How to Effectively Lead Through Uncertain Financial Times
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Uncertainty is not unusual in business. In fact, it can be seen as one of the defining features of life as a business leader. Indeed, the combination of domestic issues — from inflation to supply chain disruptions — and global tensions suggests that the level of uncertainty is likely to remain high over the coming years.
According to KPMG’s 2022 CEO Outlook, which speaks to CEOs about their current and future strategies, 86% of these global company leaders anticipate a recession to hit in the next year, and 71% expect the recession to cause a 10% shift in earnings. With uncertainty looking more certain than ever, how can leaders begin to get a grip on future business challenges?
Related: How Startups and Investors Can Thrive in the Current Economic Environment
How is economic uncertainty affecting how leaders plan for 2023?
The first thing affecting leaders right now is the fact that they exist and work within a “poly-crisis,” facing numerous challenges to their profitability and security at once. Operating in crisis mode inevitably affects a leader’s ability to plan ahead and adapt to changes in a business environment.
Many businesses already had to make significant changes to their organizational, operational and financial structures in order to survive. These businesses face extra challenges now while high prices, tightening monetary policy and weak demand persists — with 90% of economists predicting that tempered demand will be a significant drain on business activity.
A knock-on effect of this period of crisis has been an increase in anxiety around work, performance and money among employees. Leaders are not immune from this stress, but the pressure is high to remain calm in order to retain the best employees. And yet, any attempt at stasis is likely to be thwarted when organizational restructuring necessitates layoffs and downsizing.
The implication for business leaders is that they need to be more flexible in adapting their strategies. In fact, even large firms need to think more like smaller startups, which focus on agility to survive and thrive. Alongside lingering anxieties and monetary restrictions, leaders face new obstacles left over from the Great Resignation and Reshuffling. The move to remote-hybrid work environments means that leaders’ usual methods of making decisions are no longer available to them. They need to find much more resilience and adaptability in order to lead through uncertainty.
All of these factors will be especially impactful for startups and smaller businesses. Newer businesses may not have even established a status quo of reliable processes before the pandemic hit; now, they need to raise their baby in a recession.
As leaders try to navigate growing their businesses and retaining their teams, what should they be focusing on in early 2023? Here are three considerations to keep in mind:
1. Reaffirm the purpose of the organization
When leading a startup, a sense of purpose is vital. Leaders may begin by describing how their ideas are going to make a dent in the universe and why they matter in an attempt to instill this into the organization and create a purpose-driven business.
Leaders should ask themselves and their teams: “What do we offer the world that no one else can deliver? What is our reason for being?” Bringing clarity to purpose will strengthen the bonds between teammates and re-center people’s vision on the horizon rather than on the chaos that surrounds them.
According to a recent survey by Deloitte, 43% of surveyed business leaders said their company views organizational purpose exclusively as a marketing and brand play. That’s not the smartest approach, as customers aren’t satisfied when companies speak empty words about purpose. They expect to see action.
Related: 6 Key Tips for Leading Transparently in Economic Uncertainty
2. Build trust by celebrating integrity
Integrity should be the last quality to fall by the wayside when times get tough, but it’s often one of the first. Integrity can be incredibly motivating; it can inspire a team and keeps members focused on what is important.
If leaders make promises they will be unlikely to keep, short-term wins will be overshadowed by long-term damage to trust. Both integrity and transparency should enhance trust in leadership, which is important if the organization is heading into the unknown.
According to Deloitte’s The Future of Trust report (2021), “trustworthy companies outperform non-trustworthy companies by 2.5 times, and 88% of customers who highly trust a brand will buy again from that brand. Furthermore, employees’ trust in their leaders improves job performance, job satisfaction and commitment to the organization and its mission.”
3. Don’t forget the positives
When challenges abound and the world seems chaotic and uncertain, leaders can often get stuck in a negative thinking pattern. This, coupled with the calamity language of news programs and social media, can be devastating for employees’ anxiety levels.
In a 2022 study by the American Psychological Association, 73% of people from the United States who participated in the study reported being overwhelmed by the number of crises happening in the world. Nearly nine out of 10 participants also reported that they felt crises had been occurring in a constant stream.
Leaders will be wise to remember that optimism is still valid and possible. Highlight that times will get better, eventually. Offer some assurance that there is light at the end of the tunnel.
Economic uncertainty, which continues to unfold and evolve, has the potential to derail even the largest and most well-organized companies. For smaller companies and startups, uncertainty can be destructive and formative at the same time. It’s their nemesis and the water they swim in. Leaders need to be able to incorporate uncertainty into their futurecasting to grow despite the obstacles it presents.
Related: How to Prepare Your Business For Economic Downturn