In the Pacific station of calm waters, navigation of a vessel is a task that is easy and predictable. Perhaps, the only way to discover the mettle of the Captain (Leader) is to observe how they respond to turbulent and stormy conditions. The test of leadership is in challenge and adversity.
Historically, it has been during times of crises and wars that real and sometimes exemplary leadership has emerged. Winston Churchill, without the occurrence of World War II, would have remained in obscurity or at best known only within the British Isles. The war brought out in him exceptional qualities, which, until then, had remained latent. In 1940, Churchill, in praise of himself, remarked upon assuming the office of Prime Minister, “I felt as if I was walking with destiny, and that all my past life has been but a preparation for this hour and this trial.” Napoleon’s existence was dependent on his unwavering pursuit to remain in the adventure of expanding the French empire. His exploits, inclusive of his managerial techniques, yielded good dividends for him and his people. Great crises produce great men and great deeds of courage (J.F. Kennedy).
Scanning the blood-soaked pages of human history, it is evident that it is always debatable whether crises produce leaders or if leaders create crises. Several historians and history books hold Churchill responsible for consistently provoking Hitler’s Germany to bomb civilian areas of the British Isles. Historians on this type of narrative actually allege that the war was prolonged and enlarged with the purpose of hoisting Churchill as the most popular ruler. It is also a historical fact that he did indeed emerge as the strongest leader during the war; however, the same people voted him out of power once the war was over.
In the arena of corporates and organisations, the story is not dissimilar, though leadership-inspired crises are far fewer.
Personally, I faced what is globally recognised as a “banker’s nightmare” — a run on a financial institution, which means depositors line up to withdraw their money for fear that the institution may go belly up. This was triggered anonymously, and obviously housed in a rumour generated via a malicious and rogue email. This email identified eleven financial institutions (all the large ones, including foreign-owned) as entities having liquidity issues. This was far from the truth. All financial institutions sailed through this lethal attack, but the ability to remain calm and confident was tested to its zenith. The rumour died in about ten days, but that seemed like ages.
In the current environment, where even the slightest rumour can spread at lightning speed, thanks to the uncontrollable and unbridled social media, it is critically important for organisations to keep rehearsing the expected or anticipated reactions of the market to both real crises and rumour-inspired crises. The Business Continuity Plans, depending on the sector or industry, need to be documented. In the midst of an engaging crisis, each senior management team member should be aware of and fully abreast of their respective roles, responsibilities, and obligations.
While it is prudent for senior management, including the Board of Directors, to prepare and document scenarios that could turn into crises, it is very difficult to rehearse for every possible risk. Business Continuity Plans (BCP) and Disaster Recovery Plans (DRP) became buzzwords following the 9/11 incident in New York.
Global regulators started making demands on organisations to have remote DRP sites, preferably in a city other than where the manufacturer was located. During a real crisis, prior practice helps largely with the coordination of resources to respond to the challenge. As an example, running frequent fire drills helps identify the relevant human resources who must be documented to take specific roles in such emergencies. Simulation exercises can prove useful when followed up with assessments of what went as expected and what emerged as unexpected scenarios.
Management must have its ears to the ground to prepare for any impending or looming crisis. Not all risks can be covered by simulation; the element of market surprises must be reckoned with maturity and resilience. Organisations, depending on their nature and industry, can face myriad risks, from losing a key employee to dealing with fraudulent activities, from data breaches to cyber-attacks on the mainframe.
It is important to identify exactly who will do what in a given situation. Crises impact both internally and externally. Within the organisation, each department must evaluate the impact of a crisis event. Externally, regulators, stakeholders, vendors, and clients must be informed of any untoward incident with full details. Standards for disclosures ought to be met with strict adherence and compliance.
Lee Iacocca, who was put into the driving seat while Chrysler was going belly up, took a critical decision. Faced with a daunting liquidity crisis, he called a meeting of the senior management and put a compelling proposition on the table. He said, “Colleagues, we have a choice: either we agree to take a 50% cut in our wages and come to work tomorrow, or the assembly/manufacturing plant will remain shut from tomorrow.” Sanity and maturity prevailed; pay cuts were taken, the plant remained operational, and later, Chrysler was back on its feet — the P&L was back in the black. In a speech at the trial of Warren Hastings (1879), Edmund Burke said, “An event has happened upon which it is difficult to speak and impossible to be silent.”
Proximity to crisis is an impending crisis. “For it is your business when the wall next door catches fire” (Horace). If fortune turns against you, even jelly breaks your tooth (Persian proverb). There are some crises, like Katrina, that lethally lash upon organisations and leave them devastated in no time, while others arrive on horseback but depart only on foot. In many instances, crises engulf like a creeper for the longest of times. It is here that the tenacity of leadership comes into serious play.
Leadership (comprising the CEO, Board, and senior management) must possess the grit, determination, and confidence to take full charge and responsibility for the outcome of any critical situation. There should be no blame game among the stakeholders.
“We learn geology the morning after the earthquake” - Emerson.
Sirajuddin Aziz
The writer is a senior banker and freelance contributor.