| By: By Nan S. Langowitz

The past few years have been tough and turbulent for most business leaders. But a growing body of Babson research shows that that the entrepreneurial leadership exhibited by the CEOs of many small and mid-sized companies can serve as a model for how any manager can navigate and thrive during adversity.

The past few years have been tough and turbulent for most business leaders. But a growing body of Babson research shows that that the entrepreneurial leadership exhibited by the CEOs of many small and mid-sized companies can serve as a model for how any manager can navigate and thrive during adversity.

Below, I highlight three ways entrepreneurial leaders differentiate themselves, based on my recent research. In my teaching and conversations with chief executives, I’ve found that these leadership tendencies and practices often provide insight and practical guidance:

Think and act like managers and entrepreneurs simultaneously.

The key word here is “and.” To no one’s surprise, maintaining profitability and controlling business costs are the top two concerns CEOs report, reflecting the pressing times of the economic downturn. A tough economy makes any executive focus on the basics of business management but what differentiates the best leaders is a willingness to view adversity as an opportunity to rethink. To update the old phrase: necessity is the mother of reinvention.

Many CEOs are taking a “back to the future” approach to recenter their companies. For instance, they report rethinking and analyzing the process by which the company grew, helping them find inefficiencies that can be corrected and waste that can be eliminated to drive toward profitability. And, not only are they re-examining the nuts and bolts, they’re getting excited about the new possibilities that doing so is uncovering. As one respondent said, “We need to be more efficient, we need to play like a bigger company—we’re looking at changes that five years ago we would never have talked about—better, cheaper, smarter . . . in some ways it’s kind of fun.” For these leaders, there is serious management going on, but there also is a constant counterpoint of opportunity seeking.

Combine opportunity evaluation with a bias for action.

The opportunity seeking behavior entails both a discipline to evaluate opportunities carefully and a predisposition for action. For example, some firms use “Plan B” budgets as a decision guide for what investments or expenses could be delayed if the economy declined. The discipline of opportunity evaluation—whether it be through budgets, financial forecasts, strategic planning, or vision statements—can be essential to filter opportunities as well. One CEO noted, “There are so many opportunities to acquire talented staff as well as new clients, you have to be careful on weeding out, knowing what you want—all of those opportunities just seem to get louder.”

CEOs report moving quickly to capitalize on opportunity. Lines of business may potentially be merged for greater impact and new cross-selling opportunities; new niches can be found that exploit a previously undisclosed characteristic of a product or service; moving to a vendor-supplied core material might free up the opportunity to focus on expanding other parts of the business. As one CEO put it, “We have to be on top of our game, finding new ways. . . . We see once-in-a-lifetime real estate opportunities with favorable lease terms; the smart companies will try to find opportunities rather than doom—I get pretty excited.”

Focus on the people and the organizational culture.

A distinguishing characteristic of leaders successfully navigating the downturn is an exceptional focus on the firm’s employees and organizational culture. The oft-said business maxim that “our people are our greatest asset” can be severely tested in an economic downturn. Yet CEOs who want to maintain the ability to offer a great product or service and provide winning customer care know that it becomes even more important to focus on employee satisfaction during adversity. They report redoubling their efforts to maintain morale, enhance employee effectiveness, and build both confidence and camaraderie to energize the organization.

These executives are well aware that all eyes are on them and their attitude, and work to energize their staff with a positive vision while being clear about the conditions the firm faces. They focus on being decisive and fair, on overcommunicating (to quash the rumor mill), and celebrating the small wins as they come. One CEO reflected, “Organizational culture is really important—keeping positive, frank but open communication with staff, thinking through strategies to work with employees, having the management team in the trenches. The staff is committed to help us. . . . We’re still doing philanthropy programs because we don’t want to drop our commitment; it sends a negative value message to our employees.”

Small and mid-size firms are weathering this storm. The typical CEO has seen at least one previous downturn and many already had begun to put plans in place in anticipation of a recessionary environment. While most said that this business cycle was unlike any they had previously experienced, their focus on steering toward a sunny horizon rather than staring at the nearest crashing wave, stood out through the research. As one of them put it, “A recession forces good habits—those stick when the economy bounces back.” And another noted, “You need to make really quick decisions, realizing you’re in a different era; but just because the news says the world is falling in doesn’t mean your business is—think about how you can take advantage of the new economy, to position for opportunity based on what you do well.” In my analysis, the three entrepreneurial leadership practices—managing while adopting an opportunity focus, proactively acting on opportunity, and taking a people-centered approach—can be winning methods for any executive or aspiring leader in these adverse times.