THE world is facing the worst economic crisis since the Great Depression. Now, more than ever, leadership matters. Leadership is needed to restore hope, address short-term challenges and capitalise on long-term opportunities.

Learn from the past

When the information technology (IT) bubble burst in 2001, two of human resource consultancy Hewitt's clients in the technology sector had high engagement scores (80 per cent according to its engagement framework).

The two companies however, reacted very differently to that downturn. In the first organisation, the leaders had a bunker mentality. Common comments from employees were, "I don't know what's happening", "We never hear from the chief executive officer (CEO) anymore".

Layoffs and reductions started small, but kept growing. Eventually 15 per cent of the workforce trickled out over a 12-month period. Engagement in the company dropped by 30 percentage points in this period - one of the largest year on year.

Customer satisfaction also declined significantly at the same time. The culture changed from high-performing, collaborative and energised to toxic, distrustful and defensive.

The second company also reduced its workforce by about 15 per cent. The CEO, who was in the habit of calling monthly town hall meetings before this downturn, increased this to fortnightly sessions.

He used these sessions to talk openly about the financial situation and the "triggers" that would force the company to take decisions about layoffs.

Employees knew what level of performance against budget would result in what kind of cost-control decisions.

Rather than a slow trickle of layoffs, the reductions happened over two days, with the company holding a farewell session to thank the leaving employees.

Amazingly, the engagement scores of this company actually increased by 8 per cent, and employees delivered consistently high levels of customer satisfaction throughout the period.

The lesson: The time for courageous communication is when it is most difficult to do so. In tough times, frequent and open communication from leaders can reduce anxiety, enhance trust and build teamwork.

Learn from the best

The Top Companies for Leaders Study (the most comprehensive longitudinal study of leadership practices around the globe) and the Best Employers in Asia study (a definitive benchmark for companies to measure their effectiveness in employee engagement) revealed similar leadership themes.

The two key findings are:

1. Clear and consistent communication

Consistent with Hewitt's case study, senior leaders in the top companies engage in more frequent and candid communication initiatives, like town hall meetings or informal chat sessions.

In these sessions, the leaders are often very open in balancing the needs of the employees with the needs of the business. Leaders here recognise that such open communication is instrumental in building and maintaining trust - a factor that is all the more critical in difficult times.

They also use these sessions to answer questions, manage expectations and provide strategic vision. Strong leaders are able to inspire their people by painting a clear picture of their desired destination, the journey ahead, as well as the obstacles they must collectively overcome.

2. Unrelenting focus on talent development

In good times, all companies espouse the value of talent identification and development. The very best companies, however, place a maniacal emphasis on talent that is uncompromised by market conditions.

A CEO recently told Hewitt: "The crisis will not affect our commitment to talent development - we simply need to be more creative in finding cost-effective alternatives for our people."

The top companies are not only more committed to talent development, they are also more sophisticated in understanding what learning methodologies work best.

These organisations recognise that experiential learning techniques, rather than formal leadership courses, lead to stronger and more sustainable change.

They tend to adopt a holistic and integrated framework that typically comprises high-impact feedback, hands-on workshops, job rotations, action learning and coaching sessions.

When top leaders are asked how they became so effective, two observations become clear.

First, many indicate that they had to actually very work hard at becoming strong and engaging leaders. What may appear to be natural and innate leadership skills are often the result of concerted and prolonged hard work.

Second, they often mention that overcoming adversity was pivotal in helping them elevate their leadership effectiveness to a new level.

It is often said that every crisis creates its share of opportunities.

Business leaders now have a rare opportunity to accelerate their leadership growth by overcoming the many challenges that will inevitably surface during this downturn.

The challenge for human resource practitioners is how they can best support, sustain and foster this leadership growth.