INTERVIEW OF THE WEEK
Prof. Piotr Wachowiak, rector of the Warsaw School of Economics: Leadership in crisis
The crisis is at the gates. What is the role of leaders in times of economic crisis? What kind of leadership do companies need?
In a crisis, a leader needs to know what he wants to achieve and how. The most important thing is that he act with determination and act in a very consistent manner. He must have the ability to analyze the rapidly changing socio-economic reality and to design and implement effective activities. He should be flexible in reacting to unexpected situations and see the benefits of turbulent changes. He must be a leader who can influence his employees in such a way that, despite difficulties with commitment, they carry out their tasks, even though they can change quickly and be difficult to achieve.
In times of crisis, a leader should be sensitive to employees. Above all, he should be able to maintain a good, collaborative atmosphere in the team. He must be able to build proactive attitudes with emphasis on community. Must be able to see changes in their expectations. Currently, an important expectation is to ensure safe working conditions and care for the health of employees. Empathy is also important: the leader must understand that employees may be in a difficult personal situation. Nowadays, caring for employees is the hallmark of a good leader. Companies in which employees are treated as capital rather than a resource are coping better with the crisis.
“During the weather, you must take into account the possibility of a storm.” Evolution of expectations towards leaders in the era of rapid changes in the environment. Is it possible to predict situations like the one with COVID-19?
A good leader knows that reality may turn out to be surprising at the least expected moment. Therefore, it is good for him to be able to maintain a balance between resolute implementation of the strategy and openness to change. Since March last year, enterprises have been operating in conditions of uncertainty, which are extremely difficult for them. The types of risks to the business can be predicted, as well as the probability of their occurrence. However, in a pandemic, we can say that we have only question marks. Questions such as how long will the pandemic last, what the world will look like after it, and what shape the economic path will take – the letters U, W, L or V – has no clear answer. Only one thing is certain: we will not go back to what was before March 2020. It can be said that the current situation is similar to a blind date, which is rarely successful. The leader has to take such turbulences into account, which is clearly visible now. It is not known, for example, whether the pandemic is about to get worse due to a mutant virus (hopefully not). Therefore, it is worth doing your homework well. You have to draw the right conclusions for the future, analyze what mistakes we have made and think about what to do to avoid them. Companies should develop a set of recommendations, and may also update some crisis management procedures. The pandemic should be used as an opportunity to increase creativity and integrate employees. As the saying goes – strength in the team. A leader should be ahead of the future, so an effective leader, having done his homework well, should be able to anticipate the next difficult situation.
In times of pandemic, leaders, instead of introducing order, manage disorder. Is irrationality a sign of the times?
Rationality in managing an enterprise in the long run always brings positive results, while irrationality can bring benefits, but in the short run. In crisis situations, it is first necessary to control the crisis and then manage it in such a way that it contributes to the development of the enterprise. This is the job for leaders. A good leader introduces order and a sense of stability regardless of the conditions in which the company operates. Chaos management can be good for the short term – it stimulates creativity. It is certainly not suitable for a crisis situation when we have to adopt an appropriate problem-solving strategy. Obviously, this strategy should be very flexible, but this does not mean, say, a very spontaneous management.
Changes today are the only constant element of reality. In the past, the ability to plan long-term was important, today improvisation seems more valuable. What does this mean for the organization?
Change is nothing new. I think that over the years of relative peace, Western societies have become accustomed to the kind of stability that characterizes the reality around them. Meanwhile, people had faced rapid social and economic changes much earlier. The pandemic clearly reminded us that change is the only constant thing in a company, as Peter Drucker, a management guru, wrote a long time ago. A modern company is characterized by flexibility, i.e. the ability to quickly adapt to changes and use them as opportunities for development. There cannot be room for improvisation. However, long-term planning does not make much sense in a turbulent environment where changes are rapid and difficult to predict. The strategy should therefore be evolutionary, it must be volatile over time. In 2021, the company should work on a strategy for 2022-2027, and in 2022 on a strategy for 2023-2028. This process of designing the strategy will ensure that it is always up-to-date and adapted to the changing environment.
What is adaptability? Why do some people succeed, and others fail with the misfortune? Is the crisis an inspiration to look for new solutions?
The ability to adapt is the talent to adjust to changes in the environment. In a rapidly changing reality, you should take advantage of various opportunities without losing your own identity. Some companies see the crisis as an enemy to be fought against. Meanwhile, the company usually does not come out victorious in such a fight, and a lot is lost in fact. There are many reasons here. First, businesses may be unprepared for a crisis that usually comes out of the blue. In good times, a professional leader prepares the enterprise for more difficult times. Second, some think they are so good that they will not be affected by the crisis. The current situation does not confirm such an optimistic approach. Thirdly, the symptoms of a crisis in a company are often noticed too late. If the disease is allowed to develop too much, then it is difficult to heal the patient, and the crisis is just a kind of disease. Fourth, some leaders fail to manage crises. That’s why in the West, the top-earning managers are those in crisis management, whose job is to take the business straight. The reason may also be the inept use of opportunities arising in the crisis environment. It is worth recalling that the crisis may be a development opportunity for an enterprise. It drives innovation, encourages rethinking and changing business models and introducing radical changes. Those who lose, cannot adapt to change, or they get distracted and take too many initiatives and consequently do not discount any sufficiently.
What distinguishes timeless organizations that have been successful and developed regardless of external circumstances and changing reality?
Successful companies have real leaders. A leader should be a strategic leader who, on the one hand, will be able to formulate and implement strategic goals, and on the other hand, will trigger creativity and the ability to look for opportunities in the environment in which they work together. Authentic leaders allow colleagues to act more independently by assigning roles to them that require greater and more serious challenges. Thanks to leaders, companies that are successful regardless of conditions have the right features. These include thinness, i.e. focusing on key competences that distinguish a given company. The second feature is flexibility, which I have already mentioned. The enterprise should also be intelligent – it should learn all the time. The determinant of an effective enterprise is also cooperation with competitors. The tendency in management is to replace competition with cooperation, creating networks. It is also important to invest in human capital in the long term and consciously shape the organizational culture that strengthens the organization’s entrepreneurship.
Are new technologies changing the principles of leadership? What are the key challenges for leaders in the mobile era, where the most important resources are human heads, efficient information flow and innovation?
Technology is a tool that a good leader skillfully uses. By contrast, the principles of leadership and sources of success do not change. Excessive reliance on technology and the lack of leadership principles do not bode well for success. However, digital transformation affects leaders directly and presents them with completely new challenges, but also opportunities. It is important for leaders to understand that digital transformation is inevitable and is changing the way all sectors function. It should be realized that digital transformation is not only a technological change, but also a cultural one. On the one hand, digital transformation contributes to the success of organizations, and on the other, it requires new competences from their leaders. It is essential that they acquire broad digital competences. This academic year at the Warsaw School of Economics, we launched an interdisciplinary postgraduate course “Digital Transformation” with Accenture. Our goal is to shape leaders in this field as well – people who will be able to flawlessly recognize the needs of their clients and create digital strategies, innovative projects and services. The crisis caused by the COVID-19 pandemic has clearly demonstrated how important for a company’s competitiveness is the ability to quickly introduce digital technologies.
What leadership skills are necessary to manage an organization remotely?
Virtual reality has to be accepted: it will remain with us after the pandemic, although to a lesser extent, I suppose. In my opinion, the basis for efficient functioning in such conditions is the development of a strong organizational culture based on such values as honesty, integrity, respect for others, professionalism, but also pragmatism. The leader must be able to build it, which is not an easy task. The more so that changing the organizational culture is a long-term process. It is also worth remembering that the leader’s virtual work conditions should still be supported by employees, even though he has limited contact with them. Therefore, he should be able to form relationships based on trust. His organizational skills are also important: each employee should have clearly formulated tasks and goals. The leader should leave them a lot of freedom to act, acting primarily as a coordinator. In remote work, the real authority of the leader is particularly important, resulting primarily from competence and sympathy. Thanks to this, the leader can properly influence employees so that they act in accordance with his expectations towards them. It can be said that a leader must be an accountable leader. Above all, he is expected to be competent in the field of communication, inspiring and engaging employees.
Peter Drucker said that most of what we call management is about making other people work harder. What are the advantages of working remotely when everyone is somehow their boss?
Remote work has its pros and cons. The pluses include greater independence in the performance of tasks by employees. They can organize their work better, save time associated with commuting, are usually more focused on carrying out their tasks, because no one and nothing distracts them. You could say that they are bosses for each other. However, this situation requires a lot of self-discipline from employees.
The disadvantages of remote work include the lack of direct communication with the supervisor, colleagues and others, inadequate working conditions from home and blurring the difference between work and private life. The employee may also feel alone in carrying out tasks due to a lack of interest from the boss. During remote work, the employee’s immediate supervisor plays an important role. It should help the subordinate to create appropriate conditions for remote work. It is also important to increase interest in the employee – daily contact with him. A good leader should also provide employees with a work-life balance. Must be aware of the fact that working remotely there are also working hours and the employee cannot be available to the employer 24/7 and on weekends. The employee and his immediate supervisor should establish clear rules of remote work that will facilitate their cooperation and reduce the number of misunderstandings.
In the current crisis, managers and entrepreneurs fail many times. Do failures teach us more than success?
Success can put you to sleep, reduce the motivation to change. The leader must find a balance in appreciating success, but not in reinforcing the belief that his enterprise is indestructible and unsinkable. Fear of failure limits the creativity and entrepreneurship that are so badly needed in modern business. But failures are also a kind of testing ground, an important element of gaining practical knowledge. An effective leader should be able to transform them into success. Each of them should be analyzed, and the conclusions drawn on this basis will make the probability of making mistakes in the future much lower. As good practices are disseminated in every enterprise, so should failure be discussed. It is good if there is a book of good practices and failures in the company. A good leader should develop competences in himself and his employees that should significantly reduce failure. That is why it is so important to invest in people – it is the most valuable capital in the enterprise.
Rector, dr. hab. Piotr Wachowiak, prof. SGH
Rector for science and management at the Warsaw School of Economics, director of the Management Institute, secretary of the Organization and Management Committee of the Polish Academy of Sciences. For 26 years he has been associated with business practice, working in managerial positions in various organizations, incl. he was the deputy director of the Management Board of Domy Komunalne Warszawa-Śródmieście, the Director of the Municipal Buildings Department of the Warszawa-Centrum Commune Office and the deputy director of the Żoliborz District Management Board – a member of the District Management Board and the Chancellor of the Warsaw School of Economics.
Last Updated on March 26, 2021 by Karolina Ampulska