• Crisis Management: The Ultimate Test of a Leader

    by  • September 12, 2011 • Human Resources, Leadership, Strategy

    The sudden, unexpected and potentially catastrophic event that threatens a business is a CEO’s greatest challenge. Ever since the Tylenol tampering recall of 30 years ago, the performances of companies in crisis have come under public scrutiny. The entire world was touched by the most environmentally destructive business crisis of all time – BP’s oil spill in the Gulf. Everyone watched as CEO Tony Hayward made blunder after blunder while BP’s crude killed. Three weeks after the explosion, Hayward called the spill “relatively tiny” in comparison with the size of the ocean – 6 weeks later he said he’d like his life back, and 6 weeks after that, BP’s shell-shocked Board finally put him out of his misery.

    How is it possible for three months of crisis management ineptitude to occur in an organization the size of BP with a product as environmentally toxic as oil? You’d think a company drilling on the ocean’s floor would be adept in risk management planning. Whether Hayward was a part of a risk management plan or not, the guy failed at the moment his employees, his shareholders, his fellow human beings and the planet needed him most.

    Politics aside, I’m willing to bet Rudy Giuliani was never briefed on how he might handle the possibility of a terrorist attack on New York City. On that tragic day in September, Mayor Giuliani had little time to react to the horror. In a time of chaos and uncertainty, he established himself as a courageous leader by calming, consoling and urging the public to return to their normal lives; this was how Americans could stand up to the terrorists . . . this was how to deny them their goal.

    Compared to Giuliani’s challenge, a business crisis should be a cakewalk for the organization’s leader. But it is not. Those who excel under fire do so because:

    1. They have the right values and beliefs. Great leaders live by a set of principles that guide them when the need arises.

    2. They are inherently courageous. There is not an absence of fear, but the management of fear. Anyone who has overcome intense fright will tell you that there isn’t a better rush.

    3. They are prepared. Their organizations are disciplined to assess threats and map out ways to mitigate, to deal with the potentiality when it occurs. The CEO has to believe this day will come, and when it does, the company will be prepared to cope from the moment the crisis occurs to the point that recovery procedures begin.

    4. They know how to communicate. Getting the right ideas into the heads of others is paramount. In the case of a recall or an environmental disaster, the first concern is public safety, not the financial interest of the shareholders.

    5. They live and breathe the company culture. If the culture is right, the decision-making is so much easier.

    At the outset of the Tylenol crisis, J&J CEO James Burke was guided by the company’s “customer-first” credo written by Robert Johnson in 1943. How Burke and J&J dealt with the crisis has set the standard for all to follow — to be prepared for that inevitable day when disaster WILL strike. Prudent leaders prepare for calamity. And yet, despite pervasive recall awareness, we have CEOs of companies that have the capacity to maim the domain of life, with their heads in the sand.

    Not many years after the Tylenol fiasco, a massive batch of sour coffee that made some people nauseous became my ultimate test of leadership. Without hesitation, I sacrificed the company’s annual profit target by immediately issuing a national recall. Like James Burke, my guiding light through the high-anxiety was the company’s core value of “doing the right thing” for the consumer. In the end, we got through the sour coffee crisis successfully. As for how I handled myself as CEO, my feelings are the same as they were all those years ago. I loved every minute of it. Now, why would I say that? Quite simply, that crisis gave me the opportunity to be the leader my employees expected and the leader I’d always dreamed of becoming.

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    About

    Formerlife: Jacobs Suchard CEO (Kraft, Nabob), Strategy Consultant. Afterlife: Palgrave Macmillan Author, Business Blogger, Wannabe Novelist

    5 Responses to Crisis Management: The Ultimate Test of a Leader

    1. September 13, 2011 at 3:27 am

      Excellent post, John, as always. Advance planning is very important, however, as you know, it’s impossible to know every crisis that may come your way. That’s why I think #1 on your list is so important: the leadership of the organization must have “the right values and beliefs” and leadership’s behavior in time of crisis, just as in non-crisis, must be consistent with those values and beliefs. In big crises, the “whole world will be watching,” so if the behavior is inconsistent with stated values and beliefs, that will be exposed very quickly. Separately, but on the same topic, a question for you, John: How do you feel about “scenario planning” exercises as a way to try to imagine and think through the most probable crises that may confront a particular company or organization? Paul

      • John
        September 13, 2011 at 10:30 pm

        Thanks for the comment, Paul. Re: Scenario Planning – I can’t think of a better way for a CEO to show the organization that he/she is serious about being prepared for a crisis that one day will come. Additionally, role playing is a wonderful opportunity to take stock of systems and performance, take corrective action, develop people and ready the organization for that fateful day.

    2. AJ
      September 14, 2011 at 4:10 am

      Hi John,

      Very well written. I especially agree with the point that it all starts with a persons values and beliefs. During a crisis you can have a good plan and all the right scripts but eventually you will slip up as a leader if you dont hold a sold set of values and beliefs to draw on.

      AJ

    3. John
      September 14, 2011 at 7:37 am

      Thanks AJ. Re: values – there is more to that ‘sour’ coffee story. The decision to recall the coffee should have gone to my boss in Zurich for approval. I chose not to do this because I suspected he would either reject the recommendation or delay the recall to bring in the profit for the fiscal. What to do? Personal and corporate values provided the answer. I could not run the risk of his refusal . . . so, I kept the crisis from him until the recall was well underway. I was prepared to be fired for it . . . and that guy tried to take my head off, without success. Might that make for a good corporate war story blog?

    4. Pingback: Massive Crises Put Culture on Display | Leadership and Communication