Lead Like the Federal Reserve

Few people should have been surprised when the Federal Reserve announced today its decision to keep the cost of borrowing money unchanged. 

Ever since Alan Greenspan stepped down as chairman of the Fed in 2006, the central bankers in charge of policy have been at pains to signal every policy twist and turn well ahead of the actual event occurring. Boring, may be. Still, it’s something that business leaders might want to aspire to do.

“Leaders who are consistent and predictable create a feeling of safety in others, which contributes to trust,” says Susan Snyder, vice president of Global Talent and Effectiveness at Korn Ferry Hay Group.

In the case of the Fed, Chair Janet Yellen and other policymakers want to build trust with investors and make them feel safe. When investors don’t feel safe, they often flee, which sends ripples or waves through the financial markets. Likewise, leaders who create an environment where people feel safe are more likely to have teams who execute with speed and efficiency—they’re more focused on getting the work done than on feelings of insecurity.

Snyder says it can be hard for leaders to achieve a high level of consistency and predictability. “Things change internally and externally all the time,” she says. “The key is to clarify why things are changing and what it means for people.” In other words, it is important for leaders to communicate not just their decisions, but also how they make decisions and the internal and external events that may change the way those decisions go.

The idea of creating an environment where people trust their boss and feel safe can benefit the organization. It can help with the speed and execution when employees are carrying out tasks, says Snyder. The problem for leaders is that things can get in the way of delivering on those predictable decisions. In a possibly apocryphal story, when asked what he feared most, a former British prime minister said: “Events, dear boy, events.”  It’s those "events" that are the problem.

There is no way to avoid events, of course, but leaders should react to them consistently based on a set of principles aligned with the purpose of the organization. “Basically, it’s about defining what the organization believes in. Those beliefs should be the basis for how we make our decisions,” says Snyder. When leaders clarify those principles it can help them make decisions faster. It also makes it easier to explain those decisions to others.

The trick is to be able to communicate what those core principles are and then show that they will be acted on consistently, no matter what events occur.