To complicate this, add that his production capacity is fixed partly by physical capacity, partly by organizational structure (regional focus), partly by organization size and capability, and partly by operating model. Hmmm, starting to sound a bit more complex. Well, let’s add a bit more. His organization is part of a larger corporate structure and he is subject to expectations to support an enterprise direction. The larger organization is not seeing increases in demand, and in fact is still creating pressure to reduce costs and downturn in response to other market and financial factors. To further expand, this leader, and his organization, is accountable for individual and organizational performance as a business unit, and at the same time overall corporate performance at the enterprise level. His choices are these:
Respond to demand as possible within the existing structure. Stay opportunistic, allow room to back out, and keep organization costs down. Basically, Stay hunkered down, but do everything possible to capture what is there. The major downside risk here is that he could be missing a new market sector that could vastly increase his business. Someone is going to get it, right?
Ramp up and take the risk to capture this new market. Major downside risk here is that this might not be sustainable, or he might miss contractually, and he would end up in a high cost situation that is completely off the mark with the enterprise. Additionally, it is possible that demand could return in his existing customer base before expansion plans are completed. He would then not be able to meet demand on existing customer contracts.
Those of us who work in the world of developing leaders are commonly faced with this sort of scenario. Very often the leader wants help in knowing which direction to go and which choice to make. But the real question is, if you were in his situation, what would you do to lead this organization? The test of leadership is in how you create an organization of people who can handle the complex questions and issues on a daily basis, and make real progress towards a common goal, not how well you personally know which choice to make.
The most successful leaders focus on the relationships of people who bring together collaborative technical responses, not those who have the answer on their own. This event offers an opportunity to the business to transform. Every time the environment shifts, organizations have that opportunity. The key to leadership is in creating the organization’s ability to respond rather than being caught in the details of what the response is.