Volatile. Uncertain. Complex. Ambiguous. VUCA – what was once a nebulous term used to forecast an uncertain future, today is our “new normal.” For the most part, the world has moved past COVID, and when we emerged from the other side, we somewhat expected it to be business as usual.
Today, we are on the brink of another economic slowdown with a looming recession. The recent failure of Silicon Valley Bank and filings by J&J to lay off as many as 1,000 workers in their medtech business are just a few examples of a new reality in our world. We know a private equity and venture capital recession means reducing financial burden, layoffs, and hiring freezes. This is usually accompanied by rosters of qualified talent posted to social media as an unofficial endorsement by managers or peers. But how do you know if you have the right people in the right seats to weather this next storm?
Among publicly held and privately held organizations, we specialize in working with PE and VC firms to build out senior leadership teams within their portfolio companies. Lately, we’ve heard our clients and CEOs tell us:
“The team I have in place is good, but they are stuck in their ways. They don’t have the right skills to drive the strategy forward in difficult or uncertain times. Direct reports and functional leaders that thrived in a booming environment are struggling to perform – and I fear this will last through the next few quarters.”
We have compared notes on the advice we offer to our trusted CEOs by sharing their fears and concerns. We found that many of these conversations are much deeper than the typical chat around talent retention strategies or succession planning.
Should You Focus on the Short-Term or the Long-Term?
We know CEOs are under immense pressure to perform and deliver results in the very short term, especially during difficult economic times. We’re all tired of hearing about COVID, but even during those years, we saw a lot of leaders focused on the long term when they should have been looking at the here and now. What CEOs failed to take away from the pandemic is that the short-term will always impact the long-term strategy. Today, we’re back in an uncertain economy where the decisions you make right now will impact the next three years. So the real question we pose to our CEOs is, “In an economy where stability, supply chain, and growth are all uncertain and beyond your immediate control, what do you need today to drive for impact and get you to where you want to be in three years?” The answer should always include your people.
Do You Have the Right Talent in Place?
When it comes to an economy on the edge of recession, layoffs are inevitable and you need to decide who remains and who will be let go. Here is what we tell our CEOs to look for.
Are Your Leaders Adaptable, Resilient, and Agile?
Focusing on the shorter term requires adaptability, resilience, and agility. Ask yourself, has this team member demonstrated that they can flex and adapt to changes in resources, markets, and reporting structures? If they have successfully navigated this, they are a valuable asset to retain. In the short term, we know the strategic direction can change almost on a daily basis. It’s these agile team members and leaders that can maneuver through unexpected shifts. By thinking linearly they are able to pivot, operating and executing with an ad-hoc approach. By strategically envisioning the end result they can identify, prioritize, and take action on the items they can accomplish today. As search consultants for over 20+ years, we’ve seen companies go through a lot, and we know that layoffs can create chaos in a team or an organization. So having these steadfast, agile leaders will not only support the organization through uncertain times but help enable and coach other team members who may find it more difficult.
Have They Faced Adversity in the Past?
As often is the case with an economic recession, we know resources are impacted. In uncertain economic times, cutting back on expenses such as tools or software go hand-in-hand with layoffs. We advise CEOs to look for team members who have proven success in their current or past roles when faced with these limitations. Individuals that have experienced this in the past but still delivered results with fewer resources are more likely to be able to revert back to that mindset. Strong leaders in uncertain times can lean into these lived experiences to cope with unexpected scarcity and still be able to perform and produce. Those individuals who have not experienced this adversity in the past may be unable to accommodate these losses. We have seen CEOs eliminate an entire functional level across the board without taking this lived experience under consideration. When doing this, you could be left with too wide of a gap in management levels, including senior leaders who find themselves unprepared to deal with fewer resources and junior team members unable to meet the expectations of a new manager and style.
Do Different Times Call For Different Leadership Styles?
What we saw throughout COVID was that different times called for different leadership styles. In PE and VC, the leaders who were able to tap into communication, strategic thinking, and prioritizing the short-term vision were the ones who thrived during COVID. We always search for unicorn candidates and leaders who can drive results through rapid growth and scale at an exponential pace. But in today’s “new normal” of uncertainty, great leaders must be able to downshift and leverage skills like self-awareness, empathy, thoughtful communication, and resiliency. Some leaders that have only operated during booming economic times may lack these skills making them unable to perform or effectively manage the team.
In these cases where a more senior leader is unable to adapt, but functional leadership is still necessary, we typically recommend to our PE and VC firms to appoint an interim leader, or contract-functional leader. Interim leaders are highly experienced executives that step into a leadership role on a temporary basis, usually from 6 months to 1 year, to help steer the course and stabilize the organization. They serve and operate as the interim figurehead of the team while we search for a permanent placement. In some cases, these interim leaders embed themselves so deeply into the organization, team, and culture that they transition into the role permanently.
How Can You Inspire Innovation During Difficult Times?
After you have gone through layoffs or a series of layoffs, you are left with what should be your best talent to navigate the short term. Sometimes, the remaining team members have only about 50% of the skills needed to support the organization. Tough times call for innovation, but most team members after layoffs are not in an innovative or changemaker mindset. A call-to-arms for new innovative ideas or asking “Blue Sky” type questions to your team will likely fall flat, so how can you reorient their perspective to drive innovation? By encouraging curiosity. During disruptive economic times, strong leaders will inspire team members to be more curious about the changing world around them. Curiosity challenges teams to look at how their product or service fits into the ecosystem of competitors and partners in the market and enables them to think deeply about alternative solutions.
We tell our CEOs to stimulate a culture of curiosity by asking more “what if?” questions during meetings that don’t have definitive answers or solutions. We also prompt our CEOs to examine the long-term goals of the organization and encourage their team to explore alternative pathways or directions in order to pivot in the short term. These short-term deviations from the larger strategy will help keep organizational goals on track in the long term.
In uncertain times, when you are left with only a handful of team members to drive the company goals and mission forward, investing in the right talent is imperative. We know that it’s easier said than done, and in the coming weeks, some CEOs may find themselves in this very position. If you are unsure of whether you have the right leadership talent in place today or need some advice on how to see your team through the next few quarters, we have these conversations on a daily basis and we would love to hear from you.
Managing Partner + Co-Founder
Chris Bull brings over 20 years of experience in retained executive search. He has a strong track record of success partnering with client organizations to deliver best-in-class talent with private and public companies, private equity firms, and their operating companies. As a trusted advisor to the clients in which they serve, McDermott + Bull has become one of the fastest-growing executive search firms in North America with offices located both domestically and internationally.
Jake Vander Zanden serves as a Partner and leader of McDermott + Bull’s Technology + Life Sciences Practice.
Jake spent over 25 years as a turnaround and growth leader completing business transformations as a senior executive at companies like Allergan, Medtronic, and more. He has lived and worked throughout Asia, Africa, and Europe, and managed businesses in all the major regions of the world. Jake’s success has come from his ability to quickly and continuously develop high performing teams and guide their achievement of company changing initiatives, regardless of country, language, culture, or product group.