Leadership in a Slowing Economy: Key Steps to Protect Your Business

By Dr. Mary Kelly, PhD Economist and Leadership Strategist

A slowing economy is not a red light; it is a yellow one. It does not mean stop; it means proceed with intention. For leaders across industries, these moments offer an opportunity to assess, adapt, and accelerate in smarter ways.

If Q1 of 2025 taught us anything, it is that conditions can change quickly. With GDP ticking down, tariffs shaking up supply chains, and interest rates creeping higher, leaders need to be proactive, not reactive.

I received a lot of notes after my article last week, so here is more on what should leaders do when the economy slows down.

1. Refocus on Efficiency — Not Just Cost-Cutting

When growth slows, many leaders instinctively reach for the red pen. And yes, expense management always matters. But long-term resilience does not come from slashing, it comes from strategic efficiency.

• Audit your operations for areas where processes can be streamlined, systems automated, or waste eliminated. Now is when we can ask first if we can use AI to make things more efficient and effective.
• Cross-train your team to build flexibility and deepen skillsets. People need to understand how the rest of the organization works so they can best support each other. Get rid of silo-mentality and encourage collaboration.
• Review vendor and supplier contracts for potential renegotiation. Your vendors and suppliers are your partners for your success, so find win-win solutions. Can you combine orders or deliveries with their other clients? Can you work collaboratively with your competitors? I know, it sounds odd, but my closest competitors are also my closest collaborators, and we actively help and recommend each other.

The goal is not just to save money; it is to increase value per dollar.

2. Stay Close to Your Customers

During economic slowdowns, customer needs and spending behaviors shift. What they valued in a booming economy may not resonate as much now.

• Revisit customer conversations. What are their pain points today?
• Reassess your value proposition. Are you positioned as essential or optional?
• Build loyalty through personalized service, flexibility, and proactive communication. Communicate more than you think they need.

If you understand your customers better than your competitors do, you win — even in a downturn.

3. Invest in Your People, Especially Your High Performers

In uncertain times, your best people are quietly weighing their options. A slowdown is no excuse to pause leadership development, training, or career planning. In fact, now is when they need your guidance, direction, mentorship, and professional growth.

• Hold one-on-one check-ins not for performance, but for personal alignment and career direction. If you need help, the book You Next: A Step-by-Step Guide to Taking Charge of Your Career is great for supervisors and managers who do not know how to advise their employees. There are talking points, templates, and career progression guides to make the conversations easier.
• Use tools like the Leader’s Blind Spot Assessment to grow self-awareness and leadership capacity. That is free for you at https://productiveleaders.com/leadersbsassessment/.
• Provide visibility into the future — people do not fear change as much as they fear the unknown. Provide reassurances and tell people what you know and what you are planning. People are worried when they feel they do not know what is going on.

The companies that emerge stronger from slowdowns are those who grow their people through them.

4. Reiterate Your Vision and Mission

When external conditions feel shaky, internal stability becomes vital. That means reconnecting teams with the “why” behind the work.

• Talk about your mission and vision more, not less.
• Highlight how your products and services make a difference.
• Celebrate wins that align with your core values.

People can thrive during difficult times if they believe in where they are going and why it matters.

5. Be the Calm in the Chaos

We say this a lot in the military special force’s world: calm is contagious. Leadership is not about knowing everything. It is about creating clarity, confidence, and courage when others feel anxious. In times of economic uncertainty, your demeanor and how you plan, and act sets the tone.

• Share economic updates with context — not just headlines. Headlines are designed to make people anxious and reactive. Provide more information so people understand the full picture.
• Focus on what can be controlled. You cannot control the weather, politics, the stock market, or who wins the French Open. You can control how you take care of your health, your family, time with friends, and how you approach work. Focus on what you can control and stop wasting time on social media and being upset by what you cannot control.
• Use tools like the 5-Minute Mindset Plan from the Leadership Vault to help your team stay centered and focused.

Slowdowns test leadership by revealing what is real. Be the leader people remember for bringing direction during the drift.

6. Do not Wait

The best leaders are not waiting for conditions to get back to normal. This is the new normal. The best leaders, entrepreneurs, and workers are positioning for what is next.

• Explore adjacent markets or offerings that serve emerging needs.
• Evaluate what should stop, what should start, and what needs to evolve. (I recently received a note on that idea, and I am going to create a worksheet to make that easier. Stand by.)
• Build best and worst-case scenario plans, so your team knows how to move when opportunity strikes.

Economic slowdowns are breeding grounds for innovation if you are willing to look ahead while others look down.

Final Thought: Leadership Is a Long Game

A slowing economy might tempt you to retreat, delay, or play it safe. But history tells us that downturns are the crucible in which great leaders are forged.

This is the time to communicate more, not less. Develop more, not less. Think bigger, not smaller. The path forward may be slower, but that does not mean it cannot be smarter.