It’s what you can’t see . . . It’s a well-worn metaphor, but shockingly apt. Leaders steering their organizations through rough waters focus on the obvious dangers—the iceberg peaks that are visible above the waterline. And they fail to account for the enormous undersea bulk of the bergs until ice rips through the hull of their ship.

VitalSmarts research suggests that the vast majority of leaders are putting their companies’ futures at risk at this very moment with the same miscalculation. They are rightly focused on visible perils like shaky capital markets, uncertain cash flow and nervous customers. But as they take measures to respond to these external threats, they fail to apprehend the more profound danger lurking below the surface within their own organizations—a dramatic reduction in performance capacity we call “corporate depression.”

For example, we watched a large telecom company struggle to respond to massive market shrinkage with a series of downsizing announcements. Senior executives could easily spot impending budget shortfalls and used well-worn strategies to address the threats. They eliminated or delayed ambitious IT investments, which enabled them to reduce staffing levels significantly. In following months, as the recession deepened, they repeated the process. Over a two-year period they announced four successive targeted layoffs. Simultaneous to this they evaluated the costs and benefits of outsourcing the bulk of the remaining work.

The Invisible Problem

Now, let’s be clear—at times like this, leaders have to make tough choices. We tee up this example not to suggest that traditional responses to economic turmoil are inappropriate.  Our goal is now to turn attention to the invisible problem these leaders left unsolved. While leaders wrestled over complex policy decisions, they failed to recognize a progressive and catastrophic reduction in their organizations’ capacity to get work done.

The problem wasn’t due to the overt messaging—the “written rules” of the strategy, the operating model and the integrated processes were quite clear. The top leaders knew things weren’t moving in the right direction, but they couldn’t specifically identify what was out of alignment. So they did what many leaders would do. They pushed harder. They over-communicated the new strategy, they made sure everyone understood the new organizational model, and they looked for measures and scorecards that demonstrated adherence to the new processes.

Ultimately, an organization’s capacity to perform is a function of individual human behaviour. And our research shows that when times get tough, leaders tend to take their eyes off this most fundamental of leadership responsibilities: the challenge of strategically and systematically influencing the behaviour of their people. They make this mistake both because they lack vision into looming behavioural threats and because they lack the tools to respond quickly and effectively to them.

Over the course of two years the 5,000-person IT organization at the telecom company spiralled uselessly. Every layoff was preceded by months of employee agony, apathy, and dysfunction. Our measurements showed that up to 40 percent of employee discretionary effort was squandered on non-value-added activities, and that voluntary defections of key players increased three-fold. One employee described this period as akin to “having your leg amputated one inch at a time.”

Even worse, when the economy turned around, and leaders began to rebuild, the organization was in such a depressed and weakened condition that they were unable to seize new opportunities for at least two more years.

The invisible threat that leaders tend not to address when times get tough is this: Depressed organizations don’t perform.

Today’s leaders are navigating through seas filled with external threats. What they need now more than ever is the ability to scan below the surface, assess threats like these to the organization’s internal capacity, and develop strategies to build confident, engaged performance.

The promise to leaders who address the murky challenges below the waterline is huge. Our recent study shows that leaders who effectively influence the right behaviours during economic downturns create organizations that are five times more agile. These companies are able to make intelligent cuts many millions of dollars deeper than those who fail to appropriately engage their employees in the problems. Furthermore, executives report that the quality of their response leaves them far more productive in the short term and more than ten times better prepared to grow as new opportunities emerge.

In brief, reacting quickly to visible threats may help you survive, but thriving depends on your response to the problems below the surface.

Curing Corporate Depression

When people see problems as permanent, pervasive, and uncontrollable, they become depressed. And when a substantial number of employees in an organization see their circumstances in these three ways, you’re facing a case of corporate depression.

When individuals get depressed, they become apathetic, can’t concentrate, overreact to setbacks, and neglect relationships. Organizations locked in depression suffer the same problems. Leaders who want to address these risks are highly attentive to these “triple negative” story patterns. The most serious risks an organization faces below the waterline are when isolated frustrations become accepted norms. When people begin to conclude that bad behaviour is permanent, pervasive and beyond their control, they’ve essentially thrown their hands in the air and accepted dysfunction as normal. A systematic search for triple negatives is a powerful way to surface these hidden risks.

A Path Forward

As we reviewed the triple negative stories, two clear patterns of problem behaviour emerged:

1. People were not speaking up and voicing their concerns. Despite the rhetoric employees heard from leaders about wanting their input, the unwritten rule they understood was that speaking up could label you a troublemaker. As a result, employees were hunkering down, staying quiet, and appearing to be supportive even when they saw plans that were doomed to failure.
2. Embedded leaders were unknowingly contributing to the unease and unrest in the organization. Their downstream communication, which previously had been effective, had become guarded and limited. Their own sense of concern about the future had sapped their engagement and energy. As they tried to keep up with the pace of the changes, they piled further tasks onto already overwhelmed teams. All of these actions combined to create a confused, lost, and frustrated workforce.

Based on the patterns from the triple negatives, the leadership team identified two vital behaviours that would significantly remove the below-the-surface threats—if they could influence people to actually embrace these new behaviours. These vital behaviours included:

• Speak Up: “During integration meetings and discussions, I will speak up effectively when I have a concern. I will make sure that my concerns are heard and be careful to use language that is widely understood. I will commit to stay in the conversation.”
• Leaders Must Lead: “All leaders will act as owners of the change: When they have concerns, they will voice those concerns with the appropriate parties. They will deliver on and hold others accountable for commitments—irrespective of title or position. They will influence their teams to motivate and enable them to embrace the changes.”

The Influence Strategy

Once leaders had identified these vital behaviours, they assembled a large group made up of top leaders, embedded leaders, and opinion leaders in the organization to diagnose why the vital behaviours were not occurring. They explored six sources of influence that might be blocking the desired behaviours, including:

• Personal Motivation (Were the behaviours connected to something people truly value?)
• Personal Ability (Were skills missing?)
• Social Motivation (Were social norms reinforcing positive or negative behaviour?)
• Social Ability (Were their managers, teams and other groups making the behaviours easier or harder?)
• Structural Motivation (Were their rewards and sanctions aligned with the vital behaviours?)
• Structural Ability (Were their structures, processes, measures, and physical layout supporting the behaviours or getting in the way?)

Something powerful began to happen, even as this large group diagnostic technique was underway. The very process introduced a new feeling of self-efficacy. Employees’ involvement in the diagnostic process created a new thread of hope that they could do something about the challenges. Stories about this engaging event began to filter out to the organization—and, because a broad cross-section of participants was involved, it filtered out everywhere.

Finally, using this same six-source model, the top team developed a “playbook” of influence strategies leveraging these six categories to overwhelm the negative influences keeping the vital behaviours from happening.

Don’t let corporate depression drain precious resources that are critical to any recovery effort.