Robert Miller: Business leaders and policy makers must break free of the recession state of mind

THERE is no question that these are difficult times for the Scottish economy. Growth is low, unemployment is high and the latest public borrowing figures show the UK’s deficit standing at more than £1 trillion.

The truth, however, is more nuanced than the headlines may have us believe and the solution is not to cower and wait for the bad times to roll away.

A change of mindset is required to allow firms to tackle the current economic problems with creativity and efficiency. Our business leaders and policy makers must break the current cycle of survival-oriented behaviours if we are to trade our way back to prosperity.

Thoughts influence behaviour. So the danger is that our beliefs become a self-fulfilling prophecy.

This situation, known as The Pygmalion Effect, can be made worse by a poor outlook. We know that increased stress tends to impair functions like creativity and decision-making.

When times are good we may be collectively prone to taking greater risks – something all too evident in the recent financial crisis – but the flipside is to become overly cautious when circumstances are perceived as more threatening.

The important point here is that threats are “perceived”. How threatening they are depends on a business’s interpretation of the facts. For example, there are notable differences in recent surveys between business leaders’ perception of how the general economy will fare over the coming years compared with their own company’s likely performance.

Our leaders – in both business and politics – have a responsibility to make the decisions as rational as possible. The first step in this process is challenging the view that poor economic times are inevitable over the next few years.

We can also start challenging conservative behaviours about investments, changing reward systems to focus on creating longer-term value and promoting positive news stories.

Finally, we must stop using the threat of recession as an excuse for overdue organisational change.

If our economy is to recover, we must challenge irrational beliefs and demonstrate visible leadership. Just as thoughts influence behaviour, behaviour influences thoughts. The time for action is now.

• Robert Miller is director of business psychology at McAdam King Business Psychology