Smart Management for Tough Times

Breakthrough management ideas for a world in which the game will never be the same

By Jena McGregor

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John Chambers knows what it feels like to survive a crash. In 2000, Cisco (CSCO) Systems had the largest market cap in the world and more than 50% annual sales growth. Then the dot-com bubble burst, and the Cisco chief executive watched the networking giant's stock drop 86%, from 80 to just over 11 by September 2001. Chambers laid off thousands of employees, shrank the number of suppliers, and simplified or jettisoned many products. He also radically changed the way he managed, turning a command-and-control hierarchy into a more democratic organizational structure. The company emerged from that recession more profitable than ever and went on to outperform many tech rivals. In retrospect, Chambers wonders if he could have done even more. "Without exception," he says, "all of my biggest mistakes occurred because I moved too slowly."

The challenge for many business leaders is figuring out what moves to make now. Whether you see signs of life in the economy or think the worst is yet to come, there's no question that the game has changed for business. The tools managers once used with great success, from how they pay their people to where they seek out new product innovations, are being reevaluated. Manufacturing processes that worked seamlessly a year ago may be a recipe for piled-up inventory as spending slows. And strategies once deemed unthinkable, such as cutting the salaries of rank-and-file managers, are being embraced by some of the world's largest companies, including FedEx (FDX) and Hewlett-Packard (HPQ).

Our special issue on breakthrough management ideas examines how leaders are responding to a fast-shifting world. At a time when many managers have already shored up cash, downsized risk, and found ways to cut costs while enhancing execution, the smart ones are looking to position themselves for the future. On the following pages, we outline bold new ideas and approaches that have heightened relevance in today's changing landscape. We have organized these ideas into the three areas we believe reflect top priorities for business right now—strategies for driving growth, methods for managing talent, and ideas for improving relationships with customers and suppliers. We profile game-changing managers—the people making an impact with radical ideas. And we highlight blue-sky concepts that might one day alter how business is done.

After all, the best businesses have to do more than just survive this recession. Jeffrey Immelt, General Electric's (GE) chief executive officer, believes that what the corporate world faces now is a fundamental "reset." He argues that the shift in the financial services sector and the increased role of government in business "will be with us for the rest of our careers."

He's right. Many consumers will be forced to accept a more frugal lifestyle for years to come. Sectors such as retail, housing, media, and manufacturing are being transformed. And layoffs could permanently alter not just the size of some companies but also the nature of relationships between employees and their bosses.

Smart leaders recognize that they can use this crisis as a catalyst to spark new ways of thinking and doing business. Niko Canner, co-founder of consultancy Katzenbach Partners, notes that the challenge is to look beyond the critical work of plugging financial holes to forge fresh strategies. Right now, he argues, "people are using approaches that are insufficiently powerful to get them where they need to go." Some CEOs are determined to avoid that trap. Ray Davis, who heads regional bank Umpqua Holdings (UMPQ), asserts that "there is no more normal."