4 Rules of an Effective Leader in the Face of Uncertainty
Organizations that succeed in crisis do much of the same things, but more effectively. Their actions differ in two important ways:
- Successful organizations focus their efforts on gaining the loyalty of their customers and employees.
- Then they hit the “reset” button to get the entire organization focused on realizing new priorities.
Gain customer and employee loyalty
When you’re trying to do more with fewer resources, the most important task is to figure out what exactly is “doing more”? Shouldn’t you be doing more of what your customers value and what they will pay for? Shouldn’t you be doing more of what your employees value and why they will stay with you?
When in 2001. Ann Mulcahy took the helm at Xerox, the company was on the edge. The stock price, revenue, and reputation were all plummeting. What was the first thing Ann did? Called legendary investor Warren Buffett, asking, “What do you advise me?” He replied, “Focus on your clients and manage your employees as if their lives depended on your success.
Ann took this advice seriously. Within four years, Xerox was back in business and had paid off major debts. The share price rose fivefold. Mulcahy attributes this impressive success to following Buffett’s advice. He helped her “filter out the distracting noise and focus on the two most important groups of people.
When you’re trying to do more with fewer resources, the most important task is to figure out exactly what to “do more of”?
Malkahi especially emphasizes the importance of focusing on what’s of value to consumers: “Consumers need to be a priority for the whole company. To do that, you have to constantly ask yourself, ‘Will consumers pay for this? She emphasized the importance of maintaining customer commitment while other major executives dealt with other business issues. “We did everything necessary to make sure that our communication with consumers was impeccable so that they wouldn’t feel the impact of the crisis. It became everyone’s business and responsibility. I think people understood that.”
Equally, Mulcahy focused on her employees, “capitalizing on the loyalty of Xerox employees to her company. The average seniority at the company was 15 years, so people largely associated themselves with it. To take advantage of this, she traveled 100,000 miles in her first year at the helm, visiting the firm’s territorial locations, meeting people in person and asking for their help.
Our employees are extraordinary people. They have made thousands of suggestions about what we can do to save money. It became a personal matter for everyone. And we were able to dramatically reduce the organization’s costs. It was amazing — we were able to improve procurement efficiencies by half a billion dollars.
Ann Mulcahy, president, Xerox Corporation
Conducting layoffs may be the right thing to do, but don’t forget that only people with the knowledge can offer the solutions you need to succeed during a crisis. Xerox had to cut some employees, but it affected far fewer people than expected, thanks to their ingenious productivity solutions.
The crisis is pushing us to shift our focus from consumers and employees to finance
The crisis is pushing us to shift our focus from consumers and employees to finances. Diving headfirst into budgets and balance sheets can lead to mindless cost-cutting instead of caring about adding value.
For example, one large home improvement retailer cut costs by laying off most of its experienced permanent employees and replacing them with temporary ones. The move was initially reflected positively on the cash flow statement, but it soon became clear that it was causing irreparable harm to both the employees and the company’s customers. When making purchasing decisions, the company’s customers relied on its consultants, many of whom were former carpenters, plumbers, and electricians. Losing these employees meant losing customers. By cutting costs in the wrong place, this large company undermined its business.
Focus on Consumers
In contrast to what has been described, companies that succeed in unpredictable times are completely focused on customer value. They’re not in the business of simply cutting back on unnecessary things, they’re simplifying, making less complicated things that consumers don’t see value in or that they don’t even understand. Usually the winning company runs a powerful, carefully planned campaign to retain customers. To do this, it carefully focuses on the work that real consumers expect it to do.
You’ll say, “We’re already doing that work.”
Think again.
- A study of 362 companies by the consulting firm Bain found the following:
- 96% of respondents said their company was customer-centric;
- 80% of respondents were confident that the company provides “outstanding customer service”; only 8% of consumers agreed with the statements.
That’s a very large gap.
You’re now thinking, “But we have high customer satisfaction scores. Our customers are satisfied!”
But you should ask yourself another question, “Are our customers loyal to us, are they committed to us?”
The difference between customer satisfaction and customer commitment
Satisfied customers simply see no reason to complain. And loyal, committed customers have an emotional connection with you. They form the biggest share of your business because they are the ones who come back to you over and over again. They will miss you if you go out of business.
In order to beat your competitors, do less than they do…
In other words, do more of what really matters to your customers and less of what they don’t need. The principle is to focus on the work that your customers expect you to do. And that doesn’t necessarily mean doing more of the same things you were doing before.
In 2001, Polaroid went bankrupt when it brought dozens of new snapshot camera options to market, and Canon and other companies succeeded by moving to digital photography. Polaroid misunderstood exactly what was required: consumers did want snapshots, but not at the expense of buying expensive film. Canon succeeded by doing less of the unnecessary – leaving the analog photography market – and more of exactly what consumers actually wanted.
Focus on Employees
Without a doubt, companies that focus on consumers achieve greater customer commitment. Interestingly, they also get a higher level of commitment from their employees. When times are tough, employees will stay with you, but that doesn’t mean they want to. Research confirms that when a company’s “customer care is aligned with employee care, employees enthusiastically support what’s important to the company. Enthusiasm and engagement go hand in hand.”
Franklin Covey’s research shows that people in general are less motivated by money than by the feeling that their contributions are valued. Intellectual workers – and they are the majority these days – want their work to be meaningful. Even in hard times (perhaps especially hard times), people want to contribute, they want to help the company and deliver results. Maybe that’s why Ann Mulcahy was able to save a lot more money by reaching out to Xerox employees for help, rather than laying them off.