October 15, 2009

Leading in Times of Crisis

I wanted to share with you the summary of my remarks at the World Business Forum this past week:

World Business Forum
October 6, 2009
New York, NY

Leadership in Times of Crisis

It has been said that “a smooth sea never created a great mariner.” The same could be said of any business leader managing an organization during stable times. With the world still reeling from the global financial crisis and the highest unemployment rates in decades, it was fitting for best-selling author and Harvard Business School Professor Bill George to keynote the 2009 World Business Forum with his presentation on leading in a crisis.

Fingers point to sub-prime mortgages, credit default swaps and excessive greed at the center of the economic collapse, but George lays blame on the failed leadership who ignored risk and placed short-term profit ahead of long-term strategy. “Ben Bernanke and Henry Paulson with limited options did the best they could. Both were able to step up. The crisis kept imploding, but they saved the system. This crisis is an opportunity for true leaders to step forward,” said George.

George used his keynote address to the 2009 World Business Forum to challenge the community of leaders. He asked the audience to consider:

  1. Is this crisis your defining moment?
  2. Are you prepared to step up and lead?
  3. Can you stay on your “True North” course, no matter how great the pressures or temptations
  4. How can you make a difference in the world? This is the ultimate fulfillment of leading in a crisis.

In his newest book, 7 Lessons for Leading in Crisis, George crafted a program to help bring about success and put the catastrophe in perspective as the ultimate test of a leader. He shared those essential lessons with the audience:

It begins with facing reality, starting with yourself. Denial will only make things worse. Success in a crisis can only be achieved when you identify and acknowledge your role and admit your mistakes. This will also open the door for others in the organization to admit their own errors, which will allow quicker access to the root of the problem and its solution.  

Don’t be Charles Atlas. Get the world off your shoulders. Turning to others, both internally and externally, will be vital in helping endure and weather the crisis. Allow your team to help you build your resilience. Leaders are more effective when they ask for help.

Dig deep for the root cause. Trust, while always important, is even more vital in this step. You must trust your team, but keep in mind it is up to you to verify all aspects of the crisis.  Information withheld will make it impossible to survive, and leaders must overcome fears of digging deeper.

Prepare for the long haul. Never underestimate the severity of a crisis. The situation will often worsen before improvement, so quick response to early warning signals is critical. Crises have long roots, making it prudent to take decisive action and have a reserve of cash. “If those in the financial crisis had been preparing for the long-term, the outcome may have been different,” said George.

Never waste a good crisis. “In crisis it’s your opportunity to make a difference.” View adversity as the best opportunity to make fundamental changes in an organization, and resist the tendency to hunker down until the storm passes. Leaders should take advantage of a crisis to reinvent the organization.

You’re in the spotlight. Follow your “True North” and get in front of the crisis by being open and publicly take responsibility. Internal and external communications collide during crisis, and it is essential to be transparent to be considered credible. Talk confidently with your people; don’t just leave it to managers. Be sure your people hear and see your direct communications. According to George, “As a leader you have two choices; you can put out a bland message, or you can get out and tell your story. Be honest; be truthful.”

Go on the offense. Focus on winning now. Use the opportunity to shape markets to your advantage while your competitors are paralyzed by the situation. “You can’t just have a defense team; you need an offense team. You have to do both simultaneously.”

Rethink your industry strategy:

  1. Shed your weaknesses.
  2. Reshape industry around strengths.
  3. Invest during downturn.
  4. Keep key people focused on winning.
  5. Foster company image as industry leader.
  6. Implement rigorous execution plans.

In his conclusion, George quoted anthropologist Margaret Mead, “Never doubt the power of a small group to change the world. Indeed, it is the only thing that ever has.” It is the responsibility of all of us to ensure that our efforts contribute to the solution and diminish the world’s problems.