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| Home - Industry Article - Apr 03 Issue |
Leadership Under Crisis
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The wishful thinker, as I call this head-in-the-sand leader, is in a constant state of denial. Perception becomes more important than reality, and reality becomes increasingly abstract and difficult for him to assess. The CEO in my example above had not only become the “fixer”, as some organizational psychologists call it (thinking he has to fix the organization’s problems all alone, without the collaboration –indeed, the input—of those on his management team), but he had completely lost touch with his own employees. When I landed in New York that same afternoon, I of course discovered that his CFO not only knew of their cash situation, but was on the verge of quitting that same day as a result of the obvious pathology in communications with his boss. Even the front-desk receptionist was more expressive of the reality of their situation, as she had been receiving bike messengers delivering vendor collection notices for much of the previous two weeks. The wishful thinker does not realize that the role of the CEO is not to honorably “go down with the ship” or play peppy music on the deck of the Titanic. He must be gathering everyone as best as possible to plug leaks or, if needed, get on lifeboats. In practice, this means galvanizing the organization around the problem at hand –be it capturing one more large “house account”, completing a debt refinancing, getting a difficult audit done, or even preparing for large lay-offs. In the case of the New York client described above, we assumed an interim CEO role. After triaging the payroll problem by begging for a few days of abeyance from our strategic partner, we put together a turnaround plan over the weekend, and held a team-wide meeting on Monday morning, patching in the company’s offices around the country. At that meeting, we did everything exactly as it had not been done before, clearly communicating the depth of the crisis to every single employee, and even putting the revised budget (including planned lay-off dates in the event of failure to meet sales, financing, and cost-containment targets) on the company server for all to see. The only antidote to the shoals of wishful thinking, as Admiral Stockdale would say, is a clear-eyed plan, with milestones, to navigate the pain of the moment.
The MacArthur
If you connect the dots in the descriptions of problem leadership approaches above, you will hit upon a common theme: inattention to context. The crusader is fundamentally disconnected from context. He is in a state of quixotic, obsessive focus on a particular “mission” or approach (often tinged with questions of power and ego, particularly in merger and control-stake financing deals) that does not properly integrate the needs of other stakeholders -- or even, in the worst cases of denial, fails to recognize the requirement to get a rescue capital deal done in order for a corporation to survive. The wishful thinker is one step evolved: he at least knows he is ignoring context. Though he won’t necessarily tell you he thinks this way, he really believes that everything will be alright if he just keeps morale up and if he just believes hard enough –and by extension, makes those around them believe. At least the wishful thinker has a strategy, though flawed.
At the most insidious end of the spectrum of denial –where it is sometimes possible to think that one is context-appropriate-- is the leader who I call the “MacArthur”. The MacArthur, named such after the famous general’s maxim that the price of inaction is greater than the price of imperfect action, believes that leadership is essentially a question of taking action and being bold. Responding to a lost customer, a market downturn, or a troubled corporate transaction, this is the CEO is likely to have the “weekend epiphany”. We’ve all seen it: the leader who squirrels away for a day or two in the face of a corporate crisis, and returns with that master plan: the silver bullet that will solve the salesforce’s diminishing pipeline, the deal structure that will entice a new lending consortium, or the product that will instantaneously reverse the trend in market share deterioration. “If only we could just implement this new master plan…,” goes the implication, everything will be alright. Although management consultants the world over are in agreement that when the going gets rough for a business, it is most critical to focus on the historical core competency of that business –be it a particular product, an approach to customer service, or a core brand identity—it is the MacArthur who is most likely to lead the organization on a new adventure just when he should be fortifying the base. Now, I don’t mean to imply that a bold new initiative (be it product/service-oriented, or even an M&A/financing project) can never be a legitimate solution to a corporate crisis or quagmire. Many tomes have been written on the important of boldness in leadership, outside-of-the-box thinking, and so forth. It is the addiction to boldness as a leadership strategy that is the problem here. In the context of corporate restructuring, planning is critical --even rushed, weekend planning as in my New York client above. Reactive leadership comes most naturally when under fire. The key is to process problems quickly (breaking out costs more effectively by line of business activity, rooting out the component of the business that acts as the fly in the ointment in a prospective merger deal, assessing senior management deficiencies), and then make triage and strategic decisions based on this analysis. Too many CEOs, desperate to feel and look responsive to crisis, will lop off business units, senior managers, or service providers peremptorily, creating a restructuring environment of chaos and capriciousness that can confuse and alienate employees, customers, vendors and strategic partners.
An old boss of mine used to say that he though the business world was divided between those that identify problems and those that come up with solutions (and he never left any doubt as to which demographic he preferred). In jotting down the thoughts above on “problem approaches” leadership in corporate restructuring, I am at great risk of being lumped in the former group. Though I will have to remedy this association in a future article, there are a couple of broad-brush antidotes that can be mentioned in the remaining space. A friend of mine in the restructuring field calls one of these remedies the “sunlight cure”. All three leadership pathologies mentioned above –crusading, wishful thinking and “MacArthuring” (taking action capriciously)—thrive in an environment of mis- or dis-information. The more a CEO or a senior management team is forced to openly communicate on the corporate crisis of the moment, the more difficult it is for the Wishful Thinker to be in the thrall of his own belief. The more feedback a CEO receives from customers, vendors and employees –even from the media-- on an atrophying product line, the less likely his response will be reactive and capricious. Communication and forthrightness in dealing with crisis, between and amongst all stakeholders, is the best antidote to denial in the executive suite.
The second overall cure to the problem leader is the most obvious, and yet it is not acted upon with enough frequency: replacement. With respect to CEO relations, the last few years of Enrons and Worldcoms should have taught us that Boards of Directors, investors, lenders, and even senior management must become more independent, more assertive, and more whistle-blowing –not just in the sense of rooting out mendacity and fraud, but also by realistically assessing the capabilities of a company’s maximum leader to confront painful corporate change successfully.
Kaleil Isaza Tuzman is the Managing Partner of Recognition Group, LLC, a restructuring advisory and investment firm based in New York City. He has written and appeared on the subjects of entrepreneurship and corporate restructuring in numerous national media outlets, and has functioned as an interim CEO for troubled companies in the manufacturing, services, media, telecom and software fields. For more information on Recognition Group, LLC, please visit www.recognitiongroup.com or to send feedback email: kaleil1@recognitiongroup.com
 
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