Stax outlines three - step approach to effective crisis leadership

By Piyumi Kapugeekiyana

Poor leadership is costliest during a crisis. When two security officers forcibly removed a passenger off an overbooked United Airlines flight last April, viral video footage of the incident led to widespread outrage and prompted customers to call for a boycott. Back then, CEO Oscar Munoz’s perfunctory corporate apology did little to alleviate tensions. Long after United reached an out-of-court settlement with the plaintiff, consumers continued to express grievances against airlines, with the US Department of Transportation logging a 13% increase in complaints in the six months following the incident.

Several other business scandals threatened corporate reputations last year; hastening the downfall of several high-profile business leaders, from Uber’s Travis Kalanick to Equifax’s Richard Smith. These incidents lead us to question: How should leaders manage during a crisis?

Much has already been written on the topic, as Daniel McGinn aptly summarises in a recent Harvard Business Review article. The challenge is that there is no one-size-fits-all approach to crisis management. Instead, it may serve leaders better to amass stories of successful crisis management and extract coping mechanisms from these narratives. As a starting point, this article offers three vignettes of effective crisis leadership.

1. Dr. Gregory Ciottone and the World Trade Center: The importance of squaring things away

Imagine going from sleeping to mobilising for an activation order from the Office of Emergency Preparedness, all in a matter of minutes.

Dr. Gregory Ciottone, a physician specialising in Disaster Medicine and Counter-Terrorism Medicine, had been sleeping off a night shift in the emergency department when he first received a colleague’s call notifying him of the terrorist attacks on the World Trade Center.

As he watched the attacks unfold on TV, Dr. Ciottone considered the role he would have to play in this crisis. At the time, he was the commander of a Level 1 Federal Disaster Medical Team, part of the National Disaster Medical System in the US – one of about 20 teams in the country. Designated ‘Massachusetts 2’, Level 1 teams like Dr. Ciottone’s were the first ones out the door in the event of a federal disaster.

It didn’t take long to receive the call from Washington, DC: “Dr. Ciottone. Massachusetts 2 is activated. Get your team and your cash and supplies to Stuarts Air Force Base just north of New York City. As quickly as possible and any way you can.”

As Dr. Ciottone recounted, “When you’re a leader in a crisis like this, there are a few things you need to do. We call it compartmentalising, putting things in a package and putting that package away. The military sometimes calls it squaring things away, locking things down. These are personal issues, personal things.”

By squaring things away, Dr. Ciottone was not only able to lead 54 people into the challenging terrain of Ground Zero but lead each member out safely at the end of their two-week deployment.

2. Mary Barra and General Motors: Taking ownership of failure and diffusing power to act 

Shortly after Mary Barra became the first female CEO of General Motors, the automaker was hit with an ignition switch debacle that led to at least 124 deaths, the eventual recall of some 29 million vehicles worldwide, class action lawsuits with thousands of claimants and investigations by regulators and Congress. Despite these crises, Barra’s skilful stewardship of GM propelled her to the top of Fortune’s list of Most Powerful women in 2015 and kept her there for three straight years.

Barra did something very right early on – she took ownership of failure.

“We didn’t do our jobs,” Barra said in a 15-minute briefing that was broadcast throughout the company. “As part of our apology to the victims, we promised to take responsibility for our actions.”

Barra apologised publicly and profusely, visited the families of victims, and set up a compensation fund for them before any legal liability had been established. Barra also conducted an internal probe that resulted in the firing of 15 employees and instated new policies that prompted workers to flag problems.

“I never want to put this behind us,” she told employees. “I want to keep this painful experience permanently in our collective memories.”

Recognising that crises involve many moving pieces, Barra also diffused the power to act throughout the company. As she pointed out, “When you are in a crisis, it’s not like you have perfect information on day one. In our situation specifically, we learned we had an issue, and we acted. But then there was a lot to unfold.”

To infuse the situation with clarity, Barra created a small team which met daily for anywhere from 20 minutes to two hours. One of the actions taken was a read-across, which is done when there’s an issue in vehicle safety. The team systematically investigated whether the problem could be happening in other vehicles.

By taking ownership of failure at the helm and diffusing the power to act throughout an organisation, leaders can help build a sense of internal clarity even amidst incomplete information.

3. James Burke and Johnson & Johnson: Customer-centric problem solving and media transparency 

In 1982, Johnson & Johnson’s Tylenol medication commanded 35% of the US over-the-counter analgesic market. However, things took a damaging turn after an assassin in the Chicago area introduced cyanide into Extra-Strength Tylenol bottles across several pharmacies. The drug tampering resulted in seven deaths over the span of a few days. The brand’s market share also sagged to 7%.

What set apart Johnson & Johnson’s handling of the crisis was their credo to place customers first. As negative media coverage mounted, company chairman James Burke formed a seven-member strategy team. Burke’s guidance was first, “How do we protect the people?” and second “How do we save this product?”

The company also reacted fast. Through the media, Johnson & Johnson immediately alerted customers nationwide to stop consuming any type of Tylenol product until the extent of the tampering could be ascertained. The company also put a stop to Tylenol advertising and ordered a national recall of the product; amounting to 31M bottles of capsules.

Withdrawing all Tylenol was a costly move, but it showed that customer safety was the priority. In addition, the company maintained open lines of communication. In the first week of the crisis, Johnson & Johnson established a 1-800 hotline for worried customers. They also established a toll-free line for news organisations to call and receive pre-taped messages with updated statements about the crisis. Johnson & Johnson also engaged the public through several major press conferences, with James Burke going on 60 Minutes and The Donahue Show to articulate key messages.

Through these well-timed and proactive measures, the public came to view Johnson & Johnson as the victim of a malicious crime – paving the way for a rare comeback.

Take-aways

As a starting point, the simple principles evident in these stories – squaring things away, taking ownership of failure, diffusing the power to act, prioritising the customer in problem-solving and ensuring media transparency – should serve most leaders well.

However, each crisis is unique. Some, like the events of 9/11, happen at warp speed and give leaders very little time to react. Others, like GM’s ignition switch scandal, might unravel over years but are no less challenging to manage. In this sense, crisis management can look very different across leaders, teams and situations. This means that every leader must be prepared to consider – ahead of time – the nuances of their company and industry that may potentially impact crisis response across a range of situations.

It is also worth remembering that strong crisis leadership is difficult without a strong sense of purpose. The leaders who effectively shepherd others through difficult situations tend to deeply value the company or team they represent. In a pinch, these leaders are not only able to fall back on core values when making pivotal decisions, but they can take the view that their organisation and broader purpose is larger than the crisis that has enveloped them. Where such dynamics are lacking, leaders need to first work on cementing core values and infusing a sense of purpose.

(The writer is a Senior Consultant and Head of Research at the Colombo offices of Stax Inc., a strategy consulting firm with a presence across New York, Boston, Chicago, Singapore and Colombo.)