.
9. Slow down to go fast. In times of uncertainty, prepare to pause, focus, and plan. Learn to anticipate the unanticipated by making scenario planning part of your daily routine rather than an afterthought when plans don’t pan out. Take the time to consider multiple perspectives and engage others who have diverse views. This may feel like slowing down, but will actually help you get where you want to go much faster.
10. Get back to basics. When everything around you diverts you into complexity, get back to basics. Make strategic planning a way of life in your organization. Use a strategic planning framework to drive what you do and where you focus your energies. Constantly check for internal and external forces that may impact where you’re going, what you need to do and how you need to do it. Organize your day around achieving your destination, and focus on informing, inspiring and engaging others in getting there.

Those are my top 10 tips for success in 2010. I’d love to hear what you plan to do differently going forward.

Here’s wishing you clarity, focus, and great success in the New Year!

At last, some evidence that suggests the economy is about to escape the doldrums.

In its June 2009 Investment Outlook, Morgan Stanley Smith Barney pointed to a number of important economic signposts that have charted upward since the beginning of the year. And while many economists and financial experts have been predicting the demise of the current recession, it’s always good to get some solid facts before making any major strategic or financial decisions.

Now that the economy might be picking up steam, I’m going to throw out two questions for consideration. What have we learned from this recent and fairly painful recession? And, what should we do differently going forward?

I recommend a return to prudence.

Over the last decade, business leaders came to expect explosive growth as the norm. As a result, many companies continued to take on more risks because they had been conditioned to expect only success, ignoring the clear evidence of declining markets. With few exceptions, they paid a painful price. So I’m suggesting that we reevaluate our assumptions and beliefs about what constitutes sustainable growth, and start acting a bit more prudently.

What does ‘prudent’ look like in today’s economy? On the financial side:

• Be realistic about your leverage. Just as many homeowners got into trouble by buying more home than they could afford, many companies sealed their doom by over-leveraging themselves based on unrealistic growth projections and valuations. Don’t count on never-ending growth in the value of your business, your products, or your markets.
• Stop spending like there’s no tomorrow. A large part of the recent economic debacle was due to individuals and organizations living beyond their means. Create a budget you can live with, one that does not count on double-digit growth in revenue year over year.
• Know where your money is going. Everyone watches their pennies like a hawk during down cycles. But once sales turn around and the cash starts rolling in again, many companies ease off on the financial oversight and return to sloppy spending habits. Don’t let this happen to you.
• Save for the next rainy day. Every business experiences fluctuations in cash flow. To prepare for your next cash crunch, avoid unnecessary capital purchases, don’t use credit to fund daily operational expenses, and put some money aside for the next economic hiccup.

On the strategic side:

• Challenge all your beliefs and assumptions. Don’t assume that what you knew as absolute fact a year or two ago is still true. Ask yourself, “Is it time to change any of my beliefs and assumptions? If so, which ones and what do I need to change them to?”
• Check in with your workforce. What assumptions and beliefs are your employees holding onto that need to be changed? Remember – behaviors do not change until beliefs and assumptions change.
• Adjust your expectations. The new ‘normal’ may be slow and sustained growth rather than a hockey-stick recovery curve. Instead of waiting for some economic miracle to rescue your company, strive to make the best of what you’ve got.
• Get comfortable with uncertainty. Don’t wait until you have all the answers before investing in the future. Certainty is a thing of the past, especially for the short-term. Instead of making rash, uninformed decisions, gather as much real data as you can, test your assumptions, and then make the best possible decision based on what you know.

Finally, get focused and stay focused, not an easy task as new opportunities open up around you. Determine what you really do best as a business (based on what your customers tell you and not what you think you know) and invest your resources in those two or three areas. Stay lean, gather all the data you can, and make every decision after pausing to check on the facts rather than outdated assumptions.

Finally, some evidence that the economy is starting to show signs of life!

In its June 2009 Investment Outlook, Morgan Stanley Smith Barney reported that eight of their nine economic signposts for 2009, which represent a varied mix of indicators from consumer sentiment to U.S. leading economic indicators, have posted an upward trend since the beginning of the year.

Many economists and financial experts have been predicting the demise of the current economic recession. But this is the first solid evidence I have come across that suggests it’s time for business leaders to start poking their heads out of the trenches and look at what they need to do differently over the next 12 to 18 months. Of course, just today, different economists questioned any positive news and the markets dropped. Keep in mind that most economists have been wrong quite a bit of the time these last few years, so don’t completely jump out of that trench just yet!

What should leaders do to prepare for the turnaround?

• Show me the data! Start by paying very close attention to the data in your industry. Look beyond the media hype and ‘feel good’ projections from pseudo-experts and get as much real data as you can about what is happening in your market. Don’t ignore your gut, but don’t make any important decisions without the hard facts to support them.
• Look beyond your immediate world. Collect information and monitor trends outside your own industry. We live in a highly connected world. The more data you have about the business world in general, the more informed decisions you can make about how to behave in your own market segment.
• Question authority. Whose authority? Yours! Pause and think hard about the assumptions and beliefs you formed over the last year or two. Then ask, “Is it time to change any of these beliefs? If so, which ones and what do I need to change them to?”
• Adjust your expectations. Over the last decade, we came to expect rapid growth as the norm. But the ‘new normal’ may be slow and sustained growth rather than a hockey-stick recovery curve. Instead of waiting for some economic miracle to rescue your company, ask, “How can we make the best of what we’ve got? How can we re-focus some energy and resources on growth versus cost cutting?”
• Get comfortable with uncertainty. If you’re hesitant to invest because you aren’t certain what the future holds, get over it! You may never be sure again, especially in the short-term. Don’t make rash, uninformed decisions. But if you wait for absolute certainty, you will never get out of first gear.

CLIMB THE LADDER

Of these suggestions, perhaps the most important going forward is to challenge your own thoughts, beliefs and assumptions (your thought bubbles). Check your thought process as you quickly climb what is known as the Ladder of Inference (originally developed by Chris Argyris). The world is changing faster than ever, and what you knew to be absolute fact a year or two ago may no longer be true.

Since our beliefs and assumptions are deeply held, challenging them is often easier said than done. I recommend a process called ‘climbing the ladder of inference.’

Developed by Chris Argyris, a Harvard professor and pioneer in the field of learning organizations, the ladder of inference is a mental construct that helps human beings interpret data, make decisions and take actions as we interact with the world. It consists of six rungs that form a mental pathway of increasing abstraction:

• Rung 1 (bottom): We gather and mentally record observable data and experiences.
• Rung 2: We select data from all that we have observed.
• Rung 3: We add meanings to the data we select.
• Rung 4: We make assumptions based on those added meanings.
• Rung 5: We draw conclusions based on our assumptions.
• Rung 6 (top): We adopt beliefs about the world and take actions based on those beliefs.

Here’s the problem. This process is so quick and largely unconscious that our self-generated thought bubbles almost never get tested. We instinctively feel that our bubbles represent the truth and that the truth is obvious. We also feel that our bubbles are based only on real data, which is not always the case. As a result, our untested thoughts, beliefs and assumptions often get in the way of achieving the results we want.

We can’t live without adding meaning to the data we gather or without drawing conclusions and having bubbles. But we can avoid falling victim to faulty conclusions by using the ladder of inference in three distinct ways.

REFLECT, ADVOCATE, INQUIRE

In the Fifth Discipline Fieldbook (Senge, et al), they advocate first, become more aware of our own thinking and reasoning (reflection). Second, make our thinking and reasoning more visible to others (advocacy). Third, delve into the thinking and reasoning of others (inquiry).

What does this process look like?

Imagine you have proposed a marketing initiative that represents a new direction for your team. It sounds great in your own head, but you want to use the ladder of inference to check your reasoning.

Start by presenting your own thinking. State your assumptions and describe the data that led to them. Explain your assumptions, including who will be affected, how they will be affected and why, and give concrete examples of what you propose. For example:

• Here’s what I think and here’s how I got to this point…
• Based on the data I have, I assumed that…
• I came to this conclusion because…

Next, publicly test your thinking by encouraging others to explore your model, assumptions and data. Reveal where you are least clear in your thought process and refrain from defensiveness when others provide feedback. Listen, stay open, and actively solicit different points of view. Public testing statements sound like:

• What do you think about this data?
• Do you have different data, assumptions or beliefs about what I am proposing?
• Here’s one aspect where you might help me think it through.

Finally, ask others to make their own bubbles and thinking processes visible by walking them down the ladder of inference. Explain your reasons for inquiring and check your understanding of what others have said. Inquiry statements sound like:

• Can you go through the data that led you to that conclusion?
• Help me understand your thinking here.
• I’m asking about your assumptions because….

In simpler times, leaders could get by with thinking they had all the answers. In today’s complex, interconnected world, the winners will be those who excel in two key areas — constantly challenging what they think they know about the world, and making informed decisions based on gathering as much real data as possible rather than solely relaying on their (probably outdated) bubbles.

For more thoughts, tools and techniques on how you can thrive in this new and uncertain economy, contact The Human Factor, Inc. today!

With small signs of an economic recovery in sight, I have noticed many companies making preparations to shift back into high gear. But simply returning to old practices could extend the downturn if one’s business is not aligned with key stakeholders and their evolving needs.

The recent economic turmoil has undoubtedly made customers, employees, suppliers or other key stakeholders look at products and services through a different filter. And new stakeholders may emerge that have greater influence in the future:

• Do the company’s value propositions resonate in the new leaner, meaner era we’re entering? Can stakeholders get excited about it?
• Has technology pushed the IT department above the customer service group in terms of priority?
• Are some key customers still stumbling while new market segments are prepared to move forward aggressively?
• Which suppliers are innovating and could provide a sustainable differentiator in terms of efficiency, pricing and/or willingness to collaborate so you both can grow stronger together?

The New Survival Instinct

By all accounts, Springfield ReManufacturing Corporation in Missouri should have gone bankrupt during the 1980’s recession. Instead, the company embraced a survival instinct born out of necessity when a few employees bought the company in 1983 as a way to save their jobs when International Harvester announced it was closing the facility.

Springfield’s core business is to bolt components together into engines that are used in cars, heavy-duty equipment, tractors, or anything else that moves. The vehicle parts industry is suffering badly these days, but Springfield remains a vibrant company because it constantly re-evaluates its stakeholders and value propositions. This preparation has helped the company quickly switch to adjacent markets of manufacturing natural gas pumps and retrofitting U.S. Postal Service vehicles as the auto industry tanked.

Three Preliminary Steps to Take

The Springfield example emphasizes how revisiting with stakeholders can drive success even when the world outside is melting down. A leader’s first responsibility is to communicate a clear vision of where the company is headed. But the right stakeholders can provide the fuel that will help drive to that vision.

• Step 1: Every stakeholder will ask the “what’s in it for me” (WIIFM) question when evaluating a value proposition. Progress will be difficult if the company values don’t line up with the stakeholder values. Getting stakeholder feedback will help validate whether you’re on the right course or not. Help stakeholders articulate their view by using starter phrases…
  • As an indispensable business partner, we provide….
  • As a trusted source, we provide the best experience and expertise to…
  • As the leader of innovation in X, we establish the standards and…

• Step 2: Analyze what each group of customers, staff and suppliers expect. Judgment calls are then made to determine whether expectations can meet realities.
  • Are there new opportunities or different stakeholders that offer a better promise for success? Or are these alternatives too far from the core mission?
  • What changes do stakeholders need to significantly increase the company’s value to them? What can be eliminated? Are there inefficiencies that have emerged as the business has evolved? What critical success factors must remain regardless of anything else?
  • Which stakeholders can make a lasting impact based on the mission? Which stakeholders’ roles need to be changed, or eliminated?

• Step 3: Success can be found where the organization’s mission and value statements intersect with stakeholders’ needs. Distill the final value proposition into clear language that resonates with both internal and external stakeholders. It’s a fine balance. Make it too simple and the value proposition becomes meaningless. Too complicated and the value proposition can be misinterpreted Powerful value propositions have several common characteristics:
  • Consistency with the organization’s mission statement. Stakeholders can become paralyzed if the mission is to market “Blue Widgets,” but the value proposition screams “Green Gadgets.” Seems simple, but many companies miss this part.
  • Compelling value that answer the stakeholders’ “WIIFM” question with confidence.
  • Specific enough to be measurable.
  • Flexible to adjust to changing stakeholder needs.
  • Pride is created among stakeholders; they feel honored to be part of the effort.
  • Inspiration pours out to compel stakeholders to buy into the value proposition, either philosophically or literally.

Determining and constantly evaluating your stakeholder value propositions is an important step to thinking strategically on an ongoing basis. And in tomorrow’s economy, it is a skill set you won’t want to be without.

Uncertainty has become a norm today. The world is moving at a pace that is hard for us to manage physiologically and the future is less predictable than we ever imagined it would be. Our history (including our successes) is less and less predictable. Based on these constantly changing conditions, how do we make timely and good decisions today? How do we deal with the fact that there is so much information available to us, changing so rapidly that we can’t possibly get all the data we sometimes want?

First, remain sensitive to the symptoms of poor decision making:

• Ideas and options have been discussed ad nauseum – they have been talked about, put on a ‘parking lot’, set aside, and keep popping up in meetings with no resolution or action taken
• Decisions get made with no discussion or data available – sometimes based on who talks the loudest or has the most seniority in the meeting
• Alternatives are ignored or risks are minimized beyond reason
• Meetings go on and on but there are no notes, no follow up and no actions taken as agreed
• Decisions get made but not communicated
• Decisions get made and changed, again and again for no apparent reason
• Facts or data are ignored because they are uncomfortable or ‘politically incorrect’ to discuss
• Same issues/opportunities/challenges keep coming up over and over
• There is never enough time to fully discuss something

Second, state your intentions and commit to making good decisions:

• Describe what a good decision looks like to you as a leader (this does not have to include lengthy or bureaucratic processes) – just a simple, “we will discuss the data available, examine alternatives, and review risks in a timely fashion…”
• Focus participants in decision making on exposing their thinking process: what data do they have, what does the data mean to them, what assumptions are they making and therefore what action(s) are they recommending
• Establish what criteria you will use for the decision (i.e. one criteria in purchasing is usually price). Don’t discount less quantifiable criteria such as customer service.
• Allow people to be heard no matter their level or expertise – great ideas and different perspectives often come from those who know less than the experts
• Compare your options to your definition of winning or excellence for your organization – does the ‘answer’ get you closer to your defined destination or not

Third and perhaps most importantly:

• Do the things you stated as your intentions above. Practice creates excellence and your words will mean little if your actions don’t align.

Don’t:

• Pretend there is a decision to be made when there isn’t. If there really are no options, there are no decisions.
• Make a decision and then change it after conversation with one person or if you get one piece of additional data without discussing it with all the people initially involved.
• Delay because you don’t have all the info – you probably never will
• Delay by second guessing yourself to death – get clear on whatever is stopping you from making the decision and discuss it. You might be surprised that others were thinking the same thing or even have an answer or data to address your concern.
• Hide decisions. It is better for people to know the truth than have to fill in the blanks guessing – they most often make up much worse stories than the real one.

Not knowing or not getting a decision is often times much worse than bad news or tough decisions. If you have ever worked in an organization that was in a holding pattern or had a boss that could not make decisions, you know firsthand how frustrating it can be. Whatever decisions you make, make them with the best data you can get, measured against criteria you have considered, with a good understanding of the advantages and disadvantages for whichever course your choose. Discuss and share them openly so everyone stays aligned and focused on winning.

What are you saying and who are you saying it to?

Remember that, in a void, employees will fill in the blanks with meaning and interpretation typically much worse than the truth! They will MSU (make stuff up). We are all quite good at it; interpreting body language, tone and inflection and often jumping straight to conclusions based in very little data! Right now, all of us are surrounded by negative messages. They dominate the news, breakroom conversations and radio waves. Almost everyone has a friend, family member or neighbor who has been laid off or will be soon. It is critical leaders over communicate and constantly state where you are going and why you can still win.

Employee ponderings are likely to include:

• Is leadership clued in to what is going on?
• Is the company responding quickly enough or will we be the next one to fall apart?
• Is my project still important?
• Am I still important?

Whether you are directly hearing these things are not, it is highly likely they are common thought bubbles among employees. Quite simply, almost everyone is at least a little worried about their job these days (according to a recent workplace poll by Gallup of US workers, more than 80% of all employees are ‘deeply concerned about the success of their organization’). This is a dramatic increase from one year ago when numbers averaged in the 20% range!

Remember, as leaders, we have been in countless meetings looking at the current environment and exploring how and why we can still win in the future. However, employees have not been privy to these conversations. They do, however, see messages and are impacted by cuts in travel and other expense reductions. They hear stories, typically with little data to back them up, about competition and what is going on in the market. After living in tough times for several months (and even longer for some organizations and industries) and with employees already feeling a bit worn down, it is more important than ever to over communicate!

Setting the stage and leadership responsibility:

• What are the key messages you should communicate right now and what do you want all managers communicating throughout the organization? How can you keep this in front of managers and employees?
• What are the significant forces at play in our markets?
• How is our company positioned to win?
• What is leadership concerned about AND addressing?
• What is staying the same despite all these changes?
• What are the top three most important business priorities for the next 3 months? …next 6 months?
• What are some personal feelings about the current situation (what does it mean to leaders to navigate through this with a strong team, how are individual leaders keeping themselves focused, etc.)?

Following is a template to assist you in communicating effectively:

• Develop the story
  • What has happened
    • honest and candid, providing as much information as possible (remember that employees will always fill in the blanks with negative stories so give as much detail as possible while focusing on the positive)
  • What’s next
    • where the organization needs to go & why
      • business justification
      • customer needs
      • industry demands/trends
      • internal efficiencies
      • what will it look like when we get there (as best as you can tell today)
    • what are the advantages/benefits of getting there
    • address implementation specifics for any changes
      • timing
      • how people will be kept informed throughout the process
      • employee responsibilities
        • employee next steps and “to do’s”
        • describe the support (e.g. people, technology, assistance) that will be provided
  • What it means to me
    • speak to both what it means to the leader(s) as well as what it means to each audience member
    • identify key things that will not be changing (what could provide a sense of stability, continuity, and identity to the group?)

You cannot communicate too much in tough times and there is little that is more important. Take the time each month to develop your message and make sure it gets shared throughout your organization.

Tips for being aware, asking the right questions, and making timely decisions

One of the few commonalities of almost every article, study or book about leadership is an agreement that self awareness is critical to be a great leader. Today, more than ever, it is important to understand what is driving you – what is influencing your behaviors, your decisions, the data you gather and the choices you make? What mental models, assumptions and beliefs do you have about the world, the economy, your company, your competitors, your employees, etc?

Following are a few questions to ask yourself to indicate how you are performing as a leader in tough and uncertain times:

• Are you delaying important decisions?
  • There is nothing worse for employees than uncertainty right now. Make tough decisions even if you don’t have all the data you would like to have. You can almost always change them later, but not making them causes tremendous anxiety and a real lack of focus in your organization, draining energy and productivity.
• Are you spending too much time in your office, avoiding communicating?
  • Even if you don’t have all the answers and there are things you cannot communicate, talk about what you can. Tell employees as much as you can – the good and the not so good. They are making up much worse in the breakroom, so fill in the blanks with more accurate information.
• Are you ignoring the input and insight of the market, competitors, customers, employees, others?
  • Those closest to the customer often know the most about what you should and could change quickly to retain customers, market share, etc. Ask them! And if ideas are offered, even those that seem like a stretch, consider them seriously.
• Have you considered multiple ways of winning?
  • If you are still trying to do the same things you were six or seven months ago, wake up and smell the burnt coffee. Things have changed and you must adapt your strategies and actions to adapt to the new realities.

Following are a few tips for continuing to be a great leader in tough and uncertain times:

• Spend time evaluating what is and what isn’t possible.
  • Take stock of what you do know about your industry and the economic climate. Be cautious to check your understanding – just because you knew it a year ago, does not mean it is still accurate. Invest in getting better business intelligence right now. It will serve you well.
  • Do scenario planning to expand your brain’s ability to see multiple alternatives and course of action. Ask yourself and others “What if…?” You’ll be amazed at what people can come up with if you give them a target and then ask questions to help them see it and believe it is possible.
  • Examining and considering multiple possibilities will help you be prepared to take action if an opportunity presents itself.
• Prioritize so that you and others remain focused on the right things.
  • Once you have reset your strategies and tactics, make sure everyone in your organization knows what they are. Most people are working incredibly hard today. The problem is, some are working on the wrong things – projects and initiatives that are now unimportant or less important to success. But no one told them! Constantly communicate priorities and the ‘why’ behind them.
• Deepen customer relationships.
  • Make sure you have a senior executive assigned to connect with significant customers on a regular basis. Customers are making tough decisions on where to spend limited dollars, so make sure your name is front and center because you have built a good relationship.
• Work on building as much resilience in your organization as possible.
  • Things are changing at a pace that is almost impossible for us to absorb and assimilate. Resilient organizations are focused, proactive, positive, flexible and organized. Don’t assume your employees can constantly adapt to all that is going on. Make it one of your areas of focus and invest the energy to build the capability to deal with the accelerating pace of change.
• Examine everything!
  • Just because something served the organization well a year ago, does not mean it is the best approach today. Pause and consider all the things that are ‘set in stone’ and consider changing them to adapt to the current environment.

Someone will win. Will it be you and your organization?