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Sunday, April 12, 2009

Introduction to Leading in an Era of Economic Uncertainty

Leading in Uncertain Times

In his latest book, Leadership in the Era of Economic Uncertainty: The New Rules for Getting the Right Things Done in Difficult Times, Ram Charan (business guru and advisor to Fortune 500 companies) lays out a kind of a corporate crisis or war plan for the uncertain economic conditions, which he thinks lie ahead for the next few years. For any leader—especially a CEO—who’s navigating the company through these rough waters, having Charan along as a navigator is smart business. An internationally known expert in business strategy, Charan has written such bestsellers as Execution and Confronting Reality and coached companies like GE, Verizon and Bank of America.

Below is the first of a number of posts over the next week based on my review of Ram Charan’s important new book: Leadership in the Era of Economic Uncertainty,McGraw Hill, 2009. Please pass it along to colleagues who could benefit from this information.

In the introduction, Charan frames the economic issue facing CEOs as a corporate crisis. In this section,he uses DuPont CEO Chad Holliday as his shining example of a CEO who read the tea leaves early and correctly and who took action immediately when he began to see the Wall Street meltdown. Holliday carefully observed the auto industry tsunami hit, which affected his company directly because they supplied the paint for all those cars that had started not to sell. Holliday’s response followed the two basic rules set out in this book, especially for key leaders like CEOs in such uncertain times:

1. Management Intensity: “Hands on, Head in.” This means that CEOs have to not only be strategic but tactical as well. During such crisis they have to have a strategic view but a tactical hand on the reins of the company. CEOs need what Charan calls “ground level intelligence” about customers and the market. This comes from being engaged and tapping sales people and others who are on the front lines for detailed on-the-ground customer intelligence.

2. Cash is King: Woody Allen said it best: “Money is important if only for financial reasons!” Charam argues that while growth may have been the key metric for leaders in the past, cash will top the list for the next few years. Paying attention to margins, cash flow and liquidity will overshadow corporate acquisitions and leveraged expansion. Liquidity over growth—a new paradigm for so many of us raised on the growth model.

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