CRISIS LEADERSHIP
7 Lessons for
Navigating the Storm
Leading
in crisis requires a combination of skills and behaviors—personal and
professional—that can be mastered, says HBS professor Bill George. A crisis,
difficult as it is, also presents an opportunity to develop and grow. Q&A
and excerpt from 7 Lessons for Leading in Crisis. Key concepts include:
- In a crisis, remember your internal compass of values: When one strikes leaders often look for an "at-any-cost" quick fix in attempting to save face, says George.
- To ensure that economic recovery is long-lasting and that future business is sustainable, leaders must practice a clear set of principles.
- It's OK, even necessary, for leaders to be open with others, admit mistakes, and look to trusted friends and associates for advice and support.
- Use a crisis as an opportunity to reshape the market.
It
is tough to think positively in a crisis. Yet one overarching lesson in a new
book by HBS professor Bill George, 7 Lessons for Leading in Crisis
(Jossey-Bass), is exactly that: See crisis as a chance to develop and enhance
your leadership skills.
"Optimistic,
forward-thinking leaders are sitting on a rare opportunity, and they must be
systematic in how they take advantage of it if they want to make positive
changes," says George, a Professor of Management Practice at HBS and the
former chairman and CEO of Medtronic, which develops medical technologies to
treat chronic diseases.
“Crises offer rare
opportunities to make major changes in an organization because they lessen the
resistance that exists in good times.”
"Leaders
must be willing to ask for help," he continues. "They should rely on
a mentor, an internal management team, and an external support group. No one
can be an effective leader in a crisis by attempting to go it alone. Leaders
must be the first to recognize this reality and plan accordingly."
The
seven leadership lessons include:
1. Face reality, starting with
yourself.
2. Don't be Atlas; get the
world off your shoulders.
3. Dig deep for the root
cause.
4. Get ready for the long
haul.
5. Never waste a good crisis.
6. You're in the spotlight:
follow your True North.
7. Go on offense: focus on
winning now.
"Leaders
must also remember that they are in the spotlight during a crisis," adds
George, whose previous books include True North and Authentic
Leadership. "Everyone inside and outside the company is watching what
they do. It is imperative that they stay focused on their True North as it sets
a standard internally for principled business behavior and will make their
companies stronger over time."
George
explained more in an e-mail Q&A with HBS Working Knowledge. (An
excerpt follows from his new book, 7 Lessons for Leading in Crisis.)
Martha
Lagace:
What leadership gaps do you see today in business and society?
Bill
George: I
wrote 7 Lessons for Leading in Crisis to explore why so many leaders
fail to step up and lead during a crisis such as the global economic crisis of
2008-09. I found that many failed to follow seven universal lessons for leading
in crisis. I believe the root cause of the recent financial crisis was leaders
who practiced short-termism. Many business leaders focused primarily on
short-term results—the next quarterly report and the rewards that come from
short-term success—while ignoring their responsibilities to sustaining and
building the company's long-term fiscal health.
Ironically,
it was the Wall Street leaders who put so much pressure on corporate America to
play the short-term game who got hit with their own boomerang. As a result,
many of these leaders have departed the scene, just as numerous corporate CEOs
did in the wake of the Enron debacle earlier in the decade.
Some
of these leaders failed to follow their True North, the internal compass of
their beliefs, values, and principles that guide them through life. Breaking
away from one's True North becomes particularly prevalent when a crisis strikes
because leaders often look for an "at-any-cost" quick fix in
attempting to save face. These leaders either could not handle the pressures of
the crisis, or got caught up in the seductions of instant gratification that
offered them money, status, and power. In either case, they failed to face the
reality of the crisis and admit their mistakes.
There
is a noticeable void today of principle-driven leadership in business and
society. In the depths of a major crisis—much like the one we're in now—is
where a principled approach to leadership and decision-making is most needed.
The leaders who successfully navigate their organizations through crises are
ones who focused on their leadership principles and stayed true to their
values. Only by practicing a clear set of principles can we ensure that the
recovery is long-lasting and that future business is sustainable. As a society,
we need to get back to practicing values-centered leadership. That's the only
way we can restore integrity to leadership.
We
need fresh ideas to incentivize principled-centered leadership. How can we
create a corporate atmosphere where principles are honored along with
long-term, sustainable results? How do we prepare new leaders to abide by their
True North, even in the most severe crises? What changes does a leader need to
make internally to ensure that the company's values extend throughout the
entire organization? These are the questions that need answering, and it's up
to the emerging generation of leaders to answer them.
Q: It is a paradox that
leaders must inspire confidence in others, yet to be effective they should also
be self-reflective and recognize their own weaknesses. Please elaborate; you
write in your book that "learning how to express your vulnerabilities on
appropriate occasions is an emerging leadership skill."
A: One of the great myths of
leadership in recent years is that leaders have to appear strong and
invulnerable to mistakes and pressures. All of us without exception make
mistakes and will capitulate under enough pressure. The key is being open with
others, taking them into your confidence, admitting your mistakes, and looking
to them for advice and support. Rarely does anyone turn down a leader who
genuinely asks for help.
Yet
we're exposed regularly by the media to the stereotype of the flawless leader
who always has an answer and is never left questioning a decision. While most
leaders know this is a fantasy, they still struggle with admitting their own
vulnerability when a situation goes awry and crisis strikes. It's as if doing
so is tantamount to admitting failure as a leader.
This
tension is not necessarily surprising. Fortune 500 CEOs are some of the
most driven, results-oriented people on the planet. Because their jobs compel
them to demand a great deal from their employees, their companies, and their
products, most demand the same from themselves. In so doing, they are at risk
of letting their egos take over and letting their protective shells harden.
When things go wrong—which they inevitably do—they assume the fault lies
elsewhere. Yet in most cases the leaders bear a high degree of responsibility
for the problems, often as a result of the direct or indirect pressures they
put on their people.
Authentic
leaders find ways to resolve this struggle. Expressing humility is a great
skill because it not only brings leaders closer to their management teams and
employees, but also encourages similar candidness and humility in others. By
taking the first step in revealing their vulnerabilities, leaders encourage an
atmosphere where concerns and doubts are voiced. Potentially unforeseen
problems can be addressed sooner, and with a team focus. It's difficult to do,
but expressing vulnerabilities appropriately will make leaders more effective.
Q: For emerging or future
leaders, what lessons from your book would make them most effective in a
crisis? Which most apply to seasoned leaders? Which lessons are most
challenging or require the most practice and reinforcement?
A: Leaders are neither made
nor born. Like great musicians and athletes, they are born with certain gifts
that give them the potential to lead, but they have to develop their gifts in
order to become effective leaders. There is no better way to do so than leading
others through a crisis. I wrote 7 Lessons to help leaders learn about
leading through a crisis. There they will develop much faster than they will in
leading through good times, or studying how other leaders behaved in crises. As
the military learned long ago, there is simply no substitute for being in the
thick of a crisis and testing yourself.
“It’s difficult to do, but
expressing vulnerabilities appropriately will make leaders more effective.”
In
the midst of a crisis, Lessons #3 ("Dig deep for the root cause") and
#4 ("Get ready for the long haul") can be especially useful for
emerging leaders. Under the pressures of a crisis, there is a temptation for
less experienced leaders to jump to quick-fix solutions that may mask the real
problems. The only way to solve these problems is to understand their root
cause and implement permanent solutions. Furthermore, when confronting
significant problems, many leaders' first reaction may be that things can't
really be that bad. As we learned in the financial crisis, things will likely
get a lot worse. To survive the crisis, emerging leaders need to prepare for a
long struggle to defend against the worst conditions so they will be prepared
to pass through the eye of the storm.
For
seasoned leaders, the most applicable are Lessons #5 and #7, "Never waste
a good crisis" and "Go on offense: focus on winning now." So
often the go-to strategy for veteran leaders when a crisis strikes is to buckle
down and ride out the storm. They don't make any major changes. Instead, they
wait until the climate is right to resume normal operations.
Crises
offer rare opportunities to make major changes in an organization because they
lessen the resistance that exists in good times. Leaders should move
aggressively to take actions necessary to strengthen their organizations as
they emerge from the crisis. Coming out of a crisis, the market never looks the
same as it did going in. Leaders should see this as an opportunity to reshape
the market to play to their strengths, while shedding their weaknesses. While
others are licking their wounds, successful companies focus on winning now.
These are often difficult lessons for veteran leaders to heed.
For
many leaders, going on offense when they are in the depth of a crisis is most
counter-intuitive, yet it is the winning strategy. Like the Chinese character
for crisis that contains two symbols, danger and opportunity, crisis represents
the best opportunity to transform your business and to win in the marketplace.
Q: What are you working on
next?
A:I'm enjoying a new year of
teaching at Harvard Business School. My Authentic Leadership Development (ALD)
class has been phenomenal to work with so far. We now have four experienced
faculty members teaching four sections with 240 students, yet there is still a
long waiting list for the course.
I'm
especially enjoying mentoring the next generation of leaders and having them
mentor me. These young leaders are amazing people. I have great hope for the
positive ways they will make a difference in the world as they step into
important leadership roles. The financial crisis has a silver lining for them:
Many are rethinking what they want to do with their lives and their leadership,
rather than just "following the herd" into high-paying jobs that do not
nourish or fulfill them. As painful as these adjustments are, this will be a
healthy thing in the end.
I
continue to sit on the boards of Goldman Sachs and ExxonMobil. Both boards
require a considerable time commitment, but I am pleased to report that Goldman
has grown stronger through the financial crisis, and Exxon has done the same in
the precipitous drop in oil prices from $147 to $33 per barrel.
I
have spent a lot of time recently with leadership groups and the media
discussing the "7 Lessons" and applying them to the current economic
environment. Most recently, I have immersed myself into social media, thanks to
an amazing team I'm working with in Raleigh, NC, that is led by Zach Clayton
(HBS MBA 2009). I'm learning how to actively use Twitter as well as Facebook
and LinkedIn. I enjoy the interaction and dialogue that is sparked there. While
I'm an old dog learning new tricks, I believe that new media is reshaping the
way that human beings communicate, so I'm eager to spend more time engaging
with people online.
Lastly,
I look forward to spending even more time with my family. Penny and I just
celebrated our 40th wedding anniversary with a four-day trip to Bermuda, and
we're coming off a great summer in Colorado with our two sons,
daughters-in-law, and two grandchildren, who live in Munich and San Francisco.
There is nothing more fun or rewarding than the time we spend together.
Excerpt: 7 Lessons for Leading in
Crisis
By Bill George
By Bill George
How
do you take the global economic crisis, or any other crisis, and turn it into
an opportunity to transform your markets and your company? Here are 7 steps to
keep your organization focused on winning the depth of the crisis:
·
Step 1: Rethink your industry strategy. To figure out what your
markets will look like after the crisis requires a keen understanding of the
changing needs of your customers. One example from the current crisis is the
extent to which consumers have shifted from expensive luxury goods to more
practical items. That's why high-end department stores like Neiman Marcus and
Saks have fared poorly. Even fashion-forward discounters like Target have not
done well. This doesn't necessarily mean consumers have lost their interest in
upscale merchandise. Rather than returning to these same stores after the
crisis, are consumers more likely to be attracted to chic low-cost items and
trendy value-oriented merchandise? If this turns out to be the case, how can
your company take advantage of shifts like these?
·
Step 2: Shed your weaknesses. A crisis presents the
opening to eliminate your organization's weaknesses, especially if it is too
bureaucratic or too slow-moving to be competitive. That's what CEO Anne Mulcahy
did in cutting 28,000 jobs to enable Xerox to be competitive once again. Now
she is refocusing Xerox, long known as the plain paper copier company, on the
paperless, all-digital office. How can you use your crisis to shed your
organization's weaknesses to prepare for future competition? You will never
have a better opportunity.
·
Step 3: Reshape the industry to play to your strengths. The bold strategy coming
out of a crisis is to move your entire industry to make your strengths the
basis for competition while exposing your competitors' weaknesses. That's what
IBM, Apple, and Medtronic did. What strategies can you deploy to expose your
competitor's weaknesses? How can you shift the market to value your strengths?
In recent years, we have learned that using size to be all things to all people
doesn't work. To win in the emerging market, you need a highly focused strategy
that builds off your unique strengths.
·
Step 4: Make vital investments during the downturn. Intel and Exxon offer
evidence that you cannot wait to make vital investments you need to win in the
emerging market. When it appeared growth was slowing in the pharmaceutical
industry, Novartis CEO Dan Vasella made counterintuitive moves by expanding
Novartis's generic drug, vaccines, and consumer health businesses in spending
heavily on acquisitions to offer alternatives to patented drugs. Meanwhile, he
focused Novartis's pharmaceutical businesses more on targeted specialty drugs.
What investments must you make at the depths of the downturn to emerge as the
leader? Can you think the unthinkable and invest in a new strategic thrust when
you're on your knees? It takes courage to defy conventional thinking and launch
a bold new strategy when business is bad.
·
Step 5: Keep key people focused on winning. During a crisis there's a
risk that your entire organization gets so focused on keeping the ship afloat
that no one is planning ahead. Therefore, you should assign a small team of
highly talented people to devise the post-crisis strategy. It may seem risky to
pull key people out of crisis management to plan for the future, but this is
required to win. How will you reshape your organization's strategy to emerge
from the crisis as the winner?
·
Step 6: Create your company's image as the industry
leader.
With public criticism of Wall Street mounting and the industry defending
itself, emerging financial service leaders are envisioning changes needed in
capital markets. In a major policy address in April 2009, Goldman's Lloyd
Blankfein outlined industry-wide changes required to restore sound risk taking,
provide appropriate regulation, focus accounting on marking-to-market, and
establish long-term compensation practices that reward sustainable gains. How
can you recreate your company's image to be the emerging leader that
understands customer needs in the new environment?
·
Step 7: Develop rigorous execution plans. This final step is often
overlooked by visionary leaders who devise new strategies but fail to underpin
them with detailed plans for marketplace execution. Emergent strategies are
only as good as their execution. Sound execution requires not only attention to
detailed planning, but adaptability to changing market conditions to alter
tactics to meet customer needs. How effective is your organization in executing
its plans? Do you assign your best people to this task and measure them in
minute detail? Are your plans flexible enough to adapt to changing market
conditions, while still maintaining discipline? If the answer to all three
questions is affirmative, then you are well positioned to come out of this
crisis as the winner in your market.
Following
these 7 steps with clarity and rigor will enable your organization to emerge
from the crises you face as a leader in your field. By going on the offense,
you can gain competitive advantage and build your market position to sustain
your future growth and success. 
Bill
George is
a Professor of Management Practice at Harvard Business School AND Martha Lagace is the senior editor
of HBS Working Knowledge. http://hbswk.hbs.edu/item/6214.html
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