In today’s tough and fast-changing environment, CEOs must help their top leaders to work through fear and denial and to learn new rules.
SEPTEMBER 2009 • Derek Dean
From https://www.mckinseyquarterly.com/ghost.aspx?ID=/Marketing/Sales_Distribution/A_CEOs_guide_to_reenergizing_the_senior_team_2444
When business conditions change as dramatically as they have in the past year, CEOs need to be able to rely on their best leaders to adapt quickly. But what should they do when their strongest executives seem unable to play a new game? The costs—organizational drift, missed opportunities, unaddressed threats—are so big that it’s tempting to replace leaders who are suffering from paralysis. But this is a mistake when, as is often the case, these executives possess valuable assets, such as superior market knowledge, relationships, and organizational savvy, that are difficult to replace.
Before sending promising executives off the field, CEOs should try to help them learn to play by new rules. While part of the task—making a compelling case for change, helping him or her meet new job demands—involves appealing to an executive’s rational side, there’s also frequently an emotional element that is at least as important. Empathizing with the complex emotions executives may be feeling as the assumptions underlying their business approach unravel can be a critical part of overcoming the fear, denial, and learning blocks keeping them stuck (see sidebar, “CEOs, tough times, and emotions”).
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CEOs, tough times, and emotions
Robert I. Sutton
I was taken with Derek Dean’s compassionate essay about how CEOs can help their direct reports work through emotions and blind spots during tough times. This piece echoes numerous recent conversations I’ve had with CEOs who tell me they are spending big hunks of time helping top-team members who are “freaking out.” It also is right in line with academic research indicating that anxiety, cognitive narrowing, and clinging tightly to old ways are natural responses when individuals and groups feel overwhelmed by scary events that they did not anticipate, do not understand, and believe they cannot control.
Here I want to expand on Mr. Dean’s argument in three ways. One is to underscore a point that’s implicit but unstated in his essay: CEOs must work just as doggedly to confront and deal with their own demons and foibles as they do to help their charges come to grips with theirs. This is crucial because followers—who usually watch the boss’s moves closely anyway—become hyperfocused on every little move that their superiors make when they are worried about what tough financial times will mean for their fates.
An executive in a leadership program at Stanford, for example, described an assistant in his office who stopped a senior executive in the hall to ask him, “When are the layoffs coming?” This executive was dumbfounded by the question because, though layoffs were in the works, this was a well-guarded secret. After the executive confessed that job cuts were likely to happen, he asked how she knew. She explained that he had been unable to look anyone in the eye all day and instead looked down at his shoes when he spoke to others. She further said it was well known that when this boss was “having an interesting shoes day,” it meant that bad news was on the way. The lesson is that executives, including CEOs, are real people too. Especially during tough times, they must go to even greater efforts than usual to unearth the fears that they can’t quite articulate or don’t feel safe enough to reveal. And they must make it safe enough for their people to point out when they are spreading fear or clinging irrationally to misguided assumptions.1
The second thing that struck me was how well Harrah’s CEO, Gary Loveman, seemed to understand that when senior teams are freaked out and frozen in their tracks, the only way to enable reasonable decision making is to create a psychological safety zone. My research and experience suggest that CEOs create safety through the hundreds of little things that they say and do when dealing with their teams—like smiling at the right time, offering praise and reassurance, admitting their own mistakes, and gently but firmly calling out people who fuel fear, cynicism, and hostility. This is why being a skilled leader, especially a CEO, requires years of experience and relentless attention to tiny details, and why the job is a lot harder than it looks.
For example, Harrah’s had for years faced highly elastic demand curves with its core gaming customers: offering them incentives and rewards stimulated incremental visits and revenue (both gaming and nongaming). In this recession, Harrah’s found itself confronted with inelastic demand curves in several of its key segments. As a result, it seemed impossible to justify the company’s traditional types of marketing investments; they simply couldn’t stimulate the customer behavior (and associated revenue) needed to generate positive returns.
One result was that Harrah’s needed to cut its costs dramatically, which involved figuring out ways to reduce services, amenities, staffing levels, and “comps” without angering loyal customers. But the trickier challenge has been to learn new ways of applying the old tools (relationship marketing, guest service, and loyalty programs) in response to new and different customer behavior. The learning process instigated by Loveman has helped Harrah’s leaders create new rules to manage falling as well as rising investments, to stimulate growth with less capital, and to deliver guest service effectively at much lower cost. These new rules, in turn, have led to new job mandates, new data to manage the business, and new norms for decision making—norms the team has put into action through a series of marketing, service, and lean-operations pilots.
Fear, denial, and the need to learn aren’t new challenges, but more senior executives are falling prey to them in today’s shockingly tough and fast-changing environment. It’s up to CEOs to help their leaders work through these issues, including the powerful emotions involved.
