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An economic or a leadership crisis?

Sep 8, 2011 11:40:18 PM - www.ft.lk

The debt crisis that started in Greece now threatens to destabilise Europe and kill the fragile recovery in the US. The reasons attributed for this economic failure is that countries like Greece      and Italy borrowed recklessly, consumed greedily and got totally uncompetitive at producing items and at providing essential services.

What began in Greece in 2010 has now spread to Italy, Spain and Portugal. These countries suffer either from crushing debt loads or huge trade deficits and continue to pile on new debt.
Then the US, the only country in the world that can use its own currency to pay back loans, created economic mayhem when it created doubt about a possible debt repayment default, resulting in a downgrade.
The US administration, by stepping back from the brink of default with a deficit trimming deal, only made matters worse. Then in Britain the outbreak of violence caught their leaders by surprise, when they should have seen the troubles coming with the slashing of the budget in a down economy, because the cut fell disproportionally on the very people caught up in the down turn.
Financial fragility
in the West
Therefore, looking at the way one crisis after crisis is unfolding and also the sovereign debt risks afflicting the West, it seems some countries in the West are being run by midgets and incompetent politicians.
Today looking at the financial fragility afflicting some of the countries in the West, it seems much scarier than 2008.
In effect, it is only a few political and business leaders who have demonstrated courage and the political will to take on the political and financial establishment to do what was good for their countries to stem the slide and deliver stability.  We all know economic up and down turns have a direct impact on the quality of leadership. Good leaders have the ability to make good decisions about how to manage in turbulent times.
For example, the few leaders who survived the crisis identified what needed to be done very early into the crisis and responded quickly and as a result they recovered faster than the others.
Leaders and lessons
But leaders, whether in business or government, come in all sizes and shapes. You get the dumb, the cynical, the mildly unsuitable, the weird and the tedious.
Then you get the clever, wise, and the good ones, the ones you have to admire and like. These leaders can offer stability and continuity in times of change.
If leaders cannot learn lessons about how to lead effectively with more accountability, more people focus, more learning and higher integrity, then the economic crisis of the last decade will only repeat itself in a few years.
Leadership improvement will be the long-term challenge for countries and organisations to grow, focus on the policies, products or services that add most value to their people, customers and in general learn how to serve the community ethically.
Building capacity
Countries and companies also need to build capacity to manage through demanding times and increase capacity to manage disruption and risk.
This means slowing down or scrapping projects that don’t deliver value to the community, streamlining processes to be more efficient, increasing productivity of the workforce and making bold and difficult decisions.
Sometimes a bad economy allows leaders to face and make tough decisions that might otherwise be avoided or put off and also look for new opportunities. In bad times, weaker countries and companies struggle more than strong ones.  Strong companies can become stronger through mergers and acquisitions, aggressively serving customers, and by introducing new products.
Good leaders should continue to do what good leaders do: know their people, their business, align business practices to business conditions, get everyone to contribute, build the quality of leadership, integrate good practices around a desired culture or capability, and measure success rigorously.  At the same time leaders must ensure that the basic and administrative work is done well by having good understanding of the value of technology and how it can be used to provide services at the best possible price.  
In principle, people who perform better and give more to the country or organisation should get more back from the establishment. Obviously, external factors such as financial markets affect our success, but leaders still make decisions and have control over how to respond to these external conditions.
(The writer is CEO, HR Cornucopia.)

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