Leadership & Negotiation - Essay Example

Introduction: The pace with which the global business environment is constantly changing has had a great impact on the functioning of business unitsaround the world. With the changing demands of the modern business world, organizations are faced with unique situations that pose considerable threats to their existence. Business practices that have long been considered staple are now becoming gradually obsolete as organizations and their leaders realize that their changed requires business processes that are radically different. For businesses to succeed in this day and age, it is necessary that the leaders realize the importance of devising and implementing techniques and skills which help their organizations meet the challenges imposed by changing circumstances of the business world. This essay has highlighted one such challenge that organizations around the world are facing in the form of the current recession. Global Recession: A Challenge for Business Leaders The financial crisis that has swept up the world in these past few years has had a lasting impact on the economic stability of countries around the globe. The credit crunch that started with the burst of the United States “Housing Bubble” (Rap, 2009), has effected much more than just the real estate sector of USA and has also deeply affected the activities of the business sector around the world. Organizations are faced with an alarming shrinkage in the availability of funds as obtaining credit has become harder, a fact which has resulted in driving well established businesses to the point of bankruptcy. The global recession also proves to be a considerable challenge because inflation has increased the level of risk associated with business activities and in these times of the financial crunch, it has become necessary for organizations and their leaders to re assess their business processes , so much so that it has now purely become a matter of survival. It has long been advocated that change is necessary; that it is even good for an organization as it helps in the leaders of the organization achieve positive growth, both for themselves, their business and their employees(Kotter, 2007). However, in the context of this global recession which has been said to be the worst since the Great depression, the job of the leader has become doubly hard as not only it entails restructuring their business processes in a completely “context-specific” way, but also maneuvering their workforce through these turbulent changing times in a way which ensures that the basic principals on which the business operates are still kept intact. Literature Review: A thorough analysis of the literature in this regard is indicative of the fact that the on going financial crisis importunately requires organizational leaders to re assess and their capital structures and manage their money differently than before. Since it is the leaders who are vested with the power to initiate and implement such changes, they have to ‘wrestle’ with issues that were almost non-consequential a few years back and it is their prerogative to manage the organization’s money more tightly (Ryan, 2008). Experts agree that everything that the leaders have learned about debt over the last ten years will now have to be forgotten and new techniques will have to be re-learned (Ryan, 2008). Apart from the need to reassess capital structures of their organizations, leaders are also faced with the increased risk that is associated with business activities during any such difficult time. Sametz (1982), points out that financial turbulence generally results in “unanticipated and erratic” fluctuations in inflation, which is an increased risk involving business activities because when faced by a suddenly rising rate of inflation, most businesses are unable to adjust the prices of their products and services quickly enough to avoid pre-tax profit decline.(Sametz, 1981) Another aspect of the global recession is the fact that the current situation has lead to severe credit conditions and an increasing number of banks are tightening their credit standards. The Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices showed that there was a record level of of credit tightening in the month of October over the previous three months in the year 2008. Around 84.4% of the largest banks reported that they had tightened their credit standards (Udell, 2009) . This shows that the leaders of today are facing circumstances in which loan negotiations have become specially difficult and for organizations that depend on bank credit for liquidity, these loan negotiations are one of the most crucial skills that these leaders will have to learn. A way Forward: What Organizations can do to Succeed through these times Although it can be argued that smaller businesses will generally be much more sensitive to the on going credit crunch because of their limited sources of external funding, larger more well established organizations will face the difficulties of keeping a huge business set up going in an atmosphere of financial vulnerability. Hence it would be safe to say that all sorts of businesses are facing considerable difficulties during these times. However, there are some ways that organizations can counter these circumstances. Leaders must aim to build their organization’s credit structures in a way which enable them to weather the “bitter cold shock to the credit markets” (Ryan, 2008). Leaders of small to medium organizations can ensure credit approval by devising strong negotiation strategies and can also look towards other sources of external financing such as “crowd funding”. Leaders will have to learn how to make their organizations more ‘flexible’, because surviving in today’s business environment means that organizations will have to respond to the micro-markets’ demands in a timely manner, and this can only be done if organizations are flexible (Appelbaum et al., 1998) . Not only this, organizational leaders will also have to make sure that at all times and through all changes that they plan or implement, they must keep their employees and workforce well informed and up-to date as informed employees are generally more receptive towards changes that directly influences them. References Appelbaum, S. H., Normand St-Pierre & Glavas. W., (1998). Strategic organisational change: the role of leadership, learning, motivation and productivity. Management Decisions. Vol. 36. No. 5. PP 289-301. Kotter. John P. (2007). Leading change: Why Transformations fail. Harvard Business Review. January Issue. Retrieved from www.hbrreprints.org on 9th May 2010 Rapp, William. V., (2009). The Kindleberger-Aliber-Minsky paradigm and the Global subprime mortgage meltdown. Critical Perspectives on International Business. Vol. 5, No ½. PP 85-93. Ryan, V., 2008. Re-thinking Capital. CFO. November 2008. Retrieved from. www.cfo.com on 10th May, 2010. Sametz, A. W., 1981. Strategic responses to today’s turbulent markets. An Introduction to Edward Attman’s Financial Handbook. New York: Wiley. Udell, G. F., 2009. How will a Credit Crunch Affect Small Business Finance?. FRBSF Economic Letter. March 2009, Number 9. Read More