The “New Economy”
When we fully comprehend the global impact of this economic catastrophe we will appreciate the extent and nature of how things have changed. From a global perspective, the shift from the “old economy” to the “new economy” is in actuality a basic redistribution of economic power. Take Asia for example. It won’t be long before Asia's contribution to global gross domestic product (GDP) will be larger than that of the United States and will become the largest in the world.
Already, its share of the GDP has tripled in just three decades. Beyond population size, when you factor in the growing global trend of governments to privatize state-owned organizations, the impact in Asia will be the most significant due to the number and size of this type of entity. While Asia will assume one of the more dominant economic positions in the new global economy, every region and country will scramble to assume its place.
Domestically, the new economy will have little room for some of the industries that we relied upon in the past, and we are starting to realize that many of the jobs therein will not be coming back as they did in past economic slow downs. The flipside is that new opportunities will arise in new sectors, and our governments, educational institutions and private sector employers will need to respond appropriately. The danger is that if we fail to adjust, and we continue to think in accordance to the old economy, we will miss these new opportunities.
Understandably, our governments have responded to the economic slowdown by providing stimulus financing to infrastructure development. This is not an untypical response. But in addition, we need to ensure that appropriate stimulus is also directed at the new economy opportunities to help ensure a long-term impact. There is no doubt that utilizing the funds in our governmental coffers will do much to contribute to whatever economic growth that we will experience in 2010, but this money does come at a price. The withdrawls of today will have to be replaced by the deposits of tomorrow if we are to reduce growing deficits and return our financial houses to order. And part of the impact will be the declining availability of these monies (our money) over time. With even more pressure on money supply, those industries that have been dependant on government subsidizations will increasingly have to fend for themselves, and then do so for a very long time. Those organizations that understand this, and strategize appropriately, will be best positioned to take advantage of the opportunities that will arise in the new economy.
Why Some Survived, Some Didn’t and Some Won’t
Never has the phrase “survival of the fittest” been more economically appropriate. The global “bloodletting” has already pared out much of the weak and most vulnerable organizations and individuals. But while the process has slowed significantly it is by no means over. Some will have an extended battle for survival while others have already weathered the most difficult of their challenges. The latter will not only have an easier short-term experience, but will be more prepared to move forward quickly. Why? These organizations realized very early on that this was a very different economic correction, and that business as usual would not do. They understood that simple cost-cutting and belt tightening were not the way to achieve a competitive advantage both within the downturn and within the future. So they changed their thinking.
As early as the first quarter of 2008, they realized that this recession was real and it was different. Understanding that cash, rather than debt would once again be king, they recognized that if things got really bad they might run out of cash and then not have the access to capital when they needed it. They accepted that their companies, no matter how large or strong, were not capable of coping with an economic downturn of this magnitude. Rather than just reduce payroll, as many companies do during downturns, these companies decided to move broadly and strategically in a number of different ways both to cope with short-term business pressures, and to strengthen the company for the new economy.
Depending on their specific objectives, these organizations not only restructured their workforce in accordance to short-term pressures and long-term requirements, they also took such initiatives as reducing inventories in order to conserve cash and prevent the accumulation of difficult-to-sell obsolete products, halting acquisitions, postponing planned investments in new plants and equipment, reducing discretionary spending, imposing salary freezes, and cancelling all bonuses (including their own). They found creative ways to squeeze more capacity out of their existing operations and they restructured or shut down low-performing operations.
By not only properly focusing on costs today, they also created an investment in their future. Beyond accelerating a long overdue "lean" program that would help them improve productivity, they have positioned themselves to capture opportunity and facilitate appropriate growth as economies improve. They were able to effectively do this because they anticipated what was happening, they strategized and organized their response, and they executed their plan. Again, rather than fall back to previous recession responses, they changed their thinking.
Unfortunately, these firms are in the minority. To date, most of the “survivors” are barely surviving, better yet positioning themselves for the opportunities of the new economy. And the most troubling aspect is that their struggle will be longer and deeper, and their odds of survival or growth even lower, because they are most likely to return to old economy thinking.
“Those who don't remember history, and learn from it, are doomed to repeat it”.
Talent in The New Economy
The real difference between those companies that are well positioned for the new economy and those companies that have failed, will fail or that will continue to struggle is simply a strong management capability. These are mangers who can develop and plan long-term organizational strategies, while realistically factoring in both global and domestic influences, and who can effectively put their plans into action within their respective organizations. They have the ability to learn from the past, to change old ways of doing things and to appropriately adapt to the future. The importance of this cannot be overstated. In the new economy, not only will there be significant global competition for talent, there will be significant global competition for management talent.
The new economy will require a level of real competitiveness that was obviously absent in the old economy. “Real Performance” will be the new mantra, as to truly compete in the new economy, on an organizational, regional or global scale, our people will have to actually meet performance targets and our managers will have to actually manage performance results. No longer will we be able to “talk” about doing the right things. The realities of the new economy will require us to put our collective “money where our mouths are”, and to leave past perceptions and inefficient methodologies behind in order to do what is right rather than what is convenient. This new way of thinking will be led by the change catalysts in every organization: the management structure. Those organizations with the most progressive and adaptable managers will win, those without will lose.
Typical old economy thinking might lead one to believe that management talent (or any other talent) will be readily available and easily sourced due to the recession’s “bloodletting”. In reality, most organizations have done everything possible to retain the best, and if some talent is happens to be presently available on the market, this will be a temporary phenomenon. The well positioned organizations are already recruiting these people to meet their current and future needs, and it will not be long before the selection is extremely limited. The remainder will consist of those who did not perform in the old economy and who will have even poorer success in the new economy.
Within the global competition for talented managers and staff, Asia alone will place significant pressure on the West. The huge demand for skilled people has already created the need for a more aggressive stance in their search for talent and they have responded. Based in their tradition of placing a high value on quality leadership, they have developed innovative strategies for acquiring and retaining the talent they so desperately require. The result is that not only are Asian nationals returning home after completing superior western education, talented non-Asian knowledge workers and managers are responding to Asia’s “open armed” approach as they search for opportunity. But this trend will not be limited to Asia. Talent will be drawn to opportunity wherever it exists.
Talented management is not only attracted to opportunity, it is capable of transforming its organization to capture opportunity. Similarly, talented employees will gravitate towards talented management while at the same time will be repelled by bad management. In the new economy, opportunity will be redistributed along with the redistribution of economic power. Thus, management and employee talent will follow this redistribution. This relocation is already happening on both an individual and on an organizational level.
And in addition to this external pressure, it should also be mentioned that the current economic downturn has temporarily distracted us from one indisputable fact involving the domestic (and global) employment demographic. If the baby boomers can retire they are going to, leaving a huge deficit in domestically based experienced and capable professionals. If they have to continue to work, motivation, health concerns and new economy adaptability will need to be given greater consideration. As for the last point, we will need to properly assess whether they have the necessary ability.
If they did not perform in the old economy it is very unlikely that they will perform in the new economy. In any event, at the upper managerial level, the number of talented managers who will be available within the typical age bracket for leadership roles will decline by 30% in the next six years. Because of this the average corporation will be left with half the critical managerial capability that it needs by 2015, and this should be of concern to those who have a long-term strategic plan.
Whatever the location, the global talent war is well under way. Those organizations that are willing to adapt and change their thinking will develop the ultimate competitive advantage by having the best managers in control. While some will argue that we are already fairly capable in these areas, poor past performance, and the resultant deeper impact of the recession, have proven them wrong. The real winners will have the right managers in place to operate smarter and leaner and accomplish more with the resources that they have. They will be capable of determining realistic long-term organizational strategies and then ensuring that the right resources are in place to accomplish stated organizational goals. They will identify true performers at all levels of the organization, they will eliminate the “deadwood”, and they will ensure the creation of, and accountability for NEW hiring processes, performance evaluation methodologies, talent development programs and retention strategies. They will refuse to return to the old thinking and methodologies of the old economy.
Why Is Strong Management So Critically Important?
Management must proactively lead the change that the new economy demands. This begins with changing attitudes within management itself, and then developing an environment of change, and competition, throughout the organization as a whole. Typically change has been driven by technology implementations or upgrades, with business processes and working practices reactively being adapted to fit in with the new system. In the current economy, change is just as likely to be driven by such things as a long-established competitor unexpectedly going out of business, a bank loan being called in, or a layer of middle management being made redundant. Again, a change comes from a reactive response. In the new economy, strategic managers will drive change rather than respond to it. They will expand their planning time horizons to envision realistic long-term organizational objectives, they will be capable of directing true organizational performance accordingly and they will have the ability to communicate their plans to, and gain support from, both external and internal stakeholders.
The immediate challenge in creating a change environment, within both management and those who surround them, will be in overcoming the natural human tendency to resist change and to gravitate towards what we know and are comfortable with. As the economy improves there will be a tendency for all parties to want to forget about the depth and nature of the recession and to return to “business as usual”. It is management’s responsibility to make sure that this does not happen, and to lead us towards new ways of thinking.
In 1977, Richard Beckhard and Rubin Harris published "Organizational Transitions: Managing Complex Change", which is still appropriate today. Within, they created their “change equation” in which they suggest that, for change to happen successfully, the following statement must be true:
Dissatisfaction x Desirability x Practicality > Resistance to Change.
“Resistance to change” generally represents a person’s stubbornness towards change, their belief in the limits of the change, or their general lack of interest at the beginning of a change process. In order to ensure the person’s willingness to move forward, the combined impact of their dissatisfaction with the situation, the perceived desirability of any proposed solutions and the belief that those solutions are realistic and practically executable must be greater than their resistance. Since the formula contains a multiplicative relationship between dissatisfaction, desirability and practicality, if one element is missing, that variable will have a value of zero, thus causing the whole side of the equation to be zero.
To stimulate change “buy-in”, management must clearly communicate the nature of the issue or problem in understandable ways, define the long-term implications, present realistic and practically implemented solutions and then lead performance accordingly. They will only accomplish this once they have come to terms with the need to change their own thinking, and provided they have the necessary skill set to actually lead and manage others.
Defining the Characteristics of Strong Managers
Since moving forward successfully in the new economy will be dependent on the quality of managers we employ, a definition of successful managerial characteristics will help us to avoid the mistakes made in the old economy. Beyond specific education, industry experience and technical skills, the key characteristics that separate the talented from the rest are personality based. Knowing which characteristics are typical of managerial success, we can assess their presence as they can provide valuable assistive information when making decisions about which managers to keep and which to release, who will benefit from managerial development programs (either current managers or young internal prospects) and which managers to hire.
Since managerial success is always tied to the specific requirements of the position, organization, and industry, we have to be careful about making broad statements that will be applicable in all cases. We should also be aware that some traits can be developed (under the right circumstances) and some are either present or never will be. In any event, we can generally say that successful managers will display above average characteristics in the following categories:
More specifically, we should look for managers who:
Quite the list!
Exceptional managers grow into their role such that they demonstrate each of these capabilities in a situation-appropriate mix and in alignment with the needs of the organization. Obviously, we want to avoid the opposites of each characteristic, but here are some definite “deal breakers”:
Functionally, we can say that talented managers have high capability in organizational management. Since they realize that their teams do not exist in isolation, they will establish and maintain a robust interconnected web of business networks. This helps them to be environmentally aware, and allows a level of feedback to help them to understand the “big picture” implications of their decisions. The network also provides a vehicle for them to be able to influence and persuade others and to gain support and commitment to their ideas, decisions, and actions. It is therefore crucial that they use their communications and interpersonal skills to build these networks and to develop working relationships with key individuals throughout the organization.
Effective mangers are continually looking to build capacity, and strategize about how to enhance their team’s (and the organization’s) future capability to capture opportunity. They hire talent and actively develop the people who surround them, making sure that each is deployed in accordance with their true talents. They have a continuous improvement mentality and creating an environment in which learning (from experience, and from one another) is encouraged. They also foster the necessary changes in individual and organizational thinking in order to adapt to emerging needs and to capitalize on the opportunity for innovation.
Thus they are skilled at supporting, coaching and developing others in order to have the talent available to meet current and future requirements. And when not present internally, they understand the “right fit” characteristics of external hires. They foster innovation by creating and supporting new ideas and improvements in practices and systems, and they facilitate change by taking steps to communicate and follow through on needed organizational innovations.
Talented managers are results oriented and require accountability for true performance. All managers are aware that they are held responsible for the outputs of their group, but weak managers forget that those outputs are generated by others, and not primarily generated by themselves. In contrast exceptional managers make a point of setting clear expectations for the performance of the work while providing the necessary resources to get the job done. They focus on fostering superior performance by individuals and the team as a whole.
To accomplish this they are skilled at aligning work and the resources required to produce the pre-determined results. They manage performance by communicating expectations and working with others to ensure that goals and objectives are met. They facilitate teamwork by structuring and harnessing the energies of the group to create a climate for success, and they encourage sustained motivated effort by challenging others and recognizing their accomplishments in order to create and sustain momentum.
A necessary requirement of managerial effectiveness is the ability to manage themselves while being subjected to multiple, and often conflicting demands. In order to accomplish their objectives, they must be able to process large amounts of information and decide relevance, they need to understand and relate well to other people while also demonstrating fairness, to maintain their focus and self-assurance in the face of uncertainty, and to make and effectively communicate decisions, and follow through on their promises.
This requires that they maintain their focus, identifying important goals and persistently directing the efforts of the team to support those priorities. They must utilize practical judgment, clearly defining key issues and making pragmatic, timely decisions. They need to be emotionally aware, coping with stress in a way that instills confidence and enhances group effectiveness. They are skilled at building relationships, and they make themselves available to others in order to foster and strengthen relationships. They are also perceptively aware, displaying insight into the perspectives and feelings of others and utilizing that information to determine appropriate approaches. Through their own ethics and integrity, and subsequent commitments and actions, they inspire trust, thus creating an atmosphere of openness and trust. Finally, they are strong communicators fostering a clear and open exchange of information and ideas between themselves and others.
How we proceed in the new economy is totally dependent on our abandonment of past ineffective activities based on old economy thinking. We will all need to make the necessary adjustments to the new economic realities, but the responsibility to lead our organizations and economies forward will rest on the shoulders of our current and future talented managers. The global competition for this essential human resource will be significant, so those of us who can identify, attract, develop and retain this most valuable resource will be the economic “winners”. By changing our thinking, and no longer accepting the poor management practices that have effectively deepened and extended the current economic situation, we will position our organizations to move forward and to capture the opportunities that will inevitably come with the new economy.