Although most interest rates are determined by the forces of supply and demand m the money or capital markets, one important interest rate—the discount rate—is not. This rate is an administratively determined rate charged by the Fed to banks when they borrow reserves from the Fed. This borrowing is supposed to be for seasonal and emergency needs, but because this rate is usually below going market rates, banks find it profitable to borrow at the discount window even when they are not in need of reserves. The Fed discourages such borrowing, however since it dilutes Fed control over the money supply.
Although a higher discount rate should discourage bank borrowing from the Fed and thus decrease the money supply, this is a very inefficient way of affecting the money supply and is not used for this purpose. The Fed changes the discount rate from time to time mainly to give a signal or announcement to markets concerning the Fed s intentions regarding interest rates. Such changes usually follow changes in market rates and serve to indicate that the Fed views these market rate changes as permanent.
When the Fed focuses on an interest rate instead of a monetary aggregate to conduct monetary policy, it uses the federal funds rate instead of the discount rate. The federal funds rate is the rate charged by one bank to another for borrowing (usually overnight) some of its excess reserves at the Fed. Commercial banks that are unable to meet their legal reserve requirement borrow other banks excess reserves, paying the federal funds rate, determined by the forces of supply and demand in this market.
The advantage to the Fed of focusing on the federal funds rate is that it is determined by supply-and-demand forces and thus is a good indicator of the “tightness” of current monetary policy insofar as market interest rates in general are concerned. Suppose the Fed buys bonds on the open market and thereby increases reserves in the banking system. As a result, few commercial banks will be unable to meet their reserve requirement, and many banks will have excess reserves. Demand for excess reserves will be low and supply high, so the federal funds rate—the “price” in this market—will be low. Furthermore, we can expect this low federal funds rate to spread quickly to the economy at large; the excess reserves that have created the low federal funds rate will cause banks to increase loans and thereby to lower interest rates in general.
Questions during a crisis are less about facts and more about emotions. This question comes straight from the gut, not the head. Most leaders I’ve watched acted as if it were just the opposite. When they ignore the emotions and speak only to the facts, they lose their team or their audience. That’s why Yes is such a tempting answer for a leader and why leaders are tempted to use it when it doesn’t apply. Nowhere is that more obvious than when it comes to job security. As much as you’d like to be able to answer this question with a yes, don’t do it unless you are 100 percent certain.
Of course, not much in today’s world is 100 percent certain, so your answer to this question is apt to be closer to I don’t know, and there are some comments about that answer in the next section. But you’re in front of your team right now and don’t have time to page through a book to find a formula for success. (Don’t bother looking for one. In this kind of situation, formulas don’t exist.) Think of it this way. What would you want to hear in this situation? A forthright I don’t know or a lot of fancy words and phrases used to obscure the fact that what is being delivered is no answer at all?
Maybe there is a formula after all. Don’t ignore the emotions you’re dealing with. Tell the truth, sincerely and frequently. Update as promised in clear and simple language. Don’t make promises you can’t keep. Keep the promises you do make, and stay visible. Don’t shy away from the emotions; learn to deal with them. You’ll be a better leader for it.
This is a question that is asked but not vocalized, so you may have to bring it up yourself. In any crisis people look closest to home first. That’s nothing to be ashamed of—it comes from the survival instinct in all of us. But sometimes, when we realized we’ve stopped thinking about the big picture and have focused on our own situation, we feel guilty.
As a leader you need to remember that people are thinking about the effect on their own lives even though that might not be what they’re saying. You might have to say it for them. You might have to bring up a question you know you can’t answer. How’s that for walking out on a limb voluntarily?
The same issues we explored for the last two answers apply here. Just because you don’t know the complete answer doesn’t mean you can give an answer and promise more information as it becomes available. Remember to keep your promises, however, or none of the good will you had before the crisis will last.
If you ignore the advice from the last question, you probably won’t have to face this question. Not what I’d recommend, however. When people ask What is coming next?, it is good news. This question means they can see a little beyond the immediate, and it is usually an indication that you’ve been doing a good job of answering the What’s happening? question.
At any given time during a crisis, you may or may not have an answer to this question. That’s okay. Just continue to tell what you know and what you can tell when you can tell it. Make the time of your next update common public knowledge and keep it, even if you have nothing new to add. Be visible. When you see some future possibilities that you can share, do so. Label them as speculation or good bets or whatever term actually describes their probability. If they become more probable, announce that. If they fade as possibilities, announce that.
Three things a leader can do wrong during a crisis are to disappear, to start and then stop communications, and to make promises in the heat of the moment that they can’t keep later. Practice not doing these three things when there isn’t a crisis, and you’ll do okay when there is.
The response to this question is less about completeness than it is about frequency. In the midst of a crisis, leaders can have an unimaginable list of people competing for their time and attention. It appears that the people on their teams often go to the bottom of the list. I think this is a mistake. Your people will be patient and understanding because you have, of course, been straight with them before this situation arose, but they need something to be patient and understanding about.
Don’t fall into the trap of thinking you should wait until you’ve gotten everything figured out or have a complete picture before talking to your team. Frequent communication in settings where they can physically see you is best. Even when there is nothing new to say, visibility always works in your favor.
Take a deep breath before you talk. Calm yourself. Make good eye contact. Let your feelings show appropriately. Finish by promising an update and KEEP YOUR PROMISE.
This is the BIG question, and only you can answer it. But answer it you must. Leaders owe it to themselves as well as the people they lead to go deeper into their own motivations, their hopes, and their dreams. Business schools don’t require a course in “Understanding Your Personal Mission” for graduation, nor do many family conversations involve parents sharing their purpose in life with their children. Most of us grow up believing that scores get kept based on things like home runs hit, beauty contests won, and amounts on annual W-2 forms. What a pity.
Think of a person who had a great positive influence on your life. How did that happen? Was it the size of their office that so impressed you that you decided right then and there that you were going to strive to be a great leader? Was it the tale of an exotic vacation, a fancy car, or a prestigious title that convinced you to follow someone’s footsteps? I rather doubt it. More likely it was a quiet word spoken at the right moment, an encouraging smile after you spoke up at a meeting, or a short note of congratulations for a job well done that caused you to say, “This is a person I want to emulate.”
My friend Mary Marcdante said, “When you’re on purpose, life fits.” How does your life fit these days? If tomorrow were your last day on this planet, would your list of regrets be longer than your list of accomplishments? People who are clear about the meanings of their lives find it much easier to make decisions about the big things, to prioritize the activities that fill up their days, and to know, really know, what’s important. There is great peace of mind in knowing how to answer if someone asks, What gives your life meaning?
I was doing a team-building session for a group of system-types in a large organization. We had claimed our space in the corporate conference center and made it ours for the two days of our session. By the afternoon of the first day, it was a mess. Flipcharts covered the walls, candy wrappers littered the floor, and colored makers were everywhere. Subgroups were taking the challenge of designing and producing a race-winning paper airplane seriously. The groups had decided to put some distance between each other to avoid industrial espionage and left the room to work outside in the warm spring sunshine. I was alone in the meeting room.
The door opened and a three-piece-suit type stuck his head in the room, looked the space over and said, with a touch of disapproval, “What’s going on in here?”
“A session on team building,” I calmly replied. “Oh,” he said as he backed out of the room, “You’re not doing real work then.”
I no longer react to such ignorance; I just feel pity. All those people who haven’t figured out that learning can be fun, work can be fun, and fun can be work, just don’t get it. Organizations thrive when people have fun as they work together. Leaders are the ones that make having fun at work a legitimate behavior.
Fun. Ah, you remember fun, don’t you? What do you do just for fun? Think about the last time you grinned from ear to ear, giggled, or laughed out loud. That was a hint, you were having fun. Hopefully it’s not taking you too long to think of an example. The more confusing, demanding, and complicated our lives become, the more we need fun as a counterbalance. On really stressful days in our office, we’ve been known to go outside to make snow angels, have a Koosh ball battle, or dissolve into fits of tear-producing laughter over really stupid jokes. What happens during stressful times in your office?
How do you feel about fun? Is it an integral part of your work and personal life? Do you believe it has a place in your off-duty life, but not in the workplace? Is fun a word that’s lost its place in your vocabulary? Think about it. You never know when someone might ask!
Did the word “love” in this question make you raise an eyebrow, cough nervously, or think about moving on to the next article? These questions are going to get increasingly personal as the pages turn, and you’re going to have to make a decision about whether or not you’re going to stay with them. Being a leader requires that you go to a deeper level instead of staying on the surface. Oh, you can manage by skimming the top of issues, emotions, and people, but you can’t lead from there.
Leadership requires thinking about and acting on things that occur beneath the surface. It requires that you care enough to confront. People who have heard me talk about teams have heard me say, “Hate is not the opposite of love. Apathy is.” Leaders can’t be apathetic. So we need to talk about love, enthusiasm, fun, and meaning. Can you handle that?
What do you love about your job? I hope it doesn’t take too long for you to answer. It’s easy for leaders to get so caught up in all the important things they’re supposed to do that they forget the things that brought them to their profession in the first place. I remember when my Aunt Elsie, who became a nurse during World War II, realized that she wasn’t happy being a nurse because nurses no longer spent much time with patients. Her first impulse was to quit nursing since the part of the job she loved the most no longer occupied most of her time, but she came to understand that, by changing the kind of nursing she was doing, she could do more of what she loved. She left the hospital setting and became a visiting nurse. She devoted the rest of her nursing career to direct patient care.
So let me ask the question again. What is the part of your job that you love? The part you would do if they paid you or not? What are the ways you can work more of those activities into your schedule?
Just one other thought. What about loving the things you have to do? There is a great greeting card that says, “In order to love what you do, don’t do what you love, love what you do.” Pretend I’ve just sent you that card. Hold it in your hands, stare at it for a while, and ponder the message. Just some more food for thought.
Everyone gets down in the dumps. The trick is not to stay there. Especially when you’re the leader. So, how do you re-ignite your enthusiasm? I call my grandson Quinn. At the time I’m writing this he’s twenty-one months old, and his favorite word is WOW! (The caps and the exclamation mark are deliberate—you can hear them both in his voice.) When I call, no matter what day, what time, my son Paul says, “Quinn, do you want to talk to Grandma?” I can hear him running to the phone saying “WOW!” I really wouldn’t need the conversation (and truth be told, at twenty-one months it isn’t much of a conversation) to go on. My pirit is lifted from whatever pushed it down by a simple word delivered with enthusiasm, “WOW!”
What about you? Do you take a walk around the plant? Substitute a session at the gym for lunch? Meditate? Pray? Call your mother or your favorite uncle? See, it doesn’t matter what you do. It does matter that you have something that you know will work, that you do right away. Something you can do without thinking, and that works about 98 percent of the time. Something that doesn’t take much time, expense, or equipment. Because you’re the leader. Your team needs you to be enthusiastic. It’s a big part of your job.
Please don’t relegate this to some of that silly “Life is just a bowl of cherries” nonsense foisted on a gullible population by overpaid motivational speakers. This is about hope, an overlooked attribute that should be a leader’s stock-in-trade. Leaders owe their people hope at the same time they’re providing the truth about tough situations. It’s their job to be role models for re-igniting enthusiasm when times are difficult.
So you need a plan. What fires you up? A day off to re-group? A vacation to re-create yourself? A conversation with your favorite customer? A talk with your newest employee? An e-mail to your mentor? A phone call to Quinn? I’ll be glad to share the number.
I’d like you to try a little experiment. Remember the first day of your first real job. What happened that caused you to hide the expression on your face so no one else could see the silly grin that spread from ear to ear? Remember what triggered the response and what the response felt like.
Cynicism is a disease that is pervasive in our society and, like a cancer, it holds the possibility of our death. Listen to people in your workplace talking about a new hire. “Did you see the new kid in accounting? Grinning from ear to ear, filled with new ways to fix all our problems.” “Yeah, what a hoot! Don’t worry, just give him a month, and this place will wipe that grin off his face.”
Variations of that conversation get repeated over coffee in organizations from coast to coast and I’ve never heard of one incident of a leader who has walked over and said, “Excuse me, but don’t ever let me hear something like that again! In our organization we want people to join us all fired-up about the possibilities and to stay that way for their entire career. And, by the way, if you don’t feel excitement about what you do here on a daily basis, maybe your résumé needs dusting off!” Can you see yourself delivering that message? I hope so. In order to deliver that message convincingly, you need to be enthusiastic about your job and show it. Not necessarily in big ways, but in small, consistent ways. Body language, tone of voice, expressions of glee, and expressions of concern are all ways people make judgments about how you’re feeling about your job. Leaders who are excited about what they’re doing on a daily basis create environments where cynicism has a hard time taking root.
As a leader, you are not, however, expected to be up all the time; you do get to be human. Discouraged, tired, and frustrated happen to all of us. You do need to have strategies to make your own attitude adjustments and, upon occasion, do them publicly. A lot to ask of a leader, isn’t it? Just remember, it’s why they pay you the big bucks.
