1: Imagine being the captain of a battleship. A torpedo has hit the ship.
Now what?
“Send a portion of their crew to contain the hull breach,” Carolyn Dewar, Scott Keller, and Vikram Malhotra write in their book CEO Excellence.
The captain, however, “stays on the bridge, increases speed to full, and deploys the rest of the crew to keep fighting the war.”
The best CEOs take a like-minded approach. “When a crisis hits a company, a similar ethos applies,” the authors write, “Many crises directly affect one or two parts of the organization, and it’s up to the CEO to keep everyone else focused on driving the business forward.”
One wise move is to “immediately activate a cross-functional ‘command center’ team,” Carolyn, Scott, and Vikram write, “that is empowered to tackle both primary (interrelated legal, technical, operational, and financial challenges) and secondary (reactions by key stakeholders) threats. . .
“These teams are typically small and agile, with a full-time senior leader, very high levels of funding, and adequate decision-making authority to make and implement decisions within hours rather than days.”
What’s the most significant benefit of establishing a command center? The CEO does not become all-consumed by the crisis which allows the essential work of the company to continue to get done.
2: What can a CEO expect when a crisis hits?
“There might have been serious damage to the community, customers, livelihoods, and/or the environment,” the authors write. “Investors will be livid; the board and any relevant regulators will be looking to assign blame.
“Natural antagonists will start to take advantage of the company’s misfortune—activists may mobilize, consumers might boycott, competitors will move to steal customers or employees, hackers may target your systems, and the media will likely dig up every past error the company has made.
“At the same time,” they note, “the facts on the ground will be few and far between, and opinions and rumors will fly about the severity of the crisis and the company’s level of complicity. Top team members might be implicated. Others might prove too inexperienced to be helpful or be simply temperamentally unsuited to a stressful situation.”
Which is why creating a command center is so important.
“Without such a team,” Carolyn, Scott, and Vikram write, “organizations quickly fall into well-intended dysfunction: Managers end up taking actions in an uncoordinated fashion and with incomplete or inaccurate information, and central decision-making slows as dozens of sign-offs are required to move. In the worst case, turf wars and finger pointing energy, resulting in gridlock.”
What are the key responsibilities of the command center team?
First, to understand “the magnitude, scope, and facts behind the crisis,” the authors observe. “This information will help leaders guard against biases and provide a sober appraisal of how long resolving the crisis will take, and it will ensure that promises aren’t made that down the road can further erode a company’s (and a CEO’s) credibility.”
Next, the team must take action “to calm the extreme reactions of stakeholders, buying time for the threat to be better understood and addressed,” they explain.
“For example, the team might propose an emergency financial package for business partners, goodwill payments to consumers, or a product recall. It will also urgently respond to regulators as necessary.”
Finally, the CEO and the command center team must communicate internally and externally.
“When the COVID-19 pandemic hit, Cincinnati Children CEO Michael Fisher dramatically ramped up communication with both his internal and external stakeholders,” they write.
“He had his crisis team create an online ‘frequently asked questions’ page. He and his senior team created a series of videos from the executive team aimed at employees. Every Monday for an hour, the executive team communicated with eight hundred of the company’s managers.”
Michael recalls: “The focus was both us informing the managers on ‘What we all need to know’ and them informing us on ‘Here are things you, Michael, and your leadership team ought to know.”
He saw the crisis as an opportunity to “not only preserve trust with stakeholders, but strengthen it.”
3: Another essential requirement for CEOs? Despite the heat of the present battle, they maintain a long-term perspective.
The best CEOs “provide a broad sense of calm and perspective so all employees can continue to do their best work,” Carolyn, Scott, and Vikram write.
“What people need in a crisis is not just constant communication,” American Express CEO Ken Chenault explains. “The CEO has to set the context, too—how are you defining expectations in the short, moderate, and long term?”
The spirits business was turned upside down when COVID-19 hit. “As bars and pubs around the world were shutting down,” the authors write, Diageo CEO Ivan Menezes and his team “decided to buy back all the kegs of beer that were sitting idle and about to expire, no questions asked, at a cost of tens of millions of pounds sterling.”
“We had a drop in earnings those two quarters, but I didn’t care where the financials were going to fall,” Ivan relates. “Taking that short-term pressure off the table was the best thing we did. It sent the message to our teams to support the brands, support the customers, do the right thing. And emerging from that period, we’ve gained share in the vast majority of our markets.”
Ahold Delhaize CEO Dick Boer summarizes the three vitally important lessons he’s learned about managing through a crisis:
“First, do not chair or lead your crisis team. Let them report out to you. This gives you the space and time to oversee all the elements of the business, not only the crisis.
“Second, show confidence in your organization,” he says, “show that you’re in control, that you know what you’re doing, and that you’ll take care of your people and your customers.
“Third, think of what’s next even when the storm is still around you, because there’ll be opportunities and other situations you have to manage as a consequence fo the crisis that you might not have thought about.”
More tomorrow!
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Reflection: How prepared am I to delegate crisis management and maintain focus on the bigger picture when unexpected challenges hit my organization?
Action: Establish a cross-functional command center team and clarify my role as a leader to ensure I can guide the organization forward while others manage the immediate crisis.
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