When times are good, it’s easy to assume that companies performing well are doing so because of strong leadership. But, as the old adage says of rising tides and floating boats, strong performance in good times often happens in spite of leadership, not because of it. Leaders are tempted to see strong financial outcomes as evidence that they must be doing the right things. But, in reality, this is more likely the result of being in the right place at the right time. A hyper-growth economy often paints over leadership cracks.

This wrongheaded assumption becomes a real problem when leaders don’t take time for self-reflection or serious feedback. Both they and their employees find themselves too busy grabbing opportunities and moving with the market zeitgeist to stop and consider:

• Is this organization doing the right thing?
• Does this company have the right vision, values and practices in place?
• Are we being led correctly?
• How well will we handle things when the music stops?

Now, in 2023, the paint is coming off the wall, and the music has stopped. Organizations with strong leadership have built cultures that can perform in uncertain times. They have employees who will stay engaged, follow well-designed systems and processes, make necessary sacrifices and bet with, rather than against, the organization.

Organizations with weak leadership, however, are surprised by how quickly serious concerns escalate. Their people check out, do the minimum, don’t have clear guidance around what to do or what to prioritize, and these employees turn cynical and critical when hard decisions are made.

As I watch this situation play out in 2023, my mind goes to first principles of leadership — principles we may have deprioritized in good times. It’s important to bring them back for organizations to avoid being overcome by changing or challenging circumstances.

First Principles for Leading Through Complicated Times

The scientific definition of a first principle is the fundamental concept or assumption on which a theory, system, or method is based. First principles are the first things to get right, because so much of a business’s strategy, culture and operational execution are influenced by them. Let’s look at a few first principles in organizational leadership that are important for us to reconsider in 2023.

1. Uncover core values. Through my consulting experience, I’ve observed, interviewed and worked side-by-side with companies’ front-line people, and I’ve read their core values printed on websites or office walls.

Sometimes, what I see and what I read line up — sometimes they don’t. I’ve learned that core values are a lot like works of art. We may create them with intended meaning, but the true meaning is left to interpretation by the masses. We may want certain values to be true, cherished and lived, but difficult times reveal which values people in the organization truly believe and follow and which they don’t. In those moments, rather than preach, leaders should listen, observe and reinforce the best of what they see.

When Southwest Airlines experienced an operational meltdown over the 2022 holidays, Barbara Barry, a retired baggage claim employee, showed up at the Las Vegas airport to volunteer her time. “Watching the news and seeing what’s going on, and knowing how overwhelming it can be — rather than just sit home and do nothing, I’d rather come here and try to do what I could,” (according to Fox 5 Las Vegas reporting). She’s the perfect example of a Southwest value actually sticking and playing out. What can the airline observe, learn and reinforce from her example?

Leaders should ask the questions, “What is it that people love about working here and how do we know that?” Or, “What is the best thing we do that our people find fulfillment in?” Senior leaders should identify the values that both stick and are worth preserving and then hunt for and remove anything (processes, policies, practices and people) that conflicts with those values.

2. Set the example. Employees need to believe that leaders invest their time, energy and passion in the company for the same reasons they do. When asking employees to make sacrifices for the good of the company (e.g., extra effort, cuts in benefits, loss of co-workers due to downsizing) leaders need to show a similar willingness to contribute more than they consume.

This goes beyond admitting mistakes when the strategy doesn’t work. Setting an example involves sharing in the sacrifice necessary to get the organization back on track. While he’s not the only one who’s done this, Zoom’s CEO Eric Yuan led by example when he coupled a 98% reduction in his base pay, along with no bonus pay, with his announcement of a 15% reduction in headcount. While this sacrifice didn’t save every job, it saved some and it sent a clear signal that Yuan’s interest in Zoom went beyond the economic value he gained from his leadership position in the company.

3. Enable operational-level action. A good measure of an organization’s cultural health is how many consensus decisions or compromises its people can “settle out of court,” meaning decisions that don’t rise to senior leaders or require executive judgment to resolve.

When operational level decision making is done well, senior leaders can focus on vision, strategy and culture, and operational leaders have clear guidance and autonomy to make decisions and take actions they feel are in the best interest of the company and its customers.

This does not mean that every decision should be handled at the operational level. In fact, the old leadership mantra of “bring me solutions, not problems” can itself be problematic. There are times when a solution executed at the operational level creates a much greater problem than originally existed. Senior leaders find it much harder to intervene at this point because they have to unwind a decision rather than consult on making it in the first place. Even the most talented senior leaders can’t unscramble eggs.

The best strategy is to set expectations and develop individuals to recognize which decisions they can, and should, make at the operational level and which they should bring to executives for buy-in prior to action. This is a muscle the organization develops over time. To develop this muscle more quickly and effectively, senior leaders should highlight when operational level decision making is done well and provide coaching when it isn’t. The process and guidance for decision-making should be well documented and evolve as the organization learns and develops.

When times are good and growth seems to happen without much added effort, many leaders fail to see the benefit of the extra work following these first principles requires. Naturally, they then become less of a priority. But taking these principles to heart is a long-game strategy. It’s what enables organizations to thrive during downward economic turns. And it’s what keeps employees betting with their leaders when these leaders have to make painful decisions.