The U.S. economy is gradually recovering from the downturn, yet business leadership is more important than ever before. Although several sectors have begun to rebound or have halted their decline, profitability growth remains slow and fragile for many companies. As the recovery gains momentum, the responsibilities of good leadership have increasingly shifted from allaying employee fears and stakeholder concerns to inspiring confidence in future prospects. Managers who adapt to these changing trends stand the best chance of leading their organizations into a position of financial strength.

Between 2007 and 2008, declining revenues and rising unemployment resulted in a severe drop in confidence for business leaders, as many people began to question the policies and management decisions made by executives. However, as the economy started to show signs of stabilizing, confidence in business leaders climbed in 2009, indicating that the United States workforce is increasingly ready for assertive leadership to guide companies into full-fledged recovery.

A November 2009 study from the Center for Public Leadership at Harvard’s Kennedy School found that 69 percent of Americans believe there is a leadership crisis in the country today, down from 80 percent the previous year and the lowest level of concern since the 2005-2006 period.

After a large drop in 2008, confidence in business leaders has begun to rebound (with the exception of Wall Street, which ranks at the bottom of the confidence index). Thirty-nine percent of the public now trusts business leaders and 49 percent have confidence in their competence.

On a global level, confidence in business leadership is generally on the rise, with more employees believing that managers are steering their companies in the right direction. In the most recent leadership confidence index from executive recruiting firm Korn/Ferry International, business leaders’ credibility rose 2 points in the last quarter of 2009, while confidence in the direction of leadership climbed 3.5 points. Employees’ confidence in their boss’s leadership ability gained 3 index points, while executives’ confidence in their own leadership qualities gained 1 point.

“It’s especially encouraging to see confidence in CEOs and corporate boards has made positive strides in consecutive quarters, because strong leadership at the top of the house influences the entire organization,” Ana Dutra, CEO of Korn/Ferry Leadership and Talent Consulting, said in an announcement of the findings.

As the new year begins, managerial roles have become less about maintaining cohesion amid a dire business climate and more about laying the foundation for expansion and greater profitability.

According to the Korn/Ferry study, the most important leadership qualities today are strategic skills and operating skills, though personal and interpersonal skills are becoming increasingly important as well.

The first step for a manager cultivating leadership qualities is to remain open-minded about the changing business landscape.

“Adopting new strategies and approaches can require letting go of some old attitudes, habits, or behaviors,” BusinessWeek explains. “If something isn’t serving the business well, be willing to give it up. There is great power in purging, and you’ll make room for better ways of working.”

Given that strategic skills are highly valued in today’s leadership, BusinessWeek recommends that leaders focus on “big-picture” goals and avoid specific tactical decisions until a clear objective is defined. Clearing up mental clutter and making an effort not to overanalyze can also allow for swifter and smarter decision-making, with careful thinking reserved for the planning phase.

Another useful concept is distinguishing between management and leadership, and learning how the two complement each other to create an effective work environment.

According to Entrepreneur.com, “Management involves putting the right people into the right places with the right resources. Leadership is about turning those right people loose by setting high expectations, providing coaching and acknowledging achievement.”

Management provides structure and stability, while leadership provides inspiration and influence, and both are necessary for a successful workplace. When these two qualities are properly combined, they can drive an organization to a higher standard of performance and help address inefficiencies.

The advantages of good leadership are especially apparent in a team setting. Good leaders ensure that when a team does well, each member receives a portion of the credit, and when performance is lacking, every member shares responsibility for the failure. Leaders should reinforce this dynamic to ensure team members have a greater stake in the business’s success.

“The employees need to know that the survival and success of the company depend on them as much as on the senior executives,” Entrepreneur.com explains. “They want to be an integral part of the solution and are willing to sacrifice during tough times so long as they see sacrifice coming from the top first.”

The main qualities that erode confidence in a leader are as revealing as those that strengthen it. According to a new survey from CareerBuilder.com, 23 percent of workers rate their company leaders as “poor” or “very poor.” The main concerns employees currently have with senior management are an inability to address employee morale (35 percent), a lack of transparency (30 percent) and major changes being implemented without warning (28 percent).

These interpersonal issues are likely to become more important as the economic recovery picks up. Rebuilding morale in the wake of the downturn requires leaders to focus on ways to motivate their employees, and the key to this could lie in understanding the power of progress.

According to a recent study from the Harvard Business Review, creating a sense of progress and providing support for overcoming obstacles is the most effective method for giving employees a positive outlook on their jobs and driving them to succeed in their efforts. By providing meaningful goals, resources and encouragement, today’s leaders can take control of worker motivation and, in turn, boost morale.

“If you are a high-ranking manager, take great care to clarify overall goals, ensure that people’s efforts are properly supported and refrain from exerting time pressure so intense that minor glitches are perceived as crises rather than learning opportunities,” the study advises. “Cultivate a culture of helpfulness. While you’re at it, you can facilitate progress in a more direct way: Roll up your sleeves and pitch in. Of course, all these efforts will not only keep people working with gusto but also get the job done faster.”

Good leadership can also be fostered at each level within an organization. Human resources consultancy Compensation Today suggests that companies seeking to improve their leadership or increase talent retention consider a leadership development program, which may improve employee engagement across the board.

Managers who become leaders inspire employees, support creativity and produce a sense of progress in their workers’ day-to-day projects. This transition is likely to prove a priority through the coming year, particularly as more businesses recover from the downturn and prepare for growth.

“Do you treat people with sincerity and respect when you first meet them? Do you help them grow and prosper, and enhance their value to the organization? Do you encourage and motivate them to succeed? Do you make them feel part of an important team?” Entrepreneur.com asks. “If your answers are ‘yes,’ most people would want to work for you.”

Earlier

5 Ideas for Leading through the Downturn

The Manager/Worker Disconnect

Making Disengaged Employees Feel Valued

Managers? OK. Leaders? Better.

Resources

National Leadership Index 2009
by Seth Rosenthal, Sadie Moore, R. Matthew Montoya, Laura Maruskin, Owen Andrews, Patrick McKiernan and Martin Frankel
Center for Public Leadership – Harvard Kennedy School, November 2009

…”Confidence in Leadership Index” Reveals Cautious Optimism Heading into New Year
Korn/Ferry International, Dec. 17, 2009

Twelve Leadership Questions for 2010
by Gayle Lantz
BusinessWeek, Jan. 5, 2010

It Takes Leadership
by Michael Sanibel
Entrepreneur.com, Dec. 30, 2009

Despite Competitive Labor Market, One-in-Five Workers Plan to Change Jobs in 2010…
CareerBuilder.com, Jan. 7, 2010

What Really Motivates Workers
by Teresa M. Amabile and Steven J. Kramer
Harvard Business Review, January-February 2010

The Necessity of a Leadership Development Model
by Vivian Mora
Compensation Today, Jan. 19, 2010