The Covid-19 is a frightening anomaly. Ever more frightening than plain “anomaly”. The norm, or the new normal, appears to be the imminent threat of a permanent epidemic: between 2011 and 2018, the World Health Organization has overseen 1438 epidemics. Hyper-urbanization and climate change have resulted in highly pressing pandemics and other ecological hazards. Therefore, it matters that we prepare collectively for this reality – to which organizations, including businesses, will naturally be submitted. The optimism that emerged when the previous crisis was “won” is now collapsing by the pessimism adjacent to yet a new crisis, perhaps more harmful to our own existence.
Article by Arménio Rego and Miguel Pina e Cunha | Reading time 17 minutes
Article also published in Líder Magazine
If we were merely rational, we would be aware that, throughout our existence, there have always been ups and downs. History is overflowing with illustrative episodes, with which we all are familiar with. However, we have been developing a sense of linear progress: the future will be better than the past, and the power(s) of technology and science will guide us through a path that leads to this bright future. No one can ascertain claim this to be true – nor false. But assuming it is in fact true – and that the numbers in the areas of health, longevity, and democracy sustain this optimism – it is imperative to admit that even long term progress can, once in a while, be interrupted.
Let us be optimists and admit that it is this linearity that is currently being interrupted. What can leaders do when facing the current crisis? A small parenthesis before continuing: the thoughts here exposed are applicable to us all. The emphasis on leaders is simply due to their responsibility as holders of power and influence. How might they act? For starters, they might begin by being aware of how the world surrounding our businesses is not entirely controllable – and that humility is required to wisely deal with this feeling of powerlessness. What is therefore required of leaders, is for them to have “infinite” mentality, that allows them to recognize the following: (a) that the rules of the game change as the game progresses; (2) that the game is infinite, played by known and unknown entities that are changing throughout time.
In this framework, it is also expected that they respect a fundamental rule of leadership: the fruits that are born from the performance of our teams and organizations are the result of contributions that come not only from the leaders but also, and mostly, from those they lead. Only this way can one solidify a culture of trust, that allows leaders and whomever they lead to embrace challenges with determination, courage and a spirit of cooperation.
Pandemic crises help us understand that the omnipotence of leaders is a fallacy. But, from this statement shouldn’t arise a feeling of complete impotence. Adversities are not circumscribed by their definition– they are also learning opportunities about our finitude, our limitations and our potential capability to grow in a humane and social way. Measures can be taken to sensibly deal with this harsh reality. In times of crisis, it is vital that we consider these possibilities (note: possibilities – not guesses nor recipes for knowledge and wisdom). From here, we revisit some ideas that we have explored, in a more detailed manner, in a past article, published about a decade ago in the magazine “Dirigir”.
A smooth sea never made a skilled sailor
Crises will always exist throughout the life of businesses and management. What distinguishes effective from less effective leaders is not their capacity to avoid or escape them – it is the capacity to face them with vigor, courage and openness to learn from mistakes. It is during critical moments that leaders can either let themselves be poisoned, or bravely turn “poison into an antidote”. Similarly, and to gloss an English proverb, “A smooth sea never made a skilled sailor”.
What happened in the USA after September 11th, is illustrative: several companies, located at the World Trade Center, became more vigorous after the twin towers attack. As a result of aid and compassion processes, developed between employees who survived (leaders and those they led), and also between the former and the families of employees who passed away, these companies developed hyper-resilience; they became stronger. In these critical moments, the behavior and attitudes of leaders’ acts as a compass, crucial to the creation of this hyper-resilience.
Bill George synthesized the essential orientations for “leading in times of crisis” by proposing seven lessons:
(1) face reality;
(2) build ties of cooperation and aid, instead of single-handedly carrying the whole world on your shoulders;
(3) dig deep for the root cause, instead of searching for specific and fast solutions;
(4) get ready for the long haul;
(5) never waste the opportunity to learn from a good crisis;
(6) in the center of the storm, guide yourself through essential values: trust, transparency and integrity;
(7) be proactive, don’t assume that the calm after the storm will just naturally emerge.
In the following lines we will explore some of these orientations, which seem most appropriate when taking into consideration the current context.
Cherish your team – no one leads alone
When standing before crises and failures, some leaders (or at least those who are responsible, whereas the hyper-narcissistic ones will only worry about protecting and fondle their own ego) will flee to their office, focus on their thoughts and, in some cases, take the confrontation of the problems upon themselves alone. They bear the “solitude of power”. This retraction prevents them from properly understanding the reality they face, and it causes them to lose touch with their employees. The remaining members of the organization will then fill in the void, left by the lack of information and transparency, by creating and feeding rumors.
In other cases, some leaders will assume, simultaneously, a humbler and braver posture by seeking the help of their employees. In the year 2000, with Xerox at the verge of collapse, enveloped in a severe financial crisis, Anne Mulcahy did not allow herself to succumb to her own weaknesses in her financial capabilities (she had pursued a career in Sales and Marketing) and she humbly sought the advice help of specialists. She personally met with hundreds of top executives of the company, inquiring them on whether they would remain in the company upon considering the difficulties (which she, without hesitation, clearly revealed). Only two executives decided to leave. With those who remained Mulcahy created a team that was firmly loyal to her. By rejecting the “solitude of leadership”, she resisted declaring the state of bankruptcy of the company, saving it and restoring it to its former glory. The January/February 2005 edition of NYSE magazine headlined in its cover “Anne Mulcahy proves that teamwork makes the leader”. Jim Collins also referred to the executive with the following comment:
“She didn’t hide the game from anyone and, in little time, managed to redirect the company towards the path of success. She never took the glory all to herself. Great leaders do not see themselves as gods, they believe in team effort. They have unmeasured dedication for what they do, their job and their mission, which is more than a matter of success”.
How should one proceed then? During critical moments, foster relations of cooperation with your team. You should also seek for social support outside your work context – with family and friends. You will be able to face the adversities with more vigor all the while receiving advice and emotional support. Accept your vulnerabilities – and look for help. Be honest. Try to stay in shape, physically and psychologically mentally. Don’t constantly take yourself too seriously – know when to also enjoy the benefits of a relaxing and joyous life.
Act directly on the root of the problem – as soon as possible
IBM faced a similar process by the end of the 1980’s. An internal analyst presented a worrisome report about the business prospects. But a top executive of the company ignored the message, arguing that the data was incorrect. The analyst, aware of the imminent decline, left the company and created his own start-up. A few years into the future and the drop in sales was so severe that the decline could no longer be denied. If it hadn’t been for this denial, the decline might have been avoided. If it hadn’t been for Lou Gestner and his ability to face the “brutality” of the facts, to “fall in love” with the company and to transform a culture of bureaucracy into a culture of discipline – the company could really have succumbed in the subsequent years.
This behavior contrasts with the behavior of leaders who would rather work within the safety of a bell jar, receiving only the bearers of good news and circumscribed to information that arrives in the form of reports. These leaders however, face a colossal risk: that of finding out the real problems only when these have assumed proportions that are hardly manageable.
Another risk that shouldn’t be taken for granted is when early symptoms are identified but only palliative care is applied, instead of the cure. Worse: denying reality and “killing the messengers of bad news”. The catastrophe that came over Boeing, after the fatal accidents with Boeing 737 Max, serves as a good example. The genesis of the problem had long been born. The dangers generated by the security systems were known and had been exposed by some of the members of the organization. But these critiques were muffled. Whomever dared to “open their mouth” and alert to the problems of construction of the aircraft would be in danger.
Amy Edmondson resumed the origins of this disaster in the following manner:
“This is yet another case study on how the absence of psychological security – the security which we can talk, present ideas, or communicate bad news without fear of being punished – can lead to catastrophic results.”
In 1984, Medtronic assumed a different approach when facing the problems with the charge of their pacemakers. They adopted a policy of complete transparency, internally as well as externally (including towards the regulatory authorities). They were not satisfied with alerts that were only emitted if a certain statistical limit of error/flaws was surpassed. Instead, they promoted a culture of open discussion of their problems and for the identification of their root cause– so that these would not happen again.
Some measures can in fact help leaders to act on the root of a problem in its initial stage. A hands-on approach. Getting in touch with people directly at the workplace (even in a regime of remote work!). Obtain the information directly from where the problems emerge. Embrace the points of view of the people with whom you interact in these encounters – besides getting trustworthy information, you might increase your respectability. The reports that arrive at your office through a clear hierarchical chain are not sufficient. Promote a culture where people take responsibility for their own mistakes – otherwise, these people will never emerge and it will not be possible to learn from their mistakes, emerge, they will not learn from their mistakes then subjacent problems will occur.
If you have experienced continued success throughout the years, do not be negligent nor arrogant, assuming that your success is “naturally deserved”. Don’t underestimate the little signals of collapse, as if they were spontaneous. Take these as serious indicators of a problem that might be coming to the surfacing.
And remember: one of the greatest enemies of future success is past success.
Don’t be fooled by the idea that the “worst has passed”
Sometimes, at the epicentre of a crisis, leaders assume that the “worst has passed” and that, in its due time, everything will go back to normal. They forget that a crisis can have deep and long roots – that have only manifested at the tipping point, like what has currently happened with Covid-19. Other times, the first signs of crisis are underestimated – and the company persists on the same solutions that have worked in the past. Something similar happened with several companies in the finance sector, when they neglected the first dangerous signs coming from the subprime market.
However, change and coming to terms with reality are, sometimes, uncomfortable events. Leaders, instead of shifting to a new paradigm, continue to believe that the crisis will fade and that everything will go back to normal. But this expectation is not always prudent. Intel took a few years to understand the need to abandon the business of memories to embark on the business of microprocessors. The emotional involvement with the business, that was once successful, was preventing the company from changing its paradigm. A similar case happened with North American automobile manufacturers (like General Motors) that underestimated the potential of foreigner manufacturers, in particular of Japanese and European.
Thus, it is fundamental that leaders do not overlook the first signs of crisis and that they get ready for a long journey. Great crises usually have roots that began to develop ten or more years prior. The fact that they emerge abruptly simply means that different factors, which have reached their maturity, intersected. Do not declare victory too early.
Do not lose the opportunity to learn from a crisis
In a little and notable book entitled “The Ten Commandments of Business Failure”, Daniel Keough (ex-CEO of the Coca-Cola Company) has recommended:
“For starters, never admit a mistake or an error. If anything seems to be going in the wrong direction, then dissimulate it or, even better, wait until you have a serious crisis and then put the blame on some external factor – or whomever you want. Clients are usually bothersome. You can always blame your hardships on them.”
Irony aside, no effective leader will ever abide by this recommendation. In 1993, as a consequence of some measure the Clinton Administration, Medtronic was facing the risk of having the prices from some of their most profitable products (e.g., pacemakers and defibrillators) drop. Had it went through, the measure would create difficulties for the company’s (strategic) investments in Research and Development, and it would harm the measures of support to doctors during implants. The company’s leadership actively confronted the scenario – eliminated the costs, restructured itself, reduced hierarchical levels and removed benefits attributed to their executives. In the end, the drop of prices did not happen, but the reduction of costs did. The company was then able to increase margins and spendings in Research & Development. In conclusion: they transformed the alleged venom into antidote. The IBM's rescue by Lou Gerstner too, is a polished example of how a crisis (in this case, drastic) can be a stimulus to recovery.
To one of the authors of this text was reported a case, allegedly true, that flawlessly illustrates this lesson. When facing the strong decline of occupancy rates of the hotel, and with a growing mass of unnecessary employees, the leadership unraveled a canny measure: restore the infrastructures with the labor of its employees. Cooks became painters – and cleaning staff took care of the construction waste. The restoration, which could pose problems to the operations when running in high season, was thoroughly executed with no inconvenience to the guests. It was not necessary to implement a lay-off measure. And, by the end of the crisis, the hotel was more prepared compared to its competitors – with motivated, loyal and committed employees. Let the reader reflect upon companies that, after catastrophes such as fires, emerged stronger.
Among the factors that can explain this strengthening you will find the following:
(1) Leaders that are resilient and tenacious adopted a protective stand towards their employees and their job posts, showing respect.
(2) Those who are led develop a sense of gratitude that result in behaviors of commitment and reciprocity.
(3) Other stakeholders, before the behaviour of both leaders and employees, took a bet on the company and supported them throughout their efforts to recover.
Prepare the future
Leading means guiding people towards the future. Frequently, in midst of a crisis, business leaders assume that, when it is over, all will go back to normal – and that they will naturally resume the successful path of the past. They are, however, overlooking the fact that market conditions will have shifted, that clients will have developed new buying patterns, that competitors have altered their conducts and strategies – and that actions (measures) from authorities will have been re-established.
By contrast, other companies are taking a proactive stance and, during the middle of the crisis, prepare to build a new future.
After going through a serious crisis in the 1950’s, that compelled the lay-off of its employees (going against the culture of the company), Toyota took as a new motto the need to create the necessary conditions for this to never happen again. Its long term strategy has allowed it to overcome crises in a more effective manner than its competitors – for which it has contributed the simple practice of the cicada: accumulate during favorable periods to resist throughout the less favorable.
Similarly, Sam Palmissano, CEO of IBM between 2003 and 2011, established a new vision for the company – to enable its transformation into a global service provider that attends to the needs of global clients. During the 1980’s – during a critical time, when the economic environment compelled Motorola to withdraw its investments due to lack of liquidity – Intel’s leadership decided to strongly invest in Pentium microprocessors. Upon the return and increase of demand for microprocessors, Motorola was quickly surpassed by Intel – which remains, until today, the leading company in the sector.
Final comments
Crises, failures and problems are an integral part of the life of organizations and businesses. Globalization, global communication networks and the integration of supply-chains create interconnected systems that promote the circulation of opportunities as well as threats. It is up to our leaders to face these realities with tenacity, courage, integrity and an open mind to learn from mistakes – instead of denying them or searching for a scapegoat. They can do it by preparing the necessary skills to face the next crisis – bacteriological, cyber-security, geopolitical, financial. Crises are (also) opportunities. Therefore, if the tumultuous sea makes a skilled leadership sailor, then the main lesson is: make good use of the wave of opportunities. Remember that you are not the center of the world – and that you need the people you lead to face the future. It is during these critical moments that your leadership skills will be tested. It is easy to stand for compassion during periods of fat cows – but it is during critical periods that this virtue is tested. Naturally, from those you lead it is also expected a conduct of responsibility.
The most relevant question, that leaders and employees should ask themselves during these critical moments is: “What is up for me to do so that our company might be a community of sensible, cooperative, down to earth and committed people?”
Afterword
Whenever we write, we reflect. In particular, we reflect upon receiving precious feedback. Pedro Brito, to whom we are all grateful for the comments provided, shared with us the following: in the past days he had received messages that this “shock” had created a “certain balance of things”. Here is the content of these messages:
- In an Era where climate change is reaching severe proportions, pollution has decreased considerably in a short time;
- Facing the reappearance of discriminating policies and ideologies, this “creature” emerges and shows us that we can all be discriminated;
- We had been so focused on productivity and consumption, without rest nor breaks, that now we have been forced to stop and reflect;
- In a period were education is mostly carried by educational institutions, this context has brought back together families and it has once again opened an opportunity for learning among them;
- In an Era where many interpersonal relations have developed over social networks (which, with this “shock” became mandatory, we went back to understanding the importance of personal contact, touch and hugs.
These thoughts remind us of our finitude, of the precariousness of life, and our essence as human beings. It strengthens an idea that has come to take shape in the academic, socioeconomic and business circles: companies need to be seen as builders of human progress, a challenge that becomes greater in critical times. Those that move towards that mission will likely be more inclusive, and therefore more resilient.
Article by Arménio Rego - Católica Porto Business School & Miguel Pina e Cunha - Professor Fundação Amélia de Mello, Nova SBE - Also published on "Líder" magazine.
References
Ahlstrom, D., Arregle, J. L., Hitt, M. A., Qian, G., Ma, X., & Faems, D. (2020). Managing technological, sociopolitical, and institutional change in the new normal. Journal of Management Studies.
Caminiti, S. (2005). The people company. NYSE Magazine. January/February, 12-18
Clair, J. A. & Dufresne, R. L. (2007). Changing poison into medicine: How companies can experience positive transformation from a crisis. Organizational Dynamics, 36(1), 63-77.
Collins, J. (2009). How the mighty fall: And why some companies never give in. Arrow.
Edmondson, A. C. (2008). The competitive imperative of learning. Harvard Business Review, July-August, 60-67.
Edmondson, A. C. (2019). Boeing and the importance of encouraging employees to speak up. Harvard Business Review, May 4 (https://hbr.org/2019/05/boeing-and-the-importance-of-encouraging-employees-to-speak-up)
George, B. (2009). Seven lessons for leading in crisis. Jossey Bass.
Giustiniano, L., Clegg, S. R., Cunha, M. P., & Rego, A. (Eds.). (2018). Elgar introduction to theories of organizational resilience.
Edward Elgar Publishing.
Gladwell, M. (2000). The tipping point: How little things can make a big difference. Little, Brown and Company.
Hudecheck, M., Sirén, C.,Grichnihk, D. & Wincent, K. (2020). How companies can respond to the Coronavirus. MIT Sloan Management Review, March 20.
Keough, D. R. (2008). The ten commandments for business failure. London: Penguin.
McNulty, E. (2020). Leading through Covid-19. MIT Sloan Management Review, March 9.
Perkins, K. M. (2019). 3 things you must know to avoid a culture calamity: Lessons learned from Boeing. Forbes, October 31 (https://www.forbes.com/sites/kathymillerperkins/2019/10/31/3-things-you-must-know-to-avoid-a-culture-calamitylessons-learned-from-boeing/#79f0842a6c6f)
Sinek, S. (2019). The infinite game. Penguin.
Takeuchi, H., Osono, E. & Shimizu, N. (2008). The contradictions that drive Toyota’s success. Harvard Business Review, June, 96-104.
