Over the past four months, virtually every CEO has needed to assume a new role as a wartime CEO. Ben Horowitz, general partner at top venture capital firm, Andreessen Horowitz, defines “wartime” as an environment wherein companies are “fending off an existential threat”. Yet wartime today is unlike other wartimes in years past. Rather than fending off economic hardship or competitive pressures, we are fighting against a spectrum of threats—macroeconomic changes, market transformations, supply chain changes, competitive threats, and dire health risks.
While there’s a lot of uncertainty about if and how well businesses will weather these challenging times, there’s much less uncertainty about how to be an effective wartime leader.
Wartime is not the time to mince words. Effective wartime CEOs communicate clearly, especially when they are delivering bad news. Don’t pretend it is business-as-usual. Take a page from Marriott’s CEO Arne Sorenson’s playbook. In a recent video message to employees, he consistently emphasized that this isn’t business-as-usual. “This is the most difficult video message we have ever put together,” he explained. For a company that is nearly 100 years old and has withstood the Great Depression and World War 2, this is a stark statement. Sorenson went on to clearly lay out the facts and explain that the COVID-19 crisis is having a more severe economic impact on the company than the 9/11 and 2009 financial crisis combined. While this level of transparency is difficult to swallow, it’s important for developing trust and is what employees want and need.
But it’s not enough to record a one-time video. Communication must be clear, as well as consistent. Host town halls that allow employees to ask difficult questions—and answer clearly. Some wartime CEOs right now have given their employees a set of pre-defined criteria for when they can expect to return back to normalcy. For many, it’s not as simple as returning to the physical office space. Determine your own criteria. What must your churn numbers look like for you to return to business-as-usual? What must your hiring numbers be? What must employee engagement levels be? Figure out what “normal” means for your business and communicate this clearly to your employees.
Act with conviction
Research has shown that during the recessions of 1980, 1990, and 2000, 9% of the nearly 5000 public companies fared especially well. Not only did they recover within three years after the respective recession, but they also thrived and outperformed competitors by at least 10% in sales and profits growth.
What characterized these success stories? Conviction. These companies acted decisively and didn’t make contingency plans. They also balanced cutbacks with investments by making both defensive and offensive moves. Effective wartime CEOs swiftly determine where cutbacks are needed, as well as where investment opportunities exist to gain a competitive advantage.
The key to determining where cutbacks and investments should be made is focus. Figure out what businesses and markets your best primed to lead and win. As Horowitz has said, peacetime CEOs have rules like “we’re going to exit all businesses where we’re not number 1 or 2”, whereas wartime CEOs often have no businesses that are number 1 or 2 and therefore do not have the luxury of following that rule.
Navigate layoffs with empathy
There’s been a massive surge of COVID-19-related furloughs and layoffs over the past few months. There’s also been incredible variation in terms of how CEOs have responded. On one end of the spectrum, the layoffs of hundreds of employees at electric scooter company, Bird, over a minutes-long Zoom call has been likened to an episode of Black Mirror. Bird employees were locked out of their email and Slack accounts as the call was underway and were unable to return to the office spaces to clear their desks.
On the other end of the spectrum, the CEO of the San Francisco Bay Area’s Three Twins Ice Cream explained his decision to close the business and layoff employees in an empathetic note to the community: “I have always lived by the philosophy that it is better to have loved and lost than never to have loved at all. While this is a heartbreaking end to a 15 year (and two day) dream, I feel entirely lucky to have had this opportunity. Thank you for sharing it with me….[|I] will be happy to get you in touch with the talented pool of former employees who are looking for their next great role.”
This level of grace and support for former employees epitomizes an effective wartime leader.
As Horowitz reminds us, “Peacetime CEOs build scalable, high volume recruiting machines. Wartime CEOs do that, but also build HR organizations that can execute layoffs.” As Stanford Professor Bob Sutton explains, during wartime, the spotlight shines brighter on you. Employees scrutinize what the boss is doing much more so than in wartime and have a natural tendency to assume the worst. “Tiny signals get magnified.”
If you expect to need to make layoffs and furloughs, it’s best to give employees a safety window. Give them confidence that they can expect to be able to keep their job until a set date. While this isn’t a great situation, it’s a lot better than employees’ having perpetual uncertainty about the security of your job. As well, as a wartime CEO, it’s best to give employees as much control over the situation as possible. Let them clean out their desk, say goodbye to colleagues, and, if possible, finish up an in-progress project.
We’re living in unprecedented times. We don’t know what tomorrow will bring. But we do know that with hardship comes opportunity. Many of the most successful companies were founded during dire economic times. Leading with empathy and grace and acting decisively are key to emerging from this time as an effective wartime CEO.