THE ROLE OF LEADERSHIP DURING AN ECONOMIC CRISIS

The reason for this text was an invitation I received from a Russian University of Russia for a series of lectures on the 'Confrontation of challenges of the global financial crisis’. During my research for the aforementioned lectures I read an excerpt from the work of Dante that refers to the way of confronting challenges presented to human life. According to Dante, “the worst parts of hell are kept for those that during difficult times remain neutral". 'The same can be said of leaders during an economic crisis. I am personally a fan of the theory that leaders are made rather than born and especially convert due to circumstances (situational or contingency theory of leadership). General Schwarzkopf, one of the leading Generals of the American Army, says that the 'most important leaders are ordinary people who have handled extraordinary conditions". Following on the foundations set by the General Schwarzkopf, I maintain that the conditions of an economic crisis can nurture leaders.

During an economic crisis, the executives of businesses are tested to the maximum. Most executives show signs of self-preservation and thus remain riveted. Some executives see difficult conditions as a challenge and therefore manifest their leadership skills. It is now widely accepted that we are in the midst of a global economic recession which affects everyone and everything. In most businesses discussions between executives surround issues related to cost reductions and restructuring. On the other hand, businesses run by managers with clear objectives and vision discussions are concentrated on increasing sales by creating more value from existing products and services. This theory is supported by empirical studies conducted by McKinsey and Accenture during the economic recession of 1990-91.

It is obvious that during these uncertain times, employees look for strong leadership, guidance and a sense of confidence. According to a recent survey carried out by academics from Harvard University (Kouzes and Posner, HBR January 2009), one of the most important characteristics that employees seek in their leaders is perspicacity and vision. The problem is that because of the economic crisis, most executives suffer from anxiety and are therefore unable to plan for the long term and to identify ways out of the crisis, limiting themselves to 'protect' their position.

The conditions prevailing during an economic crisis are, according to researchers, like an intensive training program that unfortunately very few can cope with. Those that will withstand pressure and emerge winners will be recognised as the new leaders. Executives must continually monitor developments and act immediately, rather than remain inactive.

Furthermore, successful executives are those that showed proper patience and perseverance and did not abandon their objectives simply because conditions were not favourable. Researcher Laura Lopez argues that now is the time for the emergence of new leaders of the scope of Steven Jobbs, Michael Dell and Bill Gates. The few that will survive and enhance their skills despite the difficulties will gain the trust and admiration of their colleagues and thus be able to lead their businesses. Let us not forget that according to Peter Drucker, the only commonly accepted definition of a leader is "someone who has supporters and the success of a leader is reflected in his supporters." Thus, according to the above analysis, despite the negative consequences of the economic crisis, it is time for the emergence of new leaders and certainly not the time for simple self-preservation and neutrality on behalf of the executives.

Yangos Hadjiyannis LL.B(Nott), PGDMS, LL.M (Cantab)

Lecturer in Marketing Management and Executive Skills