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Create Opportunity from Crisis
Business crises almost daily dominate the headlines, hitting the information superhighway at warp speed. Reputations are damaged, devastating both small, local companies and international conglomerates. The examples are everywhere. BP and the Deepwater Horizon oil spill. Toyota’s “sticky” gas pedal recall. The Livestrong Foundation and cyclist Lance Armstrong’s doping scandal. The CEO of Abercrombie & Fitch stating he was marketing only to “cool kids,” and not the overweight ones. The Carnival Cruise ship stuck for days without electricity in the Gulf of Mexico. The employees of Specialty Medical Supplies kidnapping their own CEO over plans to take their jobs offshore.
The Institute for Crisis Management defines a business crisis as “any problem or disruption that triggers negative stakeholder reaction that could impact the organization’s financial strength and ability to do what it does.”1 Crises are rare and significant events, challenging leaders beyond a typical “problem” because of the time pressure and the associated public scrutiny. Additional challenges for the crisis leader come from inadequate information for decision making and, in the worst cases, limited resources, including time, money, and know-how. No matter what causes a crisis—human error, natural disaster, or controversial practices—those in leadership positions are responsible for preventing, assessing, mitigating, reacting to, resolving, and learning from a crisis. Of course, those things are hard to do in the face of sudden, urgent, and unpredictable circumstances. Regrettably, the latter step, learning from crisis, is something many leaders skip altogether.
Our work with organizations, large and small, echoes our research on leading through crisis. We have identified a way to move through crisis proactively, effectively, and with integrity through these four strategies: (1) learn, reflect, and adapt; (2) scan and see possibilities; (3) engender trust and behave authentically; and (4) embrace crisis as opportunity.
Why Care about Crisis Leadership?
If you have not (yet) faced a crisis, it may seem foolish to expend time, thought, and energy on this type of “what if.” Being prepared to act, rather than just react, in the face of the unexpected can mean the difference between narrowly surviving (if you are lucky) and thriving after your organization weathers a crisis. Even mom-and-pop shops are at risk: a handful of negative local reviews on Yelp.com, a livingwage controversy with a few picketers on Main Street, or the legitimate firing of a vocal employee can attract a public spotlight so blinding that a business dies. Even the leaders in nonprofit organizations and government agencies are not shielded from crises.
Our research shows crisis leaders require more than just a step-by-step crisis management guide addressing the “during,” but not the “before” or “after.” Exemplary crisis leadership reaches beyond what we know of merely good leadership, exhibiting a positive leadership framework. It opens a leader’s mind to handle the unexpected, as a crisis almost always is, with fresh eyes, inquisitiveness, and mindfulness, even when the precipitating event requires an almost immediate response.2 Moreover, this framework brings a different perspective to a crisis situation, placing emphasis on elevating individuals and systems to produce extraordinary outcomes such as resilience, the ability to recover quickly, collective resourcefulness, positive interpretation, and positive relationships.3, 4
So why care about crisis leadership? Being a positive leader in a crisis context makes you a better leader overall, along with many other benefits. It elevates you beyond who you were before the crisis occurred, building skills, intelligence, and strength of character, as much as it elevates your organization. It becomes second nature to take actions that exemplify virtuousness by exhibiting moral goodness, human strengths, courage, resilience, and a concern for the well-being of your organization’s stakeholders.5 It also means focusing on the possibility that the crisis could generate extraordinary outcomes that change the company and its individuals for the better.6 Being a positive leader in crisis means believing the organization can not only survive the crisis but indeed also learn to thrive because of it.
Strategy 1: Learn, Reflect, and Adapt
Are you willing and able to grow and change at any point in a process? Leaders with a learning orientation answer yes. When confronted by crisis, they (1) acknowledge the need for learning, reflection, and adapting to changing circumstances; and (2) recognize that times of crisis motivate leaders and organizations to learn, change, adapt, and innovate more than any other.7 Remember that learning is just one part of moving through a crisis. Damage containment and recovery are equally critical, otherwise an organization can get “stuck” in learning mode and lose ground.
At the core is the ability to acquire knowledge, reflect on it, and implement a change in behavior. Leaders and their organizations can actually reduce a crisis’s negative impact, so long as they are willing to examine the root causes of the crisis and value that data for decision making. Before Hurricane Katrina even hit land, Wal-Mart marshaled its extensive distribution network and data analytical systems to stock its stores with supplies for the disaster to come. Because it had learned from previous hurricanes, it served the Gulf Coast better than other companies or public institutions.8 It learned from past crises, reflected on what worked best, and adapted its actions to fit the current event.
Learning as you go is not optimal during crisis. Instead, create opportunities for employees to learn about crisis leadership ahead of time. Let them discuss and analyze the company’s vulnerabilities. Let them envision ways the organization can plan for the future and respond to stakeholders.9 Allow discussion group members to emerge as potential crisis leaders, rather than presuming you will draw from those traditionally designated as management or senior leaders. One thing is critical: this opportunity must occur in a psychologically “safe” space, free of finger-pointing and judgment, and open to ideas and questions from all. A safe space allows for difficult conversations. It does not penalize honesty, even if this means confronting facts that are hard to hear or place the organization at risk. Even outside the confines of an in-house group, learning can occur. Encourage your team to seek and to be open to knowledge from diverse sources. This openness will allow your organization to experiment with a variety of ideas as they explore solutions for resolving a crisis.
Strategy 2: Scan and See Possibilities
Where exactly do things stand? What is the situation now? What could come of it? What are some short-term fixes? What are some longer-term solutions? These types of questions, and the means for answering them, are no different from those we face daily in business. The difference in crisis mode is everything is happening rapidly, with many unknowns despite your best knowledge-gathering efforts. Be open to external expertise from nonobvious sources and consider context and applicability to the current situation.
As you seek to learn more about the crisis, you will naturally find yourself scanning the environment and drawing conclusions from what you observe, which in turn equips you as a leader to see possible ways to resolve it.10 “Sense-making,” as this process is sometimes called, entails scanning information from multiple sources, integrating the information into a broader context, and connecting the dots at both the strategic and tactical levels. As a leader, you are most likely to take a big-picture approach, allowing the organization to recognize and to appreciate its responsibility and accountability to all stakeholders. During the scanning process, encourage discussion and debate within your organization. Invite people to challenge the status quo and explore the pathways to various possibilities. Welcome input from everyone.
Consider “scenario planning” as one part of scanning and seeing possibilities. Encourage your group to create a series of “different futures” based on scanning environmental factors such as demographics, political, economic, social, technological, legal, natural environment, and global trends that are key driving forces.11 Scenario planning during crisis helps leaders create cognitive maps, providing a reference point from which to navigate unfamiliar terrain. As you and your colleagues scan your environment and plan scenarios, develop a mindset of “thinking about the unthinkable.” You will engage in anticipatory brainstorming and learn how to consider a range of possibilities for the future that take uncertainty into account.
Declining revenues in an era of increasingly competing media led the Detroit Free Press newspaper to engage in scanning and identifying possibilities. To address this “smoldering” crisis, the Detroit Free Press worked with design company IDEO to create scenarios for the future by observing information-consuming habits of their customers at home, work, and in everyday settings. These scanning efforts guided the development of new offerings, such as changes in newspaper delivery and an expanded online presence.
Strategy 3: Engender Trust and Behave Authentically
A leader’s trust and authenticity come into play in several ways during crisis. Internally, leading from a place of trust and authenticity creates a positive culture in which the goals of organizational members are aligned, and they communicate freely with good news and bad. When Alan Mulally first joined the Ford Motor Company as president and CEO, he immersed himself in all the information he could find about the company, past and present. He discussed his impressions frankly with employees. At first, they hesitated to be as open and honest as he seemed to be. But in time, they bought into the culture Mulally sought to create. A positive culture is an outgrowth of collective transcendent behaviors, including a sense of caring relating to the organization’s goals, the ability to be other-focused, group efficacy, and courage.12 As a leader, establishing trust and authenticity with your team will pay off during a crisis because team members will be honest about questions, concerns, skills, limitations, and intentions. That same trust and authenticity are critical in interacting with the stakeholders and the public in general, once crisis occurs. When stakeholders trust your brand, they trust you to fix what is broken. If they have no prior relationship with you, authentic and trustworthy behavior can quickly neutralize a negative first impression.
Strategy 4: Embrace Crisis as Opportunity
Too often, leaders focus on the negative aspects of a crisis and do not perceive the opportunities in the situation. Crises are opportunities for organizational change and revitalization because a crisis brings to leadership’s attention issues that have been neglected. It also presents possibilities for innovation and system improvements.13 This window demands that leaders transition from feelings of anger, anxiety, guilt, and despair to an outlook of optimism and hope. Perceiving a crisis as an opportunity calls leaders to embody a radical vision that inspires organizational members to identify the strengths of the organization and its environment and use them as resources. In addition, crisis situations are opportunities to rebuild and to refocus an organization’s capacity.
A crisis is an opportunity to learn. If you are to be successful at embracing this opportunity, you must be willing not only to address the symptom relating to the crisis but also the root causes—to be open to whatever you discover and to encourage a climate of openness in your employees. Know that there is value in crisis, and share that knowledge with your organization before, during, and after a crisis occurs. This value can manifest in many forms, such as improved performance, enhancements to the organization’s reputation, and innovations.
Putting It All Together
Crises can be opportunities for organizations to get better, to act with greater integrity, to work more efficiently, to manufacture more cleanly, to improve safety, and to treat people more fairly. Of course, when someone, such as a customer, organization, whistleblower, or rival company, points out that something is “wrong,” it is hard to step up to a microphone and say thank you. Yet, the possibilities for gratitude exist. No matter how vindictive their accusations may seem at the time, these stakeholders are providing the organization with an opportunity to do better, to be better, and to achieve as never before. They are offering the organization a chance to demonstrate resilience, to adapt to its environment, to make sense of a situation, to take perspective, to be open to learning, and to build on the knowledge repository. And this is an opportunity worth taking.
FORD MOTOR COMPANY: A LESSON IN POSITIVE CRISIS LEADERSHIP
By now, everyone knows Ford endured the Great Recession of 2008 without the infamous government bailouts given to General Motors and Chrysler.14 But Ford did not simply survive the uncertainty and devastating economic circumstances—it thrived. Ford emerged from the crisis in a better strategic position, bolstered by widespread consumer confidence and respect, including frequent recognition as one of the United States’ most trusted companies. How did Ford manage to thrive during this crisis? By seeing crisis as opportunity, Ford’s top executives, CEO Alan Mulally and Chairman Bill Ford Jr., exemplified positive leadership, allowing the company to emerge as a stronger organization positioned for postrecession growth.
Strategy 1: Learn, Reflect, and Adapt
When Mulally joined Ford in 2006, he was an outsider to Detroit’s auto industry. He decided to set the standard for openness and learning, with endless interest in studying the company’s recent and distant past. Mulally ramped up the use of data and charts to make the company’s operations more transparent to the whole executive team. A whole room filled with charts displayed the company’s operational results. By modeling the skill of learning from and resolving challenges, rather than hiding them or assigning blame, Mulally and his team built a Ford culture ready to address the full force of the recession crisis.
Strategy 2: Scan and See Possibilities
Before Mulally’s arrival, Ford was struggling to compete, suffering multibillion-dollar losses as the company lost market share to foreign competition. Ford Jr. had already begun assessing the economic environment, and as Mulally came on board, they agreed a recession was possible and that Ford needed to have cash on hand to survive. They leveraged many assets, including the “blue oval” brand, which initially caused doubt among creditors. When the recession hit, Ford had enough cash on hand to continue to be open to more opportunities. In fact, the two leaders recognized that investing in research and development while their competitors struggled through bankruptcy would enable them to emerge from the crisis in a strong strategic position. As they analyzed their situation, they invested in key development areas, including lighter and more fuel-efficient cars, to gain a competitive advantage.
Strategy 3: Engender Trust and Behave Authentically
Building a positive culture in which team members are aligned and communicating openly—both good news and bad—is crucial to leading with trust and authenticity. For his part, Mulally wanted to avoid being blindsided by covered-up issues. So he developed a concept, which he called “One Ford,” that emphasized the point that they were all on one team. When he recognized trust was missing among the executive team, he worked to align executives’ interests and goals by changing incentive structures to account for company-wide performance. He modeled the behavior of being open and transparent about challenges and vulnerabilities by asking for everyone to help solve a problem, even if the problem fell largely under one executive’s jurisdiction. Any problem was everyone’s problem, he said, and it was not just the fault of the one executive responsible for that area. By facilitating a positive culture of collaboration and open communication among the “One Ford” team, he ensured issues were dealt with proactively before they became company-wide.
Externally, Ford built trust through their dedication to avoiding bankruptcy and federal bailout dollars. As Ford proved it could navigate the recession without taxpayer money, customers took note. Multiple polls showed people were more likely to buy a Ford product solely because the company did not take taxpayer loans. Instead, small-business owners and consumers alike sent letters praising company leaders for refusing the money and managing their business wisely. Customers did not have to question whether to buy a car from a bankrupt company. Ford was solvent. Since the recession, Ford has been ranked one of the top ten trusted brands by YouGov’s BrandIndex.15
Strategy 4: Embrace Crisis as Opportunity
As the recession hit, Ford leadership recognized the opportunity to become more efficient and to develop their internal business processes to position them well for the future. By accelerating the development of new products, such as fuel-efficient vehicles, and aggressively restructuring to improve its operating efficiency, Ford took advantage of the chance to learn and to adapt rather than simply hunkering down and trying to survive. They reduced redundancies by building more cars using the same platforms, rather than letting each division and brand operate independently; in addition to aligning with Mulally’s “One Ford” vision, this move allowed Ford to gain savings that would last beyond the crisis. In addition, Ford continued to focus on discovering new ideas to position itself strategically for the future, partnering with university researchers to develop important technologies for the next generation of smaller, lighter cars.
When the recession hit, many loud voices were saying the era of U.S. manufacturing was over, and that it was time to let the Big Three die. Given the economic crisis, this attitude could have swayed many leaders; instead, Mulally believed in and looked for opportunities before and during the recession. He built trust and showed a willingness to learn as the crisis evolved. Ford leadership stands as a shining example that, operating within a positive leadership framework, crises can become opportunities for an organization to grow and to thrive.
TWEETS
Not if—but when—business crisis hits: become a student. See crisis as an opportunity to learn.
In crisis leadership: figure out how to change and to improve your business, not just bounce back.
Four strategies for positive crisis leadership: learn and reflect, scan for possibilities and plan, gain trust, and embrace crisis as opportunity.