September 08, 2009

Microwave Meltdown: My First Business Crisis

It didn’t take long to encounter my first big crisis in business. As a 27-year-old going into my first line assignment, I was packing my bags to move to Minneapolis to become assistant general manager of Litton Industries’ microwave oven business when the news came over the radio. “The Surgeon General has just declared that microwave ovens may be hazardous to your health,” the announcer said.

The next morning I arrived at my new office to find chaos and fear wreaking havoc with people in the fledgling microwave oven organization, just as its first consumer products were being launched.  We had only one product, the microwave oven.  If the Food and Drug Administration (FDA) pulled it from the market, we were out of business. This event became the ultimate test for a young organization already suffering from weak leadership and a lack of confidence.

A week later the corporation’s executive vice president arrived on the scene. He arbitrarily directed us to recall the first one thousand products shipped, much to the dismay of our customers.  My first instinct was to challenge him because we thought the products were safe. He was correct, of course. He may not have had all the facts, but he had the wisdom to take the more conservative course.

His decision may have saved the business. It forced us to recognize that our designs were not robust enough to meet the pending Food and Drug Administration standards.  Nor did we have the disciplined quality control procedures to produce consistent products.

As we struggled to meet the emerging federal standards for microwave emissions, I learned just how tough a crisis can be.  Several nights I went into our factory at 3 am to work with the engineers and quality experts to determine whether we could start the production line the next morning. After nine months of wrestling with the problems that ensued, I said out of exasperation, “In business school I never realized it was this hard to make money.”

The lessons from this experience have stayed with me throughout my career and were especially useful years later at Medtronic.  I found out the hard way how important it is to get to the bottom of a problem, rather than fixing it on the fly.  I also recognized how easy it is to underestimate its consequences, especially when you’re receiving so much negative publicity.

I learned first-hand the importance of understanding the mindset of regulators and government officials and of building a cooperative, problem-solving relationship with them instead of being defensive.  I realized that in a crisis you have to set aside your near-term profit plans and get the problems fixed, no matter how high the cost. Most important of all, I learned not to judge leadership from the outside before understanding what is going on internally.

The preceding was a slightly-extended excerpt from my recent book, 7 Lessons for Leading in Crisis.