With the recent fluctuations in the global economy and threats of personal safety in many countries, CEOs across the globe are preparing to lead their organizations through a crisis.
A crisis can happen at any time, but it is how a leader reacts going forward that can make or break a company. Crisis leadership skills are essential to cultivate as a CEO, but how does one recognize and navigate a crisis?
While this term can be quite broad it is used to describe times of intense stress or danger for an individual or group. When it comes to company management, there are two types of crises — external and internal. Examples of external crises include pandemics, natural disasters, war, or economic downturn whereas an internal crisis could include a workplace accident, product recalls, cybersecurity breaches, or even employee misconduct.
Regardless of the cause, these crises can either bring down an organization or lift it up.
Take the United States’ most recent recession in 2008 for example. According to a 2018 study on employee morale during the recession, there was a significant increase in job and employment insecurities. This survey also showed a decrease in both the physical and mental health in employees, leading to lower productivity and more mistakes being made.
Being able to make effective decisions that ease the uncertainty and promote long-term sustainability is crucial to overturn the negative effects of a crisis.
One good case study to look at is Honeywell International’s response to the 2008 recession and how they ensured a smoother recovery process without conducting large layoffs.
Why It Matters (And How to Improve)
A good leader can inspire others and motivate change. Although many leaders already utilize skills like strong communication, self-awareness, and conflict resolution, these qualities aren’t enough to keep the boat afloat during a storm. Leaders who are unprepared often rely on these skills alone and make bad decisions that only worsen the outcomes.
The first step comes from recognizing a crisis. Many leaders miss the warning signs of a crisis and fall behind. Whether the crisis is sudden or gradual, having the ability to spot potential stressors of any kind can help you get a head start on risks mitigation and enacting a sustainable recovery plan. Some examples of what to look out for include reoccurring negative trends, decrease in employee morale, negative consumer reactions, or a disruption to daily life.
Once a crisis is identified it is important to utilize these 5 skills:
- Transparency: Being open and honest with consumers and employees is important to maintaining integrity and establishes you as a trustworthy and capable leader.
- Quick and decisive action: quick thinking is a skill that has shown repeated success in crises. It allows leaders to seize opportunities, mitigate risks, and navigate complexities effectively.
- Empathy: having the ability to understand and share the feelings of another person facilitates trust and companionship. Showing empathy during a crisis is also able to boost productivity when employees know that they are supported.
- Adaptability: Things change at the drop of a hat. Being able to quickly adapt to any situation and testing innovative ideas is key to staying on top of crisis management.
- Observation: Taking a step back and viewing a situation from multiple angles will help with problem solving and task delegation. While you will never have all the facts, knowing what you can will help lead your company to solid ground.
Prioritizing these skills will establish trust, encourage optimism, and promote ease of mind.
Need to know the best strategies to lead during a crisis? One white paper article by McKinsey & Company offers leaders a deeper insight into the methods of crisis leadership since the pandemic and beyond.
Lessons To Learn From
There are many examples of how effective crisis management can be.
One example of a successful crisis response from a major company was Johnson & Johnson’s 1982 Tylenol crisis. In 1982, seven people died from cyanide-laced Tylenol capsules. While the tampering was local, Johnson & Johnson immediately halted production, sent out an alert, and recalled the product withdrawing around 31 million bottles from the market. Company leaders also fully cooperated with law enforcement and media agencies to keep customers informed.
After the incident, Johnson & Johnson developed tamper-resistant packaging, which included a triple sealed package to make it obvious if tampering occurred. The company’s swift action and accountability is one of the reasons the company had a quick recovery for the Tylenol brand.
Compare that response to the BP Deepwater Horizon Oil Spill in 2010. This is not only advertised as a catastrophic environmental disaster, but the company response was just as bad. Initially, the company downplayed the severity of the spill and the potential environmental impact. As the crisis escalated, the company’s slow response and failure to enact adequate containment measures caused further backlash against the company, from which it would never recover from.
These examples prove that having crisis leadership skills is vital for CEOs to have. Crises are unavoidable and you will never truly be crisis-proof, but knowing how to effectively use these skills will determine if you sink or swim.
Sources: PubMed
