Managing the Economic Crisis
The economic crisis is tapping the inner reserves of experienced leaders and introducing a new generation of managers to crisis management. These previous WK articles explore leadership, the role of the Board, the emotional needs of managers, and the risk to corporate giving programs.
Sharpening Your Skills dives into the HBS Working Knowledge archives to bring together articles on ways to improve your business skills.
Questions to be Answered:
- How do I lead in a crisis?
- What roles does the Board play?
- What are the emotional needs of people who lay off fellow employees?
- What do companies lose when they cut corporate giving?
How do I lead in a crisis?
Leading in crisis requires a combination of skills and behaviors—personal and professional—that can be mastered, says HBS professor Bill George. A crisis, difficult as it is, also presents an opportunity to develop and grow. Key concepts include:
- In a crisis, remember your internal compass of values: When crisis strikes, leaders often look for an "at-any-cost" quick fix in attempting to save face, says George.
- To ensure that economic recovery is long-lasting and that future business is sustainable, leaders must practice a clear set of principles.
- It is OK, even necessary, for leaders to be open with others, admit mistakes, and look to trusted friends and associates for advice and support.
- Use a crisis as an opportunity to reshape the market.
What roles does the Board play?
To understand what transpired in the boardrooms of complex companies during the financial crisis, and to offer a prescription to improve board effectiveness, eight senior faculty members talked with 45 prominent directors about what has happened to their companies and why. Key concepts include:
- Regulations and laws offer little guidance about what specifically boards should do, and, given this lack of specificity, most boards have gradually developed an implicit understanding of what their job should be.
- Directors expressed strong consensus that the key to improving boards' performance is not government action but action on the part of each board.
- To improve board effectiveness, each board should achieve clarity about its role in relation to that of management: the extent and nature of the board's involvement in strategy, management succession, risk oversight, and compliance.
What are the emotional needs of people who lay off fellow employees?
"The core challenge for everyone who performs necessary evils comes from having to do two seemingly contradictory things at once: be compassionate and be direct," say Joshua D. Margolis of Harvard Business School and Andrew L. Molinsky of Brandeis University International Business School. Their research sheds light on best practices—typically overlooked—for the well-being of those who carry out these emotionally difficult tasks. Key concepts include:
- Most managers who conduct layoffs feel a mix of emotions that may catch them by surprise: sympathy, sadness, guilt, shame, anxiety, and perhaps anger.
- Best practice for managers includes understanding yourself and recognizing your limitations. Recognize ahead of time the emotional cocktail that you will likely experience when performing a layoff, say the researchers.
- Companies should focus not only on getting the task done and on ensuring the well-being of victims, but also on the well-being of those who perform the layoff.
- Conduct training beforehand; have pairs or teams perform the tasks together; provide a good physical environment in a nonpublic, quiet area of the organization; and later allow those who carried out the layoffs to decompress and debrief.
What do companies lose when they cut corporate giving?
Financial turmoil is not a reason to scale back on CSR programs—quite the opposite, says HBS professor V. Kasturi "Kash" Rangan. As a marketing scholar, Rangan is optimistic about strategic CSR efforts that provide value in communities and society. Key concepts include:
- Companies should not cut corporate social responsibility programs across the board, but rather weed out less effective initiatives and consolidate good ones.
- Effective programs that serve the community in a compelling way, and that also demonstrate a strong potential to influence the business, must be retained and grown.
- Corporate social responsibility should be treated as a business discipline and practiced with the same professionalism and rigor as other aspects of a firm's strategy.