Crisis Management: Leading Successfully Through the Storm

Tylenol and HealthSouth came out of crisis even stronger.

By + More

The Globe published a series of damning reports. The state opened an investigation. Dana-Farber's accreditation went from "full" to "conditional," and massive lawsuits loomed. But after a period of hand-wringing , Dana-Farber's management decided to act rather than hunker down. It opened up to the public and tried to build something positive from the tragedy. It spoke candidly about the mistakes, suspended responsible staff, and recommitted itself to quality control and patient care. It upgraded its computer system to alert pharmacists when a doctor prescribes unsafe dosages and invested $1 million in retraining staff.

More significant, the institute became a high-profile advocate for patient safety throughout the industry. "They realized that, through that mistake, they could become leaders around the issue of patient safety and help their competition become better," says Dufresne, who wrote about the case in the book Positive Psychology in Business Ethics and Corporate Responsibility.

From the ashes. On Sept. 11, 2001, Cantor Fitzgerald CEO Howard Lutnick took his son to kindergarten and was late to work. It saved his life. But 658 of his employees died that day in the attacks in the World Trade Center, where the financial services firm occupied the top floors of the north tower. Cantor Fitzgerald lost two thirds of its New York employees and its headquarters, wreaking unfathomable devastation on the firm.

Two days after the attacks, a tearful Lutnick appeared on television and vowed that the firm would press on. Furthermore, he promised to care for the families of the employees lost on that day. But in the following days, Lutnick stumbled. He quickly severed the paychecks of the deceased, outraging family members, many of whom still held hope their loved ones were alive. Lutnick took a beating on national TV. But his image, and his company, started to recover when he reached out to victims' families personally.

In the end, Lutnick made good on his promise to reshape the mission of Cantor Fitzgerald by caring for the families. He dedicated a quarter of company profits to the families for five years and extended health coverage for 10 years. To date, the company has given $180 million to the families. Last year, it also donated $10 million to the National September 11 Memorial and Museum. But Cantor Fitzgerald has continued to make money—lots of it. The firm has been one of the few success stories of the ongoing financial crisis.

HealthSouth recovers. By 2003, HealthSouth, one of the nation's leading hospital chains, was nearly dead from corporate malfeasance. The Securities and Exchange Commission was investigating insider-trading allegations against top executives. The Department of Justice raided the corporate office, and Medicare officials were poring over company books in search of fraud. The New York Stock Exchange delisted the Alabama-based company, and bondholders threatened to put the company in bankruptcy.

In the end, federal investigators tallied $2.7 billion worth of accounting fraud. Many of the top brass were found guilty in criminal court. The company was on its knees, mired in debt, without leadership, and unclear about its own financials.

But HealthSouth persevered, thanks in large part to a new management team headed by CEO Jay Grinney, who arrived from a Nashville-based competitor in May 2004. Grinney discovered that the company had no reliable financial statements and had to dedicate manpower and money to refiguring its numbers back to 2000. Only then could HealthSouth make peace with the SEC and get back on the stock exchange. "It clearly was a situation where things were a lot worse than I anticipated," Grinney says. He also set about streamlining the company. Over grumblings from the board, Grinney rapidly sold off three of the company's four business segments to pay down its massive debt.

The moves worked. Since the first quarter of 2008, HealthSouth has turned a profit. Revenue is growing, the stock has soared, and the company is preserving jobs. "That's especially important to me during these economic times," Grinney says. "I know many of our competitors are laying people off, reducing benefits, eliminating 401(k) contributions. We're not doing any of that."