Business Leadership Mistakes to Avoid in Crisis
The scale of the Covid-19’s impact has begun to sink in amongst the business community. With this crisis comes a variety of questions. How does an organization share this economic pain amongst its many stakeholders? How do they secure their supply chains to make them resilient and minimize disruption? How do they avoid the mistakes they made in the financial crisis?
Organizations are facing a global disruption, the likes of which have not been seen since WW2. Leaders are facing enormous anxieties fueled by the dangerous health circumstances involved with running a business. At critical times like these it is important for executive teams to continue to innovate and improve processes rather than falling victim to “threat rigidity” or freezing innovation and resorting to actions that have worked in the past rather than coming up with new ideas.
Mindset: Narrow Thinking
You might think that crisis make people more innovative, actually the tendency is for people to seek comfort and certainty, or to fall back on existing remedies that have worked well in the past but might not be suited for this crisis.
- What are other organizations doing right now especially potential new competitors in our space? Focusing on the strategies of newer competitors in the space can be advantageous because they might not have older strategies to fall back on.
- Does the disaster plan we created and rehearsed fit for COVID-19? Explicitly discussing this question will help leaders understand whether they are unintentionally adopting an existing plan because it is more comfortable then developing a new approach.
- Which external advisors could you lean on to help you challenge your assumptions and see across industries and geographies? Several the company’s existing advisors who work across a wide array of company’s industries and countries can help the members of the group think more expansively and customize potential solutions. Think about bringing in a fresh set of eyes, whether that be a consulting group an investment banking advisor or even just an industry specialist.
Mindset: Deferring to the leader
When threatened, employees tend to look up to the leader for inspiration and strength. Executives should resist the urge to defer to the CEO and should take advantage of the skills and viewpoints of all the company leadership.
- Are you getting the perspectives of your independent directors?
Especially if the board chair is also the CEO, it is crucial to make sure that independent directors feel comfortable offering alternative points of view.
- Are directors over relying on the chair to make decisions?
For example, are bored committees convening to handle hot topics and then providing sufficient input for full board discussions?
- Are senior executives over relying on the chief executive to make decisions, plan the path forward, and communicate with stakeholders?
The entire team should be involved in creating solutions and communicating what is happening. Be sure everyone is doing his or her part.
Research by scholars has shown that there is a strong pressure to conform in crisis to achieve harmony. We instinctively do not want to slow actions to resolve a crisis, so we censor ourselves in discussion.
- Has everyone received the full set of information and been given a chance to form his or her own opinion? Does everyone fully understand and appreciate the problems and have an opportunity to ask questions before they are presented with any proposed solution? Have directors sought access to relevant executives outside the C suite whose knowledge is essential in addressing the crisis.
- Are all experts sharing their expertise? Every expert will see the same problem through his or her own lens and are likely to have different recommendations. Is the senior leadership team and board getting all those different perspectives?
- Does senior leadership accept the first plausible solution, or does it continue to search for alternative solutions that could prove to be more effective? The group should aspire to come up with a range of possible outcomes and options for each solution scenario. Finding the appropriate advisor is key to weathering any crisis, and DCA brings that level of experience to the table.
Source: Gardner, Heidi K., and Randall S. Peterson. “Executives and Boards, Avoid These Missteps in a Crisis.” Harvard Business Review, 24 Apr. 2020