The Leader Mindset #5

Table of Contents

• The Biggest Mistake in a Downturn: Eliminating Le …

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The Biggest Mistake in a Downturn: Eliminating Leadership Development. Try This Instead.

One thing that comes with age is experience—some good, some bad. Most of my toughest work experiences came during challenging economic times. I’ve had a front-row seat to several major economic crises in my career. The dot-com bubble. 9/11. The Great Financial Crisis. The pandemic. Industry-specific downturns. If history has taught me anything, it’s that just when things seem to be rolling along smoothly, economic turbulence is right around the corner.

And when it hits, companies follow the same playbook. They cut anything that doesn’t have an immediate impact or a clear short-term return on investment. One of the easiest things to slash? Employee development and especially leadership development.

[As a side note, this why conducting an ROI analysis on leadership development is so important. It helps prove the long-term value of the investment and when purse strings tighten, it is less likely to be eliminated.]

On paper, this seems logical. When the future is uncertain, hunkering down and waiting for the storm to pass feels like the safest choice. And for the here and now, it might be.

After living through multiple downturns, I can tell you that most organizations fail to consider the implications of the short-term decision:

• Leadership development momentum stops because there are no more talent reviews, leadership training, or onboarding for new leaders.

• Leaders begin to question whether the company truly cares about their growth.

• New leaders lack the skills needed to lead effectively through the uncertainty.

• High potentials stop growing, leaving future leadership gaps.

Then, often suddenly, the economy rebounds. Unfortunately, like clockwork, three things always happen.

1. Leadership Turnover Accelerates

The pandemic was a perfect example. Leaders felt duty bound to help their organizations navigate a once-in-a-century event. Unfortunately, after it ended, leaders were exhausted, frustrated and overwhelmed. The excessive pressure created burnout, which led to early retirements, job-hopping, and leaving leadership all together. With a lack of leadership investment, many companies were left scrambling to fill leadership gaps. Those that didn’t have a strong leadership pipeline paid the price. I remember this same scenario playing out after the great financial crisis.

A recent report highlights a surge in leadership turnover (especially CEO) following the pandemic. As businesses moved into recovery, many found themselves facing a leadership gap, forcing them to hire externally at a higher cost and with greater risk.

2. Leaders Quickly Pivot to Recovery and Business Growth

Every downturn eventually ends. You can bet as soon as it does, your organization will quickly move into growth mode. Companies that continued to invest in their leaders will be ready to scale. Those that didn’t? They’ll need to first rebuild momentum.

A study by the Corporate Leadership Council found that companies that continued leadership development during downturns grew faster once the economy rebounded compared to those that cut back.

Think of it like sports—championship teams don’t stop training in the off-season. They put in the work so they’re ready to dominate when the game starts. Leadership development works the same way.

3. Your Leaders Must Navigate New Uncertainties

Downturns bring ambiguity, rapid change, and tough decisions. Without strong leadership, teams feel lost, frustrated and disengaged. Productivity drops. Organizations that fail to invest in leadership during the downturn will not be ready for the next set of challenges.

A 2023 Harvard Business Review study found that companies with well-trained leaders were more likely to outperform competitors during economic uncertainty. Why? Because great leaders don’t just react; they anticipate challenges, show resiliency, and lead with confidence.

What we often forget is that uncertainty doesn’t stop after primary economic downturn. Look at what happened post-pandemic. Just as we started to recover, we ran into inflation, supply chain issues, and workforce shifts. The turbulence never entirely goes away.

If you build a culture of continuous leadership development, your leaders will be ready no matter what uncertainty comes next.

Here is an Alternative Approach

I’m not naïve. I know economic distress is real and is a significant challenge. Companies will need to cut some programs and be more thoughtful in their leadership investments.

When money is tight, leadership development can feel like a luxury. You may need to pause expensive Ivy League MBA programs or high-end leadership retreats, but that doesn’t mean leadership development has to stop altogether.

Here’s how I recommend keeping momentum without breaking the bank:

✅ Double Down on Succession Planning – There is no cost to this critical work. Continue discussing leadership talent, identifying development opportunities, and evaluating how leaders address current business challenges. Downturns are real-world developmental assignments and how your leaders handle them gives insight into their long-term potential.

✅ Leverage Internal Mentoring – What a low-cost, high-impact effort? Pair senior leaders with high-potential employees for coaching and knowledge-sharing. It’s free, effective, and bolsters your company’s leadership culture.

✅ Give Leaders Stretch Assignments – Let them take on cross-functional projects or broader leadership roles. Real-world experience is the best leadership training there is. During a downturn, when companies typically avoid risk, take smart risks on your “future” leaders.

✅ Create Leadership Roundtables – Encourage regular discussions where leaders share challenges, insights, and strategies. Sometimes, the best development occurs when leaders learn from one another.

✅ Use Digital Learning – If you can’t afford expensive in-person programs, online learning is a great alternative. Platforms like LinkedIn Learning, Coursera, and Harvard Business Review offer high-quality content at a fraction of traditional training costs. Uses a blended learning approach by pairing online learning with a virtual reinforcement session. This approach is effective and budget friendly.

✅ Focus on High-Impact Topics – If now isn’t the time for broad leadership training, prioritize the skills that matter most right now, such as resilience, change management, coaching and leading in ambiguity. Reinforce the skills that are necessary to do their job right now.

This playbook provides practical ideas to sustain high-impact talent conversations and cost-effective development opportunities.

Final Thought: Leadership Development Isn’t an Expense - It’s an Investment

The companies that thrive after a downturn are those that make smart investments when times are tough. Leadership development is one of the smartest investments you can make.

Throughout my career, every time we invested in leaders during a downturn, we came out the other side stronger, more prepared for growth, and ready to tackle leadership transitions.

If a recession is coming, how will you maintain momentum in your leadership programs. What are things you can do now so you are ready?

I would love to hear your feedback.

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Andy