Within every firm, every leader (edge or center) faces challenges every day. Sitting here in 2020 as I write this book, the challenges presented by COVID-19 are seismic in terms of impact as well as being totally unanticipated. COVID-19 has forced firm leaders to examine their own firm down to its very core and to make decisions that challenged their leadership in ways never imagined. COVID-19 has also resulted in new leaders emerging from the chaos of the pandemic to rise to a level of Edge leadership. Edge leaders will see the opportunities created by COVID-19 while center leaders will only see the challenges. Edge leaders will examine every challenge and find the opportunity making the firm stronger as a result. “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” – Martin Luther King, Jr. There is always a gap between the leader’s vision and what is actually taking place on the ground, day to day. There are always situations that develop that challenge a leader’s ability to remain steadfast in their leadership style and vision. COVID-19 with all of its ramifications provided an opportunity for firm leaders to step up to the edge and to face the challenge with courage, conviction, transparency and confidence – never wavering on culture or their future vision for the firm. Edge leaders got out in front of the challenge, communicating and demonstrating that they were in control, whereas center leaders let the challenge take control. Edge leaders responded to COVID-19 with clarity and focus surrounding the issues facing their workforce, their clients, their financial health and their future. Challenges come in all shapes, sizes and colors – some tactical like adopting new technology, some strategic like moving into a new market and some presenting challenges that were never thought about before like COVID-19. There are six major challenges that all leaders face on an almost daily basis. Edge and center leaders will face and address each key challenge differently. Edge leaders figure out how to address the challenge in a way that aligns with their vision for the future and the culture they have created. Center leaders will tend to address the challenge tactically, allowing the challenge to change their vision and expectations. The Six Major Leadership Challenges Facing Firms 1. Creating/maintaining client-centered focus: Everything the firm does should be anchored in and in consideration of the actions, policies and processes that affect the firm’s clients. An important and common aspect necessary for a successful client-centered focus is talent. Most firms have a strategy relating to retaining and recruiting the best talent for every position in the firm. There is recognition that talent is the firm’s greatest asset and the greatest contributor to the firm’s ability to excel within a client-centered model. Edge leaders recognize the significant importance of the talent strategy to the longer-term success of the firm, and they will not give up on this strategy when profits are challenged. The challenge from COVID-19 resulted in most firms having to reduce their workforce through furloughs or layoffs. Center leaders approached these workforce issues through the filter of profitability and cash flow. Edge leaders approached the same workforce issues through the filter of the longer-term strategy of the firm and were quick to figure out how to effectively utilize and manage a remote work force. When I asked one of my client firm leaders about this challenge, he stated that their talent strategy was so critical to their longer-term strategy that they had to address the challenge in a way that did not affect their talent strategy. Edge leaders will address innovations such as remote work within the context of maximizing the client experience and the related talent strategy so that there is a constant alignment with the firm’s future vision and client-centered focus. 2. Relationships built on personal interaction versus virtual interaction: With all the time pressure on leaders and the availability of technology, it is easy to rely on Zoom or Teams, email or other digital technology for face time with partners, staff and others. Edge leaders always find the time to communicate and personally connect with partners and employees, understanding the importance to building trust that comes with personal interaction. Edge leaders value face-to-face interactions and will adapt to the future of remote workers in a way that allows for building relationships through personal interaction. In contrast, center leaders tend to undervalue face-to-face connection and focus more on face-to-face only when there is some issue to address. In larger firms, it may be a challenge for the firm leader to have a personal relationship with everyone in the firm and that is understandable. However, the firm leader can ensure that everyone in a leadership position in the firm takes the time to build personal relationships with their team members. The Edge leader will ensure that his entire leadership team appreciates the importance of personal interaction as a major foundation for building trust. A good model that can successfully build the bond with staff is to establish a staff advisory council structured firmwide, by office, by region or by industry, depending on the size of the firm. Utilizing a staff advisory council will provide the leader with a direct link to staff when the firm is too big for the leader to meet periodically with staff one on one. 3. Building and leading teams, but not creating more followers: A leader’s ego can get in the way of how he or she looks at the people in the organization. Looking at staff as followers versus team members creates very different leadership attitudes and actions. As many articles on leadership address, a leader’s job is not to create more followers, but to identify and develop a standout team as well as future leaders. When a leader demonstrates through action and communication that everyone is an important part of the team, i.e., that
Since the first case of COVID-19 was reported in Kenya on March 13, 2020, the country just like other countries in the world, has been experiencing massive destruction of the economy in terms of GDP decline and job losses (Odhiambo et al. 2020). While the country had started experiencing the economic impacts prior to COVID-19, the emergence of virus has accelerated Kenya’s economic troubles. How has COVID-19 has affected the Kenyan Economy? COVID-19 has negatively impacted the Kenyan economy as seen in the performance of the financial markets, disruption of global supply chains, volatility of the Kenyan currency, reduction in diaspora remittances, and reversal of prior monetary and fiscal policies. Performance of Financial Markets Since the first reported case, a majority of foreign investors who had made huge investments in Kenyan securities at the Nairobi Stock Exchange, started disposing off their securities fearing a market collapse, leading to a huge slump on the securities prices traded at the Exchange (Karungu, et al. 2020). The NSE-20 Share Index has been steadily losing its value declining by 300 basis points between 15th March 2020 and 15th May 2020, a trend that is mirrored in the performance of the Kenyan economy. Moreover, as shown in the table below the Year to Date (YTD) performance of some of the large-cap stocks or Blue-Chip companies on the exchange as at 15th May 2020 have been on a dramatic decline. It is important to note that the Blue Chips typically record huge losses in their YTD performance during times of local crisis as investors sell-off their stocks and shift to less risky havens as opposed to holding other risky securities traded in the Nairobi Securities Market (NSE) see (Odhiambo et al, 2020a). Company Current Price (Kshs) YTD Performance Bamburi Cement Ltd 51.22 (36.6%) Safaricom PLC 23.90 (21.6%) Equity Group Holdings PLC 40.85 (23.4%) KCB Group PLC 41.58 (22.8%) East African Breweries Ltd 184.95 (7.1%) British American Tobacco Kenya PLC 400.55 (18.6%) Diamond Trust Bank Kenya Ltd 92.99 (15.0%) The Co-operative Bank of Kenya Ltd 12.90 (18.0%) Note: Data from Nairobi Securities Exchange market by 15.05.2020 Disruptions in the global Supply Chains The transmission of the Coronavirus has severely disrupted worldwide supply chains making Kenya, that has relied on imports, to be a vulnerable place. For instance, imports from China are about 22 percent of total imports of Kenya. With the current curfew and partial lockdown measures, a majority of the manufacturing and production sectors in the Country that also rely on the imports as inputs, have been massively disrupted. This has had a huge impact on the economic growth of Kenya forcing laying off of many workers. Volatility on the Kenyan Currency The outbreak of this pandemic has exerted pressure on the Kenyan shilling due to the curfew and lockdown within the international supply chains leading to a scarcity of foreign currency. For example, shortage of shortage of exports has made the Kenyan shilling vulnerable losing 5% of its value since the start of March (Erkekoglu, et al. 2020). With reduced value of the Kenyan shilling, all Kenyan exports will become cheaper leading to further devaluation of the currency which is detrimental to Kenyan economy especially on tourism (Wanjala, 2020). Diaspora Remittances Diaspora remittances have dropped due to the deterioration in global economic activities. This will lead to a reduction in disposal income of the recipients thus negatively affecting economic growth(Ozili et al. 2020). This coupled with increased prices of household items abroad might result in a further reduction in the amount of foreign currency expatriated into the Kenyan economy. As per 2019, diaspora remittances to Kenya stood at USD 2.9 billion that has formed the main contributor to Kenyan Foreign Exchange reserves that Central Bank of Kenyan uses when stabilizing the Kenyan currency. With the drop in the forex reserves, the Kenyan currency volatility is likely to reach all-time high due to COVID-19, that ultimately have a negative impact on the Kenyan economy. Monetary and Fiscal Policy The Monetary and Fiscal Policy Committee of the Central Bank had met on 23rd March 2020 with the aim of reviewing the results of its prior policy decisions when dealing with the latest economic developments. They reduced the Central Bank Reference rate by 50 basis points to allow banks to lend more money into the economy leading to a higher level of circulation of cash into the economy. However, a reduction in the economic activities in the country leading to people lacking money will definitely lead to poor purchasing power thus slowing down the Kenyan economy. Going by the existing economic activities in Kenyan due to coronavirus, the GDP growth of Kenya is likely to range between 1.3% and 2.2% for the year ending of 2020. This will depend on the severity of the outbreak especially at its peak, which is expected in August or September as well as how Kenyan behave with an aim of preventing the coronavirus spread in Kenya to prevent more stringent restrictions that could further negatively impact the economy. References Erkekoglu, H., Garang, A. P. M., & Deng, A. S. (2020a). Modeling and Forecasting USD/UGX Volatility through GARCH Family Models: Evidence from Gaussian, T and GED Distributions. International Journal of Economics and Financial Issues, 10 (2), 268-281. Odhiambo, J., Weke, P., & Wendo, J. (2020b). Modeling of Returns of Nairobi Securities Exchange 20 Share Index Using Log-Normal Distribution. Karungu, R., Memba, F., & Muturi, W. (2020). Influence of financial contagion on stock performance of firms listed in the Nairobi securities exchange. Accounting, 6 (1), 1-16. Odhiambo, J., Weke, P., & Ngare, P. (2020). Modeling Kenyan Economic Impact of Corona Virus in Kenya Using Discrete-Time Markov Chains. Journal of Finance and Economics, 8 (2), 80-85. Ozili, P. K., & Arun, T. (2020). Spillover of COVID-19: impact on the Global Economy. Available at SSRN 3562570. Wanjala, K. (2020). The Economic Impact Assessment of the Novel Coronavirus on Tourism and Trade in Kenya: Lessons from Preceding Epidemics. Finance & Economics Review, 2(1), 1-10. Author
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