Leading in tough times, Managing tough messages

Your company is in the crapper. Its stock value has dropped by over half. You have just gone though the company's first ever lay-off. Good employees are resigning because they have lost faith. There is a daily onslaught of stories in the media predicting your company's demise. Employee morale is terrible. Critics say that your products have lost relevance. As a team leader or manager, your job is to maintain positive morale, keep productivity high, and retain and recruit talent. Your task seems impossible.
You probably think that I am talking about Research in Motion. If so, you are wrong. The company is PeopleSoft. The year is 1999. Change a few minor facts and the company could be IBM in 1993. I lived though the collapse and recovery of both.
At PeopleSoft, the company grew from a bootstrap start-up to $1B in revenue in 1998. Our stock was trading at $54. Every sales quarter beat forecast. We could barely keep up with demand. In 1999, it suddenly imploded. Customers stopped buying software as they faced the looming Y2K deadline. By the end of 1999, our stock was trading at $12, net income had dropped to zero, we had laid off 6% of our employees, frozen hiring, and were losing employees to "Dot.com" start-ups that were "sexy" with their outrageous valuations and lucrative stock option plans. PeopleSoft's Enterprise Resource Planning (ERP) Systems had rode the client-server wave of the 1990's but was now out-dated in the face of Internet-based applications that would dominate the post-Y2K ERP marketplace. The media was proclaiming that "ERP was Dead" and was firmly riding aboard the "Dot.com" bandwagon. It was an awful time to be a leader at PeopleSoft.
I learnt some of my most valuable leadership lessons from both that time and my experience at IBM six years earlier.  In bad times, leaders struggle to a project positive attitude while remaining honest, authentic and credible in front of their employees. The company's external positive message often seems to fly in the face of commonly known facts and sometimes looks like denial of reality. Managers find that their credibility is strained to repeat and sell these messages to their employees. Yet, if they tell the story like it is, they feel as though they are being negative, contributing declining employee morale and further damaging the company's chance of recovery. There is no simple answer to this conundrum, but here is what worked for me.
Those who know me know that I do not respond well to insincerity or obvious bullshit. As such, I could not convincingly dish it out even if I tried. Instead, in the face of desperate outlook at both IBM and PeopleSoft, I chose to take a hard look at why I was sticking with my company. I rationalized that if I didn't truly believe it could become successful again then I should resign. Each time, I found rational reasons why I truly believed that staying, not resigning was my best course of action. Now, my own reasons became my messaging for my employees. These reasons were something that I truly believed and on which, I was making my own personal big bet. I could also now bluntly comment on the parts of the corporate messaging that I felt was "Spin" and the parts that I felt were real because I was anchored in my position. I could be critical and constructive at the same time. I felt authentic in beliefs and sincere in my passion to help fix the company. It is these elements that people look for in leaders and greatly contributed to my success.
During this period, I learnt how much employees just wanted to follow their leaders but they had to be able to trust them. In times of crisis, at all levels of leadership in a company, I discovered that many people, who were viewed as leaders before the crisis, implode and "go silent. This often leads to a leadership vacuum.    Because I knew why I was doing what I was doing, I could be honest about the brutal facts of our business, but also honest and credible about where I saw opportunity and glimmers of hope.
Both PeopleSoft and IBM took bold steps to turn around their companies. IBM's story is well documented in Lou Gerstner book "Who says Elephants can't Dance". At PeopleSoft, our motto was "go big or go home" We knew for the company to survive that we needed to throw away our current product and completely rewrite it in HTML and XML, based on Internet architecture. This was a huge gamble. Only one other company in the history of application software industry had survived this type of transition. In 2000, PeopleSoft's Product Development costs spiked to represent almost 30% of revenue and consumed all profits. Sales of our client-server product dropped to almost zero for the fifteen months it took to release the new product. The company survived on maintenance and professional services revenue. The CEO and entire senior management team turned over. Many long time employees and senior managers also left. Others (including me) were promoted or recruited externally to fill the gaps and build our new vision. 
By March of 2001, we were back on top. Our stock was trading at $44 per share. Morale was high; the company was growing again and recruiting the best talent was easy. Four years later, PeopleSoft had grown from $1B in revenue in 1999 to over $3B in 2004 and was sold to Oracle for $10B.
So if you are faced with managing people through hard times, here are my thoughts which may help you in your journey:

Read "Who says Elephants can't Dance". Also read "Good to Great" and "21 Irrefutable Laws of Leadership".

Leading in tough times and managing tough messages is the hardest part of being a manager.  It is also the time you will grow most as a leader. My advice is to embrace it. Don't run from it.

© 2011 Meaford Group

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