From the CEO: When the Music Stops

Boards must evaluate all the risks before business conditions deteriorate, as they inevitably will.

Gary Burnison is the CEO of Korn Ferry and author of Lose the Resume, Land the Job

In the interest of driving shareholder value, boards are tasked with evaluating risks that are inherent in any business strategy. But few are actually looking at the biggest risk of all: complacency, the unintended consequence of success.

As the world economy keeps growing, in one of the longest-running stretches in recent history, it’s as if the music keeps blaring. It’s so loud, it’s hard to tell who’s out of tune, who’s in sync with the beat, and who’s only lip-syncing. The problem, though, is that the music becomes mesmerizing, and it’s so easy to get comfortable. As the hits keep rolling, who wants to upset or change anything?

But that’s precisely the risk.

Boards must evaluate all the risks before the music stops, as it inevitably will. When that happens, the questions will be obvious, just as they were during the 2007-2008 financial crisis, when people suddenly began scrutinizing everything from mortgage-lending practices to the riskiness of mortgage-backed securities. But before that crisis hit, virtually no one raised a hand and questioned things. Businesses were growing, stock prices were accelerating, everyone was happy—until the bottom fell out.

Now more than ever it’s time for counterintuitive thinking. Ultimately, it’s up to the CEO to look ahead, beyond the visible horizon for what might arise. Boards, as protectors of shareholder value, need to ask the tough questions preemptively—about strategy, technology, structure, process, people, and leadership. Brakes need to be applied before the turn, rather than slammed when disaster looms.

It takes courage to question when things appear so positive. But change must be anticipated. As the late Warren Bennis once told me, the future that is anticipated is based in the reality of today. Accurately perceiving the present is key to extrapolating meaning for tomorrow.

Preparedness for change also reflects internal attitudes. During expansion and continual growth, everyone’s focus is naturally drawn outward, waiting for the next opportunity to appear. During contraction and slow or absent growth, everyone’s focus is inward as they try to figure out what went wrong and how to move forward from there. It’s the leader’s job to challenge convention and fight complacency, to get people looking inward during the good times and outward during the challenging ones.

Anticipating what’s ahead, however, is never an exact science. Changes in conditions, terrain, and climate (economic and geopolitical) require navigation in real time. Strategic thinking is far less about planning in the calm than it is about decision-making and course-correcting as storm clouds loom. Effective leaders need to deploy these twin skills with greater awareness and agility, like chess masters who think several moves ahead.

The key is avoiding hubris and complacency. Leadership is rarely judged during the good times. The real proof is how leaders prepare for when things go bad.