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Published: November 16, 2009

 
 

Leadership Lessons and the Economic Crisis

This type of governance structure is made even more necessary by the fact that only 25 percent of new CEOs today come from outside the company. Consequently, the outsider’s perspective is not coming from top executives. Many corporate leaders will thus need organizational innovations that provide visibility and challenge to management at quite detailed levels. The financial control function at most companies is an excellent and well-established example; this oversight arrangement can be extended to other corporate functions.

We see this already in a few companies. It has helped some institutions avoid or mitigate the effects of the crisis. Central corporate leadership at the financial-services firm Barclays PLC is entirely devoted to governance, leaving day-to-day and even month-to-month management to the divisions. The center has a strong risk control function, but also governance roles across many other areas of the business. And despite Barclays’ extensive involvement in the debt market and other troubled markets, it has avoided many of the problems facing other banks.

Of course, there is a risk that such governance models will simply re-create the old bureaucratic staff structures that hobbled companies in the 1960s and 1970s. What we will need is tightly limited roles and processes, a separate voice and perspective, and a smaller number of resources and processes. This spare, collective, and relatively informal approach will require leaders who are unusually holistic, integrative, and dispassionate in their character and thinking. This is not a time for leaders who will be waylaid by details, nor for those who are convinced they see the future clearly and want their organizations to fall in line. Rather, they must see the general patterns, and see them better than others, while recognizing, not suppressing, the risk and uncertainties.

The most successful leaders of these newly transformed organizations will do one more thing distinctively well. They will set the overall purpose and mission of the organization, not just its strategy. Indeed, they will often concentrate on corporate purpose or mission, leaving strategies to the executive team. We already know that companies with an articulated purpose that goes beyond simply the expediency of “making more money” have fared much better in the downturn. They will also fare better in the recovery. But this will depend on the temperament of leadership. If we are fortunate, the leaders who emerge this time will be honest, robust, and farsighted enough that their prevailing style will last for some time.

Author Profile: 

  • Richard Rawlinson is a Booz & Company partner based in London, where he leads the organization, change, and leadership practice.
 
 
 
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Resources

  1. Richard Rawlinson, “Leadership Lessons and the Economic Crisis: Where We’ve Come From and Where We’re Headed” (PDF), Booz & Company white paper, July 2009: The paper on which this article is based says this crisis will be a powerful catalyst for change in both the theory and practice of leadership and governance.