Thursday, March 5, 2009

Leadership in Chaotic Times

Posted by Mark Brousseau

An interesting article from Monday's USA TODAY:

Chaotic economic times call for CEOs to show optimism

Management consultant Ram Charan has had the ear of dozens of Fortune 500 CEOs. A native of India, Charan received a Harvard MBA after getting an engineering degree from Banaras Hindu University. He is known for living in hotel rooms and without an apartment for much of his career, traveling from meeting to meeting with top executives. Charan, 67, spoke last week to USA TODAY corporate leadership reporter Del Jones. Following are excerpts, edited for clarity and space.

Q: Publicly, CEOs seem worried about the economy. Privately, are they frightened to death?

A: When somebody (such as Moody's or Standard & Poor's) calls the CEO and tells them their bond rating is on watch, it causes a huge anxiety. Most companies cannot escape a warning, and so they are anxious. They worry if their customers will pay, if their suppliers will go bust. They are watching accounts receivables daily and with intensity.

Q: Should they be expressing their fear to employees and shareholders, or is it best to put on an optimistic face?

A: Leadership is judged in times of crisis. They must be optimistic about weathering the storm, that solutions will be found. But don't sugarcoat. Figure out what the reality is, and communicate that reality. Give everyone the facts. Engage employees in defining problems and solutions.

Q: What steps are you telling them to take?

A: It's largely out of their hands. About 10 people in Washington need to come up with a coordinated plan. Everything is being done piecemeal. Unless these Washington guys deal with it, there's not much companies can do.

I just came back from India, and government action there is much more coordinated.

Q: There's nothing corporate leaders can do?

A: They must manage cash. Cash is king, and corporate boards should build in the incentives of cash and financial safety. Companies must raise cash so that when it's time to do refinancing they don't get shut out of the commercial markets. Companies that can't raise cash need to merge, and they need to do it before the 11th hour.

Q: Some companies, such as Intel, are well known for expanding into past downturns and being better positioned than competitors when the economy turned. Isn't this one of those moments in history to take a chance?

A: Under certain circumstances, but do not take risks with cash.

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