Seven Lessons for Leading in Crisis
Filed under: Crisis Management, Leadership Callling, Leading Change, Leading Churches
The Wall Street Journal – February 24, 2009
Bill George
Lesson #2: “No matter how bad things are, they will get worse.” Faced with bad news, many leaders cannot believe that things could really be so grim. Consequently, they try to convince the bearers of bad news that things aren’t so bad, and swift action can make problems go away.
This causes leaders to undershoot the mark in terms of corrective actions. As a consequence, they wind up taking a series of steps, none of which is powerful enough to correct the downward spiral. It is far better for leaders to anticipate the worst and get out in front of it. If they restructure their cost base for the worst case, they can get their organization healthy for the turnaround when it comes and take advantage of opportunities that present themselves.
Lesson #3: “Build a mountain of cash, and get to the highest hill.” In good times leaders worry more about earnings per share and revenue growth than they do about their balance sheets. In a crisis, cash is king. Forget about EPS and all those stock market measures. The question is, “Does your organization have sufficient cash to survive the most dire circumstances?”
Goldman Sachs, where I serve on the board of directors, anticipated the difficult times and built up its cash reserves. When the markets got really bad, Goldman had adequate cash reserves to weather the storm.
Lesson #4: “Get the world off your shoulders.” In a crisis, many leaders act like Atlas, carrying the weight of the world on their shoulders. They go into isolation, and think they can solve the problem themselves. In reality, leaders must have the help of all their people to devise solutions and to implement them. This means bringing people into their confidence, asking them for help and ideas, and gaining their commitment to painful corrective actions.
Lesson #5: “Before asking others to sacrifice, first volunteer yourself.” If there are sacrifices to be made – and there will be – then the leaders should step up and make the greatest sacrifices themselves. Crises are the real tests of leaders’ True North. Everyone is watching to see what the leaders do. Will they stay true to their values? Will they bow to external pressures, or confront the crisis in a straight-forward manner? Will they be seduced by short-term rewards, or will they make near-term sacrifices in order to fix the long-term situation?
Lesson #6: “Never waste a good crisis.” This piece of advice comes from Benjamin Netanyahu, the next prime minister of Israel, at the panel I chaired in Davos.
When things are going well, people resist major changes or try to get by with minor adaptations. A crisis provides the leader with the platform to get things done that were required anyway and offers the sense of urgency to accelerate their implementation.
Lesson #7: “Be aggressive in the marketplace.” This may sound counter-intuitive, but a crisis offers the best opportunity to change the game in your favor, with new products or services to gain market share. Many people look at a crisis as something to get through, until they can go back to business as usual. But “business as usual” never returns because markets are irrevocably changed. Why not create the changes that move the market in your favor, instead of waiting and reacting to the changes as they take place?
The Bottom Line:
In a crisis we learn who the real leaders are, and whether they have the wherewithal to stay on course of their True North.
About the Author
Bill George, author of “True North,” is a professor of management practice at Harvard Business School. He is also the former CEO of Medtronic and serves on the boards of directors of ExxonMobil, Goldman Sachs and Novartis.
In Search For Silver Bullet
Filed under: Crisis Management, Leadership Callling, Leading Change, Servant Leader
In Jim Collins latest book How The Mighty Fall he talks about companies that start on a systematic downward spiral that leads ultimately to total failure as an organization. One common problem he found is that when they finally realize they are in serious trouble rather than dealing with real problems they search for the quick fix approach of finding the right silver bullet.
When full blown panic sets in there is a frantic search for several silver bullets that can be dramatic big moves such as game changing acquisitions or a risky new strategy or an exciting innovation or new leadership, anything that can save us. The following is list of several silver bullets observed:
1. Grasping for a Leader as Savior: The board responds to threats and setbacks by searching for a charismatic leader and an outside savior.
2. Panic and Haste: Instead of being calm, deliberate, and disciplined, people exhibit hasty, reactive behavior, bordering on panic.
3. Radical Change and Revolution with Fanfare: The language of revolution and radical change characterizes the new era: New Programs! New cultures! New Strategies!
4. Hype Precedes Results: Instead of setting expectations low—underscoring the duration and difficulty of the turnaround—leaders hype their visions initiating a pattern of overpromising and under delivering.
5. Initial Upswing Followed by Disappointments: There is an initial burst of positive results, but they do not last; dashed hope follows dashed hope; the organization achieves no buildup, no cumulative momentum.
6. Confusion and Cynicism: People cannot easily articulate what the organization stands for; core values have eroded to the point of irrelevance; the organization has become just another place to work.
There are no quick fixes or silver bullets for organizations that have complex long term problems that have built up for decades. The new realities of the global economy did not create these problems it merely acted as a catalyst to reveal them.
Crisis Management
Every individual and organization at some point in time will face a crisis and the way they respond will determine if the situation potentially becomes fatal or they experience a complete and total recovery. I have learned a lot from personal experience on this subject over the years and probably the most important lesson is to be incredibly proactive and not stick your head in the sand and hope it will get better.
In Jack Welch’s great book Winning he gives some great advice on how he dealt with crisis situations at G.E. These are his five guiding assumptions:
1. The problem is worse than it appears—No matter how hard you might wish and pray; very few crises start small and stay that way. The vast majority are bigger in scope than you could ever imagine with that first phone call and they will last longer and get more ugly.
2. There are no secrets in the world, and everyone will eventually find out everything—Information that you try to shut down will eventually get out, and as it travels, it will certainly morph, twist and darken. The only way to prevent that is to expose the problem yourself and tell the truth.
3. You and your organization’s handling of the crisis will be portrayed in the worst possible light—The very nature of a crisis means that you and your organization will be portrayed in a light so negative you won’t even recognize yourself. Don’t hunker down. Along with disclosing the full extent of your problem you have got to stand up and define your position before someone else does for you.
4. There will be changes in processes and people—Crisis requires change. Sometimes a process fix is enough. Usually not because the people affected by the crisis demand that someone be held responsible.
5. The organization will survive, ultimately stronger for what happened—There is not a crisis you cannot learn from, even though you hate every one of them. After a crisis is over the tendency is to put it away in a drawer. Don’t, teach its lessons every chance you get.
Pull The Trigger
Filed under: Crisis Management, Leadership Callling, Leading Change, Personnel Development
There may be nothing harder to do as a leader than make the decision to terminate an employee. To be honest we feel to some degree we have failed and that is hard to accept.
This is especially true if we hired the person in the first place. Not only have they failed but now our performance as a leader may be in question also. We cannot let our own emotional need for personal success stand in the way of doing what is right for the organization.
There are three critical things that I must do as a leader before I feel that my responsibility has been completed prior to any termination. The first is to provide clear expectations of what is required in their job description. It is impossible for someone to meet your expectations if they have not been clearly communicated early and often.
The second important thing is to make sure the person has had adequate training and resources to complete their job successfully. It is not fair to ask someone to grow a particular area and not give them the financial and manpower assets they need to be effective.
The last issue for me is a comprehensive and ongoing feedback system that lets a person know exactly where they stand in the area of performance. It is not right to see someone make mistakes day after day and stick your head in the sand hoping it will go away only to drop a bomb on them at annual review or even worse an unexpected termination. If you do not have the leadership skills to positively confront someone about what they are doing wrong then you may be the one in the wrong job and not them.
If you have done all of these three things well and given this person every opportunity to improve and they don’t then you should feel no guilt or sense of failure. Never obsess on the five to ten percent of your staff that may need to go every year. What is extremely important is to remember the ninety to ninety five percent who are doing their jobs well and are watching to see if you have the character as their leader to pull the trigger.
The Power Of Momentum
Filed under: Crisis Management, Leadership Callling, Leading Change, Personal Development, Time Management
There are very few things more difficult to deal with in your personal or professional life than a loss of momentum. It can be brought on by some major tragedy or a series of small compromises over a very long period of time.
Eventually we get to a place where we start worrying about things outside our control and that drains us of what little emotional energy we have left. Also because we are so focused on the negative we stop doing the things we should and can do and that brings even more despair.
The only way to break this cycle is to start doing what you can do and build some small daily wins into your life. This principle works with individuals as well as organizations.
With every small win comes movement and that generates confidence that things are finally headed in the right direction. When we regain our confidence then we attempt even more things that product even bigger wins and the power of the momentum begins to put the wind back in our sails.
It is very ironic that when we get to the places of greatest difficulty in our lives it is the very smallest of things that can break the downward cycle. We are desperately searching for the big answer that is going to solve all our problems when the solution was right in front of us all the time.
The good news is that the power of momentum works in a positive way to an even greater degree than it does toward the negative. When you repeatedly do what you can do daily the positive flow of your life moves you beyond all the negative issues that may still be there but now they are in the proper perspective.
The Doom Loop
Filed under: Crisis Management, Leadership Callling, Leading Change
In sharp contrast to the breakthrough impact of the companies that practiced the flywheel effect all of the organizations that could not transition from Good to Great were caught in The Doom Loop. Instead of the consistent daily movement of the flywheel they went for the big impact event that would give the immediate impression of progress only later to regress into failure.
They were not willing to use the deliberate process of figuring out what needed to be done and then simply doing it. “The comparison companies frequently launched new programs-often with great fanfare and hoopla aimed at motivating the troops-only to see the programs fail to produce sustained results.”
They wanted the big event or the grand program or the new celebrity CEO that would allow them to skip the daily discipline of the flywheel and move immediately to breakthrough. The repeated pattern of this cycle consistently produced disappointing results and then reaction without understanding starts the loop all over again.
Peter Drucker commented on these companies, “The drive for mergers and acquisitions comes less from sound reasoning and more from the fact that doing deals is a much more exciting way to spend your day than doing actual work.”
The Doom Loop is a classic example of an organization continuing to do the same wrong things over and over again and yet somehow expecting different results. At the core of this problem is a leadership team that is more concerned with short term personal success than what is best for the long term benefit of everyone involved?
In the end this is not a strategy problem but a character one.