Leadership Barometer 18 Handling a Crisis

October 1, 2019

There are hundreds of ways to test the greatness of leaders.  Here is one of my favorite measures.

Handling a Crises

One easy way to measure the caliber of a leader is to observe him or her in a crisis. Great leaders take command, but do so in a special way that weaker leaders try unsuccessfully to emulate. In the first place, they have the ability to diffuse internal crises and avoiding a kind of mob scene where workers gang up on the leader.

The distinction begins even before the crisis is evident. It is a mindset. Average leaders take rest when things are going smoothly. They focus on the little fires and beat them down so they do not spread. Other than that, “if it ain’t broke, don’t fix it” is the mentality. We might as well enjoy the way things are going, since it is smooth sailing.

By contrast, the great leader sees the world as a series of calm times and storms, some of them hurricanes. The calm times are opportunities to sharpen our skills and reactions for the next storm. For sure, it will come, so we ought to be looking at our past successes or failures in prior storms to get ready for the next one.

In business, the character or timing of the next storm is far less predictable than in nature. For example, in late summer, we can expect several hurricanes to crop up in the Atlantic and work their way toward the mainland U.S.. Once they form, computer models can predict with various levels of accuracy if, when, and where the storm will come ashore.

Most crises in business are less predictable. Some trends can be tracked, but usually the big disruptive events are things that are impossible to forecast. For example, if we are manufacturing aircraft, we can plot the seasonality and long-term trends, attempting to anticipate peak loads. Then, a fire in the factory causes a crisis that is a total surprise. The impact of the crisis on our business dwarfs anything we had been planning based on market projections, yet we are forced to deal with it immediately.

Once the crisis hits, the average leader becomes unglued for a while. There are so many things to do at once, and triage in the business world is often a neglected skill, so the leader wonders whether to call a meeting or let the front line people work on the most urgent issues without interruption.

Communication channels have not been set up to handle the chaos, so instructions or intentions come through as garbled signals. Think of the first responders in the World Trade Center after the first tower fell. Instructions were not getting through to all responders, and many additional lives were lost because of it.

The average leader somehow manages to deploy an effort to fight the situation, but it is often meager compared to the proportion of the disaster. People wonder why there was not more specific leadership coming through when it was needed most. When a leader appears to be unprepared for the disaster, then there is a loss of trust.

By contrast, the great leader has refined the procedures for communication and action ahead of time. Even though the exact nature of the crisis is not known, the preparation phase is an ongoing high priority. There are often mock “fire drills” to practice damage control and hone communication procedures to be ready in case the real thing happens.

For example, a CEO might arrange to distribute a fake internal news release that the toy being sold by his chain was causing deaths in children. This would force people to react with everything from recalls, to insurance negotiations, to government briefings, to press statements, etc.

After practicing the mock disaster, they could hold a debrief meeting and might determine the internal communication between executives was practically nonexistent during the crisis. All of the managers were doing their best to keep a lid on the damage, but the total effort was not well coordinated. This debrief would allow the team to design an information dissemination process, so if a crisis ever surfaced, they would be in a far better position.

I know one college president who had to endure three different embarrassing public issues in just a few weeks time. None of the problems were caused by the president, and none of them could have been predicted, yet he had to deal with them in a way that upheld the values of the college and gave all stakeholders confidence that the institution was not out of control.

If you are the head of an organization, you need to be prepared for these kinds of disruptions. You know there is a comet or two heading your way, you just don’t know specifically what it will look like or when it will arrive. Warren Bennis, my favorite all time leadership author, put it this way:

Leaders learn by leading, and they learn best by leading in the face of obstacles. As weather shapes mountains, so problems make leaders.

The best leaders look at these kind of crisis situations as a way to test themselves and their teams.  The best advice is to keep practicing your response and communication methods. You cannot anticipate the nature of the comet that is heading your way, but you can prepare your team to deal with anything.

Trust versus CYA

October 19, 2013

Conflict3We are all familiar with the phenomenon of playing CYA at work. There is the potential for something negative happening in the future and we take care to document the problem and give our recommended solution to it.

We put the information in an e-mail that we send out to a manager involved in making decisions. The idea is that if the dreaded situation comes up at a later date, we can produce the e-mail and say, “I told them that this would happen and even suggested the fix, but nobody listened to me.”

This is just one form of CYA activity, and I offer it as an example to illustrate why this form on one-upmanship hurts an organization because it lowers trust. It is one thing to say what “they should do” about a potential problem. Words are cheap, and one can speculate that we should spend $100K to provide additional reinforcement to the foundation of our building in case of a future earthquake.

Putting that information in a note to the manager puts her in a difficult spot. Clearly we do not have $100K lying around with no purpose so we can just shell out the cash. The risk of an earthquake may be pretty low, but it can always happen.

The reason the CYA note lowers trust is because the manager realizes if she does not take the suggested action and there is an earthquake that results in several workers being killed, then she is going to be blamed, but if she does reinforce the walls and there is no earthquake, the money will be spent only for insurance.

The manager is in a no-win situation, and that lowers trust in both directions. The manager has less trust in the worker because he is trying to entrap or usurp the leader’s judgment. The worker has lower trust in the manager because there is perceived need to document the suggested remedy for future reference.

I have been in a situation where workers wanted me to purchase an entire new facility for close to $1Million because they believed the current one might someday fail. My response was to have the facility thoroughly inspected to determine if there was a real risk and how high that might be.

The engineers came back that the risk was real, but I could test for the robustness of the facility each year, and that would detect if things were deteriorating beyond a safe level. Having that inspection was better than nothing, but it was not totally foolproof, so the workers wanted to just scrap the old facility and purchase a new one.

That expense was difficult to justify because the product being made was near the end of its life, so a new facility would never pay off.

Caught between a rock and hard place, I asked the workers to understand that the minute risk was made manageable with the yearly inspection and they need not worry, but if anything ever happened in that facility, I knew I would be held accountable, so I tried to find another way to reduce the risk.

The engineers said that if we slowed down the equipment it would probably never fail or if it did, the failure would be detectable so nobody would get hurt. I decided to run the operation at a reduced speed as a compromise position, but the workers were not happy with it.

The series of discussions, notes, and meetings did serve to lower the trust that the workers had in me. Their point was that if I truly cared for them as people, I would spend the $950K to upgrade the facility even though there was no economic payback for it. It turned out that we shut down the complex less than a year later because the volume of demand for the product decreased, but the reduction in trust was something I had to live with.

The antidote for this phenomenon is to listen to the whistleblower and not ignore the request.

That was my approach in this case, but it was not an easy pathway to a decision. Trying to figure out what to do in a marginal case like this is what keeps managers up all night. Finding the right balance between trust in the system and protection from all forms of potential problems can be a very tricky area for managers.

Spending money to prevent any potential for disaster is a never-ending proposition. It is like buying insurance policies. You can never be fully protected from all hazards, but you can go broke trying. The best approach is to involve the impacted people in all aspects of the business, including protection from possible but highly unlikely scenarios.

If the workers realize that any tradeoffs made in the operation have a direct impact on them as well as the business, they can become part of the decision making process. This usually increases the level of trust for two reasons 1) it improves transparency, and 2) it lets people be part of the process so they are aware their managers care about them.