Executive compensation has been a hot topic this year, especially for execs of companies that have been the recipients of federal bailout money. But somewhat ironically, we've heard relatively little about the psychological toll that the economic turmoil of the past 18 months has heaped upon corporate leaders. Some readers may say "that's what they get paid for" -- and that would be missing the point. Outstanding executive talent is expensive and clearly worth paying for. It represents not only a huge corporate investment that requires constant scrutiny, but also vigilance to ensure that these suppliers of direction and leadership have what they need to perform at the top of their game.
This isn't easy to accomplish at the best of times. CEO's, CFO's, CPO's, CRO's, their VPs, Directors, and others weren't hired into on-the-job training programs. They got to where they are as a result of experience and proven ability to execute their responsibilities to the corporation. But what happens when the game changes dramatically as it has through what many are calling The Great Recession? For those organizations that operate in a climate of fear and intimidation, firing executive management in response to declining margins and profits is one response -- though probably not the correct one in most cases.
Forbes.com ran a column yesterday by Derek Dean which is an excerpt from a piece Dean wrote for the McKinsey Quarterly in September 2009 titled A CEO's guide to reenergizing the senior team. Dean writes that "Before sending promising executives off the field, CEOs should try to help them learn to play by new rules ... The costs -- organizational drift, missed opportunities, unaddressed threats -- are so big that it's tempting to replace leaders who are suffering from paralysis. But this is a mistake when these executives possess valuable assets, such as superior market knowledge, relationships and organizational savvy, that are difficult to replace."
Dean's approach to this challenge "doesn't require a CEO to become an armchair psychotherapist" but does claim that "Among the many emotions that can influence how executives interpret and respond to events, ... plain old white-knuckled fear ... [is] one worth addressing on its own: In times of rapid change, when the actions that used to lead to success don't any more, even strong leaders can experience intense, unproductive levels of fear caused by threats to their identity, their reputations, their social standing, and even their basic survival needs of a job and a paycheck. Ironically leaders with the strongest track records are often more susceptible to fear during tumultuous periods because they have less experience facing adversity than do their colleagues with more checkered pasts."
He quotes leadership development expert Donald Novak who claims "helping executives verbalize their emotions and acknowledge their validity can allow them to move past fear and become more productive." And goes on to say "In addition to the impact that fear has on how people interpret events, cognitive errors can lead even the most talented executives to deny otherwise clear evidence that times have really changed."
Dean's analysis and case examples are refreshing and very well worth reading. I must also add that what's good for the goose is good for the gander. Organizations that are willing to address these inevitable underlying impediments to high performance throughout their ranks will emerge from recovery far stronger and more competitive than they were before 2009 ... Let's call it human capital visibility.