Is management more difficult in boom times?

The popular thinking is that true managers are discovered when the going gets tough. Coal metamorphs into diamonds when it is put under high pressure deep beneath the earth. The best leader is one who radiates enthusiasm among his followers during dire times and finds a way out of the darkness. The mettle of a person is tested when the whole world stands against you. Though there is no denying the fact that leadership during times of adversity is very challenging and needs the best out of person to wade out of big waves, I believe that there are many things present which are of assistance to leaders in such times. But in times of boom, leadership can be trickier.

As the saying goes that "The only way now is up because you are at bottom". If you are down and out and we have a charismatic leader, he/she can marshall his followers easily to follow him. The trick is to have the people believe in him/her which is easy since the people are all down in the dark and it is human nature to follow that white lone light. The challenge is to make sure that you are convincing "the light is bright " and its the only one which in this analogy requires that the voice of leadership is clear and adresses the problems infested in darkness. Certainly charisma and clear ideas are critical requirements in a leader in such times.

Now lets think about the times of boom. The things are all going fine and the feeling in the team could be that why the hell the leader is required. They can chart their own courses and be successful. In such times, the greed to be agressive fuelled by external surroundings and take more on the plate is big and then the common sense takes a backseat. As with the example of banks, "when the music is playing, you need to dance". When everyone is earning money, risk assessment policies were relegated to the background and everyone betted big out of the greed. Each of the crisis infested banks had leaders who were blinded by this greed and didnt take any steps to stop the dance. The reasons of agency problem does exist but there was also the pressure from the shareholders and employees. If you are not earning and taking risk similar to other banks, you as CEO can be removed by the board. There are evidences where the CFOs of these banks made the role of the risk assessment department smaller and smaller so as to concur with CEO and board's assessment for taking larger risks. What we learn here is that it is very difficult for people to stand, raise their hands and say that this policy is wrong since that is going against what the market and external surroundings are saying. The herd behavior was followed by all the banks with no leadership shown by any of the parties.

The reason is that Leadership in getting people to stop what they are doing and chart a new course is very difficult since getting support for this is near impossible. It is easy in the times of the recession since the people have no other way out. But to get people to follow a difficult path when they have a choice to follow a smoother one on the other side is the most difficult things to do and that is what is required in a true leader.