The president has done three things that all CEOs should do--and two they should avoid.
It has been a little more than a month since President Obama was sworn in as the 44th President of the United States. He's riding a wave of massive popularity and has assembled a team of this generation's best and brightest, but the economy still is lurching, with stock-market indexes hitting decade-old lows. Americans are scared, and senior executives are facing the most challenging business climate of their lifetimes.
As new paradigms for leadership emerge and old strategies go out the door, corporate chiefs need to rethink how they manage. Some companies will come out of the downturn stronger, others in bankruptcy. More than ever, strong, decisive and confident leadership will be the difference between thriving and collapsing.
We can take a page from Obama's playbook and his Feb. 24 speech to Congress for tips on what to do and what not to do. His first month has been marked by some great foresight and a few misguided moves. Here are five key lessons from his first weeks in office.
Lesson 1: Have a Strong Brand and Position in the World
Right away the president started rebranding the nation. America was known as the beacon of freedom and a better way of life until its standing in the world took a hit during the Bush administration. Obama signed legislation to close the prison at Guantanamo Bay on his first day in office. He has taken practical rather than ideological stands on Iran and Cuba. He has reached out to Muslims and people of sometimes unfriendly nations to encourage them to look to America as a benevolent superpower--and a good economic partner.
Senior executives need similarly to use the downturn to hone their corporate brand images to incorporate new realities, as consumers rethink their needs, look for value and cut back on discretionary spending.
Starbucks (nasdaq: SBUX - news - people ) has announced that it will enter the instant coffee market after spending decades positioning itself as a daily luxury treat and distancing itself from the Nestlés and Maxwell Houses of the world. The company realizes the world has changed and it can no longer rely on consumers shelling out $4 for lattes with whipped cream and cinnamon.
Lesson 2: Don't Lose Sight of the Long Term
In her first trip to China as Secretary of State, Hillary Clinton pushed the Chinese government to cooperate to lower greenhouse emissions. Getting the Chinese to buy more Treasury bills or ensure human rights played second fiddle to pursuing the long-term goal of reducing the costs of pollution and reliance on oil. It's expensive, but it's a must do. When the economy gets going again, China and the U.S. will need a healthy environment and freedom from the whims of oil barons in South America, the Middle East and Africa.
Corporate leaders likewise need to shed fear and continue to make the investments and decisions for future growth even at a cost to their quarterly numbers. Intel (nasdaq: INTC - news - people ) is using the downturn to invest more than $7 billion in innovation, to distance itself from weakened competitors. Who do you think will be best poised to benefit when the business cycle changes? Intel, or its competitors that are slashing their innovation and sales budgets?
The worst thing to do right now is let fear paralyze you so you can't make the decisions that will keep your company competitive in the long run. You may need to invest more in certain areas and cut back in others; you may even need to cut everywhere. But you need to be guided by thoughtful, careful analysis rather than fear.
Lesson 3: Smart P.R. Means Managing Expectations
President Obama has continually lowered expectations about his ability to right the economy quickly. This has given him time to maneuver and allowed for more upside potential. He has maintained very high approval ratings despite the economy's continued slide. Managing the expectations of investors and employees is critical now. One of the biggest mistakes senior executives make is trying to put too positive a spin on a situation.
When General Motors (nyse: GM - news - people ) took bailout money last fall, its management raised expectations that it could figure out how to right itself by February. Now that the company is running back to Congress for another $12 billion, confidence that it will ever right anything is gone. It is hard to keep going back to the trough. Congress and the American taxpayer do not want to feel duped.
The world's best salesmen know that it is better to break conservative quota numbers than to miss overly optimistic projections. Once companies start announcing numbers that blow past analysts' forecasts, investor confidence will grow. That will be critical to starting the recovery.
One caveat, though: Don't push expectations too far down or you'll run the risk of demoralizing the troops. Obama has to walk a fine line, dampening expectations but not freezing the gears of business. That is why he took a more upbeat position during his speech to Congress than he had in recent weeks. And corporate chieftains can't be overly downcast or investors will hammer their stock and top-performing employees will jump ship.
While Obama has made some great moves, he has also made some errors we can learn from.
Lesson 4: Build Consensus--But Don't Let a Minority Hijack the Majority
Obama made being bipartisan and reaching across the ideological divide a big part of his campaign message. And he has stuck to it once taking office. He has appointed a Republican Secretary of Defense, Robert Gates, asked a conservative to be Secretary of Commerce, Judd Gregg, and has regularly stepped across the aisle to Republicans in Congress in a way Bush never did with Democrats.
He has been smart to try to build consensus, but he has gone too far. He has spent too much time trying to placate Republicans. By giving them too much voice, he has re-energized them, and he let his stimulus packaged get delayed just when decisive action was needed.
In China, on the other hand, the government pushed through stimulus measures fast enough to buoy consumer confidence. My firm, China Market Research Group, interviewed several hundred Chinese consumers in six cities in January, and 80% of them said they had full confidence that the government would implement the policies needed to right China's economy and maintain stable growth. Gross domestic product is growing rather than contracting.
Senior executives need to be nimble and move fast to adjust to new business realities. Decisions must not be slowed by endless committees trying to get everyone to buy in.
Lesson 5: Conduct Superior Due Diligence, Repeatedly
Obama has had problems vetting candidates for Cabinet positions. From Bill Richardson to Tom Daschle, nominees have had skeletons in the closet far more problematic than Obama's investigators found. In approving them and then having to retract their nominations, Obama damaged his reputation for careful due diligence.
Companies cannot make this mistake. They have to spend whatever due diligence costs. In an age where Allen Stanford's alleged $8 billion Ponzi scheme pales in comparison wtih Bernard Madoff's much bigger one, no one can take reputations at face value. I have been in far too many meetings where someone said, let's do business with so-and-so--he comes from a good family. The days of trust based on reputation are gone. Companies need to conduct due diligence, repeatedly.
In the Great Depression, superior leaders and minds emerged from the ashes. This crisis, too, will see winning executive teams take their companies further beyond their competitors. The biggest CEO of all, the president of the United States, is sure to continue to provide outsized examples of what and what not to do to accomplish that.