Crisis Leadership

Challenging times, such as the ramifications of the recent impasse over the government budget and debt ceiling, provide exceptional opportunities for great leaders to emerge. Typically these situations create a leadership vacuum as the incumbents scurry about looking for safe heavens or for ways to protect their turfs and interests, rather than serving the broader constituencies that bestowed to them their position and power. It is now clear that the leaders of some of the largest financial institutions were actively betting on the failure of some of the same instruments that their firms were marketing in order to hedge their organizations and positions. However, there is another breed of leader that sees crisis as an opportunity to demonstrate their leadership effectiveness. There are common traits that seem to define this brand of leadership

Belief in Servant Leadership—these leaders believe that the mantle of leadership has been bestowed on them so that they can serve others.  They believe that the leader’s most important job is to serve those that have entrusted them with the power and privilege of leadership. Their actions are often powerful demonstrations of this principle.  Pope Francis’ public declarations of support and care for the under privileged and poor, and his decision to expand the doctrine of the Catholic church to encompass a broader coalition of beliefs and life styles, is an inspirational model of servant leadership.

Longer-term Vision/ Perspective—these leaders understand the urgency of the situation, but are not prepared to make quick and reflexive decisions that would temporarily relieve the situation whilst creating even bigger problems in the future.  Instead, they strive to strike a balance between current recovery and strategies for future greatness.  The new leader of a pharmaceutical organization, which was put under the Consent Decree by the FDA for manufacturing safety issues, decided that there would be two streams of work to address the issues. One team was responsible for quick fixes, while the other team’s task was to determine how the organization could transform itself so that it could be seen as the benchmark of safety for the industry.  Prior to approval, the leader insisted on ways to integrate both quick fixes and the longer-term recommendations.

Ability to Identify Talent and Build Coalitions—the crisis leader finds himself short of time and with enormous challenges that require urgent action.  These leaders have a tendency to quickly locate the right talent, and empower them with the support, resources, and authority to make a difference.  When the CEO of Chrysler, Sergio Marchionne, took over the reign in 2009 in the midst of one of worst recessions in U.S. history, he inherited a company that was on its knees.  He quickly exited the old guards who were protecting the past, elevated the creative and energetic high potential talent to key positions, and relocated his own office and attention away from the executive suite to where the products were conceived and manufactured.  The results speak for itself, with Chrysler reporting consistent increases in net revenue since the federal bailout.¹

Learning Mindset—Crisis leadership requires a learning and growth mindset that allows the leader to change course with new information, and to acknowledge mistakes in order to quickly reverse course and adopt a more appropriate strategy.  The leader who steps into a challenging situation is often faced with a dynamic situation where there are many moving parts already in motion.  Quick and timely action is required.  Consequently, it is unrealistic to assume that every decision that she makes will result in successful outcomes.  However, if she is able to quickly absorb the learning and integrate it into the next strategy, she distinguishes herself from many leaders who are reluctant to change their publically stated positions, even in the face of mounting evidence of the need for change.  In 2008, Ben Bernanke, the outgoing chairman of the Federal Reserve, found himself having to lead U.S. economy out of one of the worst recession in its history.  The financial crisis, spurred by the housing crash, halted the financial markets.  Bernanke and his team quickly resolved to introduce a battery of new instruments designed to supply needed cash to banks so that they could lend to businesses and consumers. The short-term, interest rates were brought down to near zero percent and the Fed embarked on an ambitious plan to purchase Treasury bonds and mortgage backed securities so as to lower the long-term interest rate for home buyers and others. As Michael Gapen of Barclay Capital told USA Today, who at the time worked closely with Bernanke and his team as the head of the monetary affairs at the FED, the implicit philosophy of Bernanke was “let’s try it and see if it works, and if it does not, let’s try something else.”²

1. CNBC. Chrysler earnings jump 16%, give boost to Fiat.  http://www.cnbc.com/id/100921458.
2. USA Today. October 10, 2013.