Author Ram Charan is not much for idle chit-chat, and he doesn’t mince his words. His books, such as “Know-How,” “What the Customer Wants You to Know,” and his latest, “Leadership in the Era of Economic Uncertainty,” are direct, to-the-point action plans for companies that need change and need it fast. The world’s current financial situation provides an ideal opportunity for Charan to do what he does best: shake things up. He answered questions about the need for C-level executives to be visible as well as why businesses should look past the recession and think about future success.
You talk about a leader’s need to increase his or her frequency of control during a crisis period.
Why is this important?
The most important part for leaders in the era of uncertainty is to have information. Information needs to come where the action is. It needs to come unfiltered to the person so that the person can understand what’s happening. The control here does not mean micromanaging. Control means to be able to know what is happening in the ‘battle theater’ without the [organizational] layers interfering. That information is supplied by feedback. What is working? What’s not working? The difference in a recession is that if you miss the beat, the penalty can be very high.
Transparency is an issue that frequently comes up. How does it relate to both a leader’s internal and external audiences?
Transparency is a disinfectant. It simply means getting your facts together and making them known to the right people. From here, their ideas will grow and transparency will help reduce uncertainty. If people don’t have information, they often engage in commiseration.
You mention the need to understand the cost of one’s customers. Are there still companies that assume that every customer is a good customer?
Intellectually, most people understand that not every customer is a good customer. It’s what’s happening in the company’s actions that’s the problem. There are different silos within different departments, and as the actual customer final price comes to the fore, you’ll see discounts here and there. Create internal mechanisms and internal networks to see for each customer what is the net price and what is the operating margin.
Explain the meaning behind ‘hands on, head in’ and why leaders need to make this their personal mission during this crisis.
The first part, ‘hands on,’ means leaders really ought to be where the action is in their companies. Be visible and communicate. Get out of your office! Make some decisions. Don’t take too many coffee breaks and go off to off-site meetings. The ‘head in’ part refers to thinking about the future. Think clearly. … Think beyond it.
Some leaders think it is necessary to virtually cut out R&D during a time of economic uncertainty. How would you answer this tactic?
I think you can look at it this way: Anybody who is hunkering down, looking to save the company money, costwise … and does not build the company for the future is heading toward disaster. CFOs, CEOs, whoever, they need to allocate resources, however small, that continue to build the company for the future. Building for the future lies in innovation. Innovation is a people thing first and a dollar thing second. If you don’t have enough dollars, find partners. For creative ideas to be shared, you must engage people in the idea of building the company for the future.
What is your personal outlook on the financial crisis right now?
I want people to be optimistic. Go through the storm. My view today is that we’ve seen the worst as far as the financial system is concerned and the economy is going to lag behind until it catches up.
