To paraphrase the bumper sticker: Stuff happens. Fortunately, so does good leadership—but those folks looking for pat solutions to unpredictable situations will be disappointed. First-rate management of a crisis rarely looks the same twice. A case in point from America's military:
Gen. George S. Patton, perhaps the most celebrated of America's modern military men, was first and foremost a student, devouring books on history and war strategy throughout his life. He also was a brilliant tactician who believed in preparation. When Germans snapped Allied lines and poured deep into Belgium during the Battle of the Bulge, Patton had a plan. He stunned Supreme Allied Commander Dwight Eisenhower by claiming he could break off a chunk of the Third Army from its march west through France and redirect it straight north 100 miles into Belgium within 48 hours. Patton succeeded, and his army helped end the Axis powers' last great push. "The things people do before a crisis occurs have a huge impact on what occurs during that crisis," says Gene Klann, author of the book Crisis Leadership and an associate professor at U.S. Army Command and General Staff College at Fort Leavenworth, Kan. "Patton had prepared himself for that situation."
But preparation isn't always the hallmark of triumph in a crisis. Experts say it's a mixed bouquet that often contains preparation but also includes blooms of improvisation, good communication, foresight, a willingness to learn, and a commitment to established values. "Effective crisis leadership is really . . . imagining a future that brings you beyond the status quo," says Ron Dufresne, assistant professor of management at St. Joseph's University in Philadelphia. He and others argue that good crisis management does more than weather a storm. It proactively creates a better future.
Contemporary examples of strong crisis leadership are in surprisingly short supply, experts say. And all too often, the reaction to a crisis is to hunker down and ride it out. But there are a few modern standouts, especially in the business world.
Bad medicine. In 1982, a 12-year-old-girl in the Chicago suburbs woke up feeling ill and took an Extra-Strength Tylenol. Three hours later, her parents found her in the bathroom, dying on the floor. Over the next few days, six similar deaths occurred across the metro area. Officials soon discovered that the culprit was Tylenol that had been laced with cyanide. The news sparked terror across the country and nearly toppled one of America's most trusted and popular brands.
Rather than succumbing to panic, Johnson & Johnson CEO James Burke swiftly ordered a recall of 31 million bottles, which cost the company a staggering $50 million. In the weeks that followed, Burke and his management team went on the offensive. Within 10 weeks, the manufacturer introduced tamperproof packaging that revolutionized the industry. Johnson & Johnson also threw open the doors to the media to give the public an assurance of full transparency.
Within a year, Tylenol had regained more than 80 percent of its market share. Much of the credit goes to Burke and his management team, which decided to stick by the company's core values of putting the customer first—even if it cost Johnson & Johnson dearly. "Values-driven companies do better in times of crisis," says Dave Anderson, a leadership guru who has published several books on the subject.
Killer chemo. Since its founding in the 1940s, the Dana-Farber Cancer Institute in Boston has enjoyed a reputation as an elite and groundbreaking research hospital that promoted the idea of "total care"—a core value that patients were not human guinea pigs. But in 1994, breast cancer patient and Boston Globe columnist Betsy Lehman unexpectedly died in the clinic's care, and another patient was discovered to have suffered permanent heart damage.
A review revealed that a research fellow miscalculated the dosages of highly toxic drugs for the women—an error that went unnoticed by nurses and pharmacists even as the patients' health deteriorated at an alarming rate for two weeks.
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."
Each of the aforementioned crises called for a different plan of attack. And it should come as no surprise that in some instances, the best course of action is to avoid taking action. Or at least to avoid taking too much action. President John F. Kennedy famously avoided a catastrophic nuclear exchange with the Soviet Union by refusing to relent to crusading Cold Warriors inside his administration who were eager to bomb Cuba in the name of national security. Rather than provoke a war, Kennedy took a defensive stance by reaching out directly to Soviet leader Nikita Khrushchev. They struck a deal for both sides to dismantle missiles.
Kennedy's tough decision shows that there might be only one truly defining characteristic of good leadership, and that is knowing what the situation calls for. Good luck figuring that one out.