Leading Through Inflation

What kind of leader are you when everything costs more, cash dries up, and your old playbooks stop working? Ram Charan and Geri Willigan’s Leading Through Inflation: And Recession and Stagflation isn’t just a survival manual—it’s a guide to thriving in an era of accelerating uncertainty. Charan argues that inflation reshapes every dimension of business: from cash management and pricing to leadership psychology and business models. The book’s message is clear—leaders must act fast, think broadly, and turn crisis into opportunity.

Charan’s central argument is that inflation is not merely an external economic phenomenon; it’s an internal leadership test. Those who wait for central banks or government action will fail. Instead, leaders must mobilize their entire organizations—finance, sales, operations, HR, and even the board—to regain control over cash, pricing, and decision-making. Inflation, Charan insists, is everyone’s business, because it affects every transaction, relationship, and expectation within the company.

Seeing Inflation as a Leadership Arena

Rather than viewing inflation as a temporary disruption, Charan presents it as a transformative moment—a period when strong leaders can reset their businesses for the next decade. He recounts his first experience confronting inflation in the 1980s at General Electric under Jack Welch, where he built a program called COIN (“Coping with Inflation”). The lesson remains the same: inflation punishes slow movers and rewards decisive, creative ones.

Through examples like DuPont, Catalent, and TVS Motors, Charan shows that those who respond decisively—raising prices early, locking in loans, and restructuring operations—emerge stronger. He warns that inflation’s effects are cumulative and psychological: expectations of rising prices accelerate hoarding, distort value, and shift power along supply chains. To stay afloat, leaders must play offense, not defense.

From Panic to Playbook: The Tools for Acting Quickly

Charan’s framework doesn’t rely on abstract economics. It’s hands-on, tactical, and universal. He structures the book around seven actionable areas: understanding inflation’s mechanics, creating a “war room” for early warnings, managing cash with laser precision, changing pricing philosophy, cutting costs strategically, renewing the business model, and mobilizing every business function.

• Inflation literacy: Learn how inflation traps cash, distorts decisions, and can turn yesterday’s strategic investments into today’s liabilities.
• War-room discipline: Build quick feedback loops and data dashboards to react in real time to volatility.
• Cash obsession: Shift focus from paper profits to liquidity and develop metrics to detect cash traps early.
• Pricing mastery: Move from timid pricing to dynamic, value-based models and train sales teams to renegotiate fast.
• Smart cost-cutting: Eliminate waste but protect innovation and customer relationships.
• Business model renewal: Rethink who your best customers are, what products make sense, and how digitalization can bring sustainability to your margins.
• Shared responsibility: Empower every function—from HR to the board—to act with urgency.

Why This Matters Now

Charan’s approach is not theoretical; it’s urgent. Inflation and recession create a perfect storm that exposes weak leadership psychology. Many executives, conditioned by decades of low interest rates and cheap capital, are frozen by “analysis paralysis.” Charan urges leaders to evolve their mindset—to shift from “grow, grow, grow” to “strengthen, solidify, and strategize.” This psychological adaptability, he argues, is the differentiator that builds resilience now and competitive advantage later.

In sum, Leading Through Inflation is about leading transformation in disguise. It teaches you to tighten control without losing creativity, to defend cash while investing in digital tools, and to keep people aligned and confident when fear dominates the economy. Charan’s ultimate message is that leaders who proactively adapt can turn inflation’s chaos into a launching pad for future growth—and that moment of adversity may be the proving ground of your career.

Ram Charan begins the journey by revealing inflation’s less obvious dangers. He calls inflation an invisible tax on business discipline: it traps cash, erodes margins, reorders competition, and changes human psychology. You might think rising prices are simply something accountants track—but Charan insists that inflation touches every function, from marketing to HR.

The Eight Universal Truths of Inflation

Charan outlines eight truths that all leaders must understand. Inflation consumes cash by trapping it in inventory and accounts receivable. Price hikes roll through supply chains like a freight train, upsetting power balances between producers and retailers until consumers push back. Aggregate metrics like CPI mean little unless you analyze effects at the micro level—by product, region, and customer segment.

Perhaps most dangerously, inflation’s effects compound. A few years of moderate inflation build devastating cumulative pressures on cost structures. Psychological reactions intensify the cycle—people hoard goods, suppliers frontload costs, and competitors chase perceived demand spikes. The result? Planning based on yesterday’s numbers becomes a liability today.

The Bright Side of Inflation

While frightening, inflation also cleanses inefficiency. Excess capital is burned away; weak players collapse, leaving room for decisive companies to consolidate. Charan calls this “the silver lining.” It’s a moment to reset your business model, focus on high-value customers, and use cash and technology to optimize productivity. Companies that pivot toward automation, digitalization, and customer differentiation will emerge leaner but stronger.

Charan provides real examples: Chanel raised prices three times in 2021 to protect margins and brand prestige. Other leaders used inflation to eliminate distractions and improve focus, cutting low-margin SKUs while investing in future-ready technology. (In contrast, economist Mohamed El-Erian’s commentary on producer-price signals aligns with Charan’s idea that leaders must read the economy through leading indicators, not lagging averages.)

The Leadership Challenge

Most CEOs today have never managed through high inflation. Charan urges leaders to educate everyone in the organization about how inflation affects daily operations. If only supply-chain managers feel the heat while sales, marketing, and HR continue “business as usual,” failure is imminent. The company must unite around inflation literacy, from executives to the board. Only then can leaders turn rising costs into competitive advantage and psychological stability across the enterprise.

Charan’s second prescription is practical: build a “war room.” Inflation and recession are not slow-moving events—they are waves that strike suddenly. A war room gives leaders a centralized space to collect signals, interpret them, and act quickly. Without it, decisions lag and opportunities vanish.

Turning Anxiety into Action

When prices started spiking in 2021 and 2022, Catalent CEO John Chiminski convened weekly meetings with his top team to confront shortages and wage inflation. He refused to rely on forecasts claiming inflation was “transitory.” Those war-room discussions sparked concrete strategies: wage adjustments, revised pricing, and cost initiatives called Total Cost Excellence. Catalent’s resilience came not from luck but from speed.

DuPont’s Ed Breen applied a similar structure: regular leadership meetings equipped with real-time data from procurement and logistics. His team reacted to rising freight and gas costs immediately, passing price updates down the value chain before competitors even noticed. Timing, Charan stresses, matters as much as strategy—the first mover controls the narrative.

What to Monitor

Leaders should build dashboards tracking external and internal signals: customer cancellations, inventory shifts, payment delays, and commodity fluctuations. Granularity is key—know inflation’s impact on each product segment. Digital tools can scrape public data and identify changing consumer patterns, like Walmart’s shift toward cheaper private-label goods as inflation bit into grocery budgets.

Charan uses Builders FirstSource CEO Dave Flitman as an example of forward-looking leadership. Flitman planned “for bad times during good times,” mapping strategies for downturns of varying severity. His company adjusted debt maturities, trimmed organizational layers, and optimized truck turnaround—all derived from war-room foresight. By the time housing slowed, they were ready.

Prediction and Planning

Charan warns that inflation isn’t the only threat—stagflation and recession will follow. War-room reasoning helps you pivot from forecasting to scenario planning. Ask tough questions: Which customers will fail? What macro factor—a Fed rate hike, energy shock, or geopolitical event—could collapse liquidity? As Charan puts it, leaders must “reason beyond data” to predict possibility. Companies that plan through downturns, not around them, maintain velocity even when the economy stalls.

Charan makes it blunt: in inflationary times, cash is everything. Forget revenue percentages—what matters is liquidity. Inflation consumes cash invisibly; accounts receivable stretch, inventory bloats, and debt traps multiply. The leader’s job is to safeguard liquidity before profits vanish.

The Balance Sheet Mindset

For decades, low interest rates lulled companies into neglecting balance sheets. Charan insists leaders must orient to cash flow rather than percentages. He cites DuPont CEO Ed Breen and CFO Lori Koch, whose relentless vigilance turned DuPont into a master of working capital. Weekly reviews, standardized metrics, and visible dashboards made cash a shared obsession.

Charan also describes Indorama Ventures under DK Agarwal, which fixed 68% of its debt at low rates and built a $2 billion liquidity buffer—an act of foresight after detecting inflation signals in late 2020. Agarwal’s risk management saved the company from future shocks, demonstrating how early moves compound resilience.

Avoiding Cash Traps

Accounts receivable and inventory are the biggest culprits. Charan urges leaders to watch payment delays and refuse long credit terms. DuPont measured “past-due percentages” per segment to discipline account management. A large U.S. bank even dropped commercial customers who consumed excessive balance-sheet cash. In inflation, generous terms aren’t generosity—they’re risks of insolvency.

High inventory is equally dangerous. Many companies—Walmart and Target among them—were crushed by inflated inventories of nonessential goods as consumer spending shifted toward necessities. Leaders must accelerate production cycles, reduce SKU counts, and even sell faster at slimmer margins to preserve liquidity.

Planning for Cash Continuity

Finally, Charan’s advice is to test all investments under inflation scenarios, just as he did in GE’s COIN program decades earlier. Develop forecasts with different inflation rates and see where cash runs dry. Prioritize spending through a five-tier framework: continuity of operations, digitalization, fixing supply-chain frictions, focused innovation, and essential capacity. Planning for cash today means ensuring survival tomorrow—and opportunity when the storm clears.

Charan calls pricing the most immediate lever for survival but the most culturally resisted one. Inflation demands leaders overhaul pricing structures—not just raise numbers. Whether through subscriptions, surcharges, or dynamic digital pricing, pricing agility is the lifeline between profitability and collapse.

Expanding the Pricing Toolkit

Four dimensions matter: mode (transactional vs. subscription), method (custom negotiation vs. index-based), model (value-based vs. cost-plus), and strategy (penetration vs. margin maximization). Each business must redefine these combinations for the inflationary world. A lumber company with index-linked pricing thrived as costs jumped—its margins rose automatically. Another, relying on slow customer negotiation, suffered.

Simon-Kucher’s consulting insights reinforce Charan’s recommendation: value-based pricing turns inflation into leverage. When contracts become untenable, renegotiate and redefine value. “Breaking a contract is discovering your worth,” Charan quotes consultant Adam Echter as saying.

Timing and Trust

DuPont’s leadership demonstrated how honesty preserves customer trust. It implemented multiple price hikes but always with rationale and transparency. When leaders communicate openly—showing that increases are universal and rooted in cost reality—customers respect the logic. Early movers gain credibility; late ones lose both margins and trust.

Charan advises frequent smaller increases over sudden large ones. Iterative pricing adjustments maintain customer engagement and avoid surprise shocks. Companies like Catalent renegotiated contracts mid-cycle with inflation-linked clauses—proof that flexibility paired with communication keeps relationships intact.

Customer Segmentation and Sales Fatigue

Tailoring prices to segment value prevents burnout. An outdoor goods CEO classified customers into high-value, reliable ones given premium service and low-value, price-sensitive ones charged index-adjusted rates. The result: EBITDA nearly doubled. Automating smaller account adjustments avoids overwhelming sales teams. Dynamic pricing software reduces manual stress, freeing teams to focus on big accounts and strategic conversations. In essence, smart pricing is not greed—it’s survival science.

You’ve probably heard “cut costs” before—but Charan reframes it: cut in ways that build resilience, not weakness. Inflation tempts panic, but smart cost-reduction fortifies the value chain. Catalent’s CEO John Chiminski exemplified this through his “Total Cost Excellence” program—empowering cross-functional teams to eliminate waste, not capability.

Thinking Beyond Your Four Walls

The key is collaboration. A shoe manufacturer in Southeast Asia used inflation to strengthen both suppliers and customers. Instead of passing on cost increases, the CEO improved efficiency in production and forecasting across the chain. Helping suppliers optimize machinery reduced raw material prices; guiding customers to buy seasonally minimized inventory shocks. The whole chain grew leaner and more profitable.

Charan highlights how reducing organizational layers boosted responsiveness. Trimming from nine to six layers made decisions faster, improving customer satisfaction. Cutting layers, not frontline strength, enhances agility—an approach echoed by Larry Bossidy’s philosophy in Execution: focus on capability, not bureaucracy.

Geographic and Structural Change

When costs ballooned, the same shoe company relocated managers closer to production zones, eliminating travel and communication lag. This made real-time problem-solving possible. Similarly, reassessing sourcing—like exploring Mexico or Caribbean countries—created logistical advantages and faster product delivery to U.S. buyers. Inflation thus triggered reinvention, not retreat.

Charan’s larger message: don’t isolate efficiency efforts. Help your suppliers cut cost, assist your customers in forecasting, and redesign roles to capture hidden value. Cost excellence in inflation means creating win-win structures that become long-term competitive advantages.

Charan insists that inflation doesn’t merely harm margins—it transforms entire industries. Business models that once thrived in high-consumption economies collapse under sustained inflation and lower consumer spending. The wise leader revises before forced disruption arrives.

Signs of Model Erosion

Identify when your profit formula no longer holds. Are customers dropping, or paying slower? Are past investments misaligned with today’s cash realities? Under inflation, some once-profitable segments vanish or become unviable. Charan warns against denial: acting early preserves flexibility and investor trust. Otherwise, stagnant earnings trigger valuation decline and pension burdens.

Elements of Renewal

Re-examine five components—customer mix, product mix, ecosystem partners, geographic footprint, and portfolio allocation. DuPont’s Raj Ratnakar emphasizes aligning exposure to stable regions and inflation-resistant industries. Indorama’s Agarwal adds risk management through currency hedges to protect emerging-market operations. Rationalizing SKUs reduces complexity and cash drag, while digitalization—automating pricing, demand prediction, and operations—creates lasting efficiency.

Charan regards digitalization as a survival multiplier. It’s not a luxury but a short project that releases cash fast. He cites examples like Li & Fung, which freed inventory through digital supply matching, and Larsen & Toubro, which improved receivable collection via automation. Each project costs less but accelerates decision cycles—the new backbone of business modeling.

The TVS Motors Transformation

TVS Motors’ Managing Director Sudarshan Venu embodied proactive renewal. Facing rising costs, he targeted premium customers willing to pay for innovation. By cutting dealer credit and moving to cash-and-carry, TVS didn’t just curb risk—it boosted efficiency throughout the chain. Channel financing became self-sustaining, and innovation accelerated. Microsegmentation of customers, paired with faster R&D cycles, lifted margins even as mass-market demand contracted.

Charan concludes: inflation divides businesses into those that contract and those that reinvent. The latter refine markets, enhance focus, and digitalize their processes. Renewal under constraint becomes a competitive edge—and a promise of endurance.

Charan’s final message rounds up his pragmatic vision: fighting inflation requires full organizational mobilization. CEOs, CFOs, HR, operations, marketing, and even the board must act like synchronized pilots of the same aircraft, constantly adjusting altitude and speed.

The CEO’s Leadership Psychology

The leader must first shift mindset—from chasing growth to preserving solidity. Charan urges CEOs to personally manage cash, pricing, and contracts. Communication must be frequent, transparent, and energizing. Inflation breeds fear; CEOs must trade certainty for conviction. Creating frequent forums for information sharing and honesty creates stability across functions.

Cross-Functional Responsibilities

CFOs become liquidity guardians—tracking working capital traps and redefining performance metrics around cash, not EBITDA. Sales teams rebalance segmentation and pricing agility. Operations modernize Capex-to-Opex decisions and digital dashboards. Procurement acts as intelligence hub, anticipating supply shocks. IT executes short-term digital projects to generate immediate ROI. HR redesigns incentives and KPIs to reflect new priorities, including cash flow and customer retention—metrics that mirror survival instinct rather than ambition.

Boards cannot remain spectators; they must recalibrate CEO incentives toward liquidity and speed. Charan advises boards to challenge management regularly with scenario-based questions and to revise long-term compensation structures to real-dollar outcomes. As in Pay Governance’s pandemic study, performance curves may shorten, and qualitative judgment gains weight.

The Integration Imperative

Charan’s ultimate takeaway is organizational unity. Inflation crushes siloed decision-making. A company’s resilience lies not in isolated excellence but in cross-functional synchronization: finance feeding data to marketing, operations informing investor relations, HR teaching everyone inflation literacy. Communication, transparency, and collective adaptability turn economic chaos into coherence. As Charan closes, leadership during inflation isn’t about survival—it’s about transformation into a smarter, faster, more connected enterprise ready for the next wave.