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Learning to Lead Amid Recession

July 27, 2010

The prolonged global recession is putting leadership development to the test, as many companies slash training budgets to save money.

But some companies, such as Saskatoon Health Region, are going against the grain. Despite severe budget restrictions, the hospital system in western Canada says it is not planning to cut a training program that targets employees with leadership potential. That two-year-long initiative has produced 50 internal leaders since its inception in 2008, including physicians, frontline managers and people in support functions. Among the beneficiaries is Rod MacKenzie, a manager at a Saskatoon Health facility in Humboldt, Saskatchewan.

MacKenzie and other up-and-coming leaders participate in coursework that includes assessment, collaboration, employee coaching, team development and “systems thinking,” which refers to a management approach that emphasizes how different departments and business functions interact within an organization—sometimes in ways that are not obvious.

“While many [people] see change as difficult, it presents unique opportunities to examine what we are doing and find ways to make improvements,” MacKenzie says. “The systems-thinking sessions really drove home the point that positive changes, even in times of economic restraint, are possible.”

The recession has thrust many newcomers into the managerial ranks, and often they struggle with the steep learning curve. In 2002, the average manager had spent 2.7 years on the job, says Brian Kropp, a consultant with the Conference Board in Arlington, Virginia. By 2009, the average job duration for managers was 11 months.

“There is a lot of trial by fire going on,” Kropp says.

Focused leadership training helps boost managerial performance and employee engagement, Kropp says. “Managers don’t need more tools; they need fewer tools that are targeted to improving behaviors that drive employee engagement,” such as communication, coaching, setting expectations and recognition.

According to “Managing in the Downturn,” a June report by the Conference Board’s Corporate Leadership Council, 21 percent of employees are “highly disengaged” at work—nearly a threefold increase since 2007. During the same time, the number of employees putting forth high levels of effort has dropped by half. That finding corresponds to a sharp decline in managerial effectiveness, which “has decreased substantially over the past three years,” according to the report. It indicates the percentage of organizations rated to be effective at providing high-quality managers fell from 35 percent in 2006 to 25 percent in 2009. The survey encompassed about 50,000 employees in various industries on five continents.

Companies, though, are often hesitant about investing in training for managers and executives, even when business is good. Despite spending vast sums of money on leadership skills, organizations frequently are dissatisfied with the outcome, says Rick Maurer, an independent consultant on change management in Arlington, Virginia. That’s partly because they mistakenly view training as a way to restore order went it is really needed to spur change, he adds.

“Training should be a handmaiden to any change or intervention. It should support the direction the organization is trying to go,” rather than making fixes after the fact.

Saskatoon Health embodied this philosophy in preserving its leadership development program amid hard times. Like other government-funded health systems in Canada, Saskatoon Health faces a huge budget shortfall. The Saskatoon Regional Health Authority, a quasi-governmental agency that helps fund the hospital, in June approved a budget of $912.4 million for fiscal year 2010-11, which involved cutting $3.4 million in operating costs.

Through mid-2010, Saskatoon Health laid off 40 of its 600 nonunion employees—mostly managers, directors and vice presidents—and about 1 percent of its 11,400 unionized workers, who include nurses and other allied health professionals. At the same time, the organization spent $4 million on leadership and professional development in 2009, the most ever, says HR chief Bonnie Blakley.

“We need to maintain the programs that help to build our capabilities and enhance our quality-of-care initiatives,” Blakley says.

Like Saskatoon Health, Bostik Inc., a Wauwatosa, Wisconsin-based adhesives manufacturer, hasn’t pulled back on leadership development despite the recession. The company’s already paper-thin margins shrank even further when the bottom fell out of the construction and transportation industries. Softening demand prompted Bostik, a unit of the French conglomerate Total, to shutter three U.S. manufacturing plants during the past two years.

It would have been tempting to cut training in response, but CEO Mike Klonne says he never considered it. Instead, Klonne and his executive team launched a “Community of Leaders” initiative that targeted 100 directors, site managers and other leaders—roughly 10 percent of its 1,000 U.S. workers.

“Especially in tough times, we knew we desperately needed to expand the mantra of leadership to a much broader group,” Klonne says.

Bostik’s emerging leaders interact regularly to share information and map out the company’s rebound strategy. Central to the plan is a communication strategy that keeps employees informed of current business situations and Bostik’s plans for coping with the downturn.

“We focus on five key factors: where are we today, where are we going, what things are important, how we are going to act [as a company] and why, and how that execution plan relates to everyone in our organization,” Klonne says.

Leaders are learning to coach employees and nurture collaborative work environments, an effort that appears to be paying dividends. As part of an internal engagement survey in 2009, Bostik employees rated managers on communication, setting expectations and involving employees in key decisions. Bostik then compared the survey results with those of other business units within Total.

Klonne says Bostik’s managers earned higher marks than many other units, scoring especially well on quality of leaders and their ability to articulate the company’s strategies.

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