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For Morgan Stanley top executive Robert Scott, who helped his company survive the heavy toll from September 11, one leadership lesson is particularly clear.
"If you wait for a crisis to begin to lead, it's too late," said Scott, president and chief operating officer, during a recent talk at Harvard Business School.
Scott spoke about "Leading in a Crisis: September 11 and Its Aftermath" with close to a thousand students, faculty, and staff on December 5 in Burden Auditorium—and with many others in the HBS community through a live Webcast—as part of a new "Rising to the Challenge" speaker series on business leadership at the School.
Calling the September 11 tragedy "a milestone more than any other" in his career, Scott said that thirty-two years on Wall Street did little to prepare him for the terrorist attacks. But he found that a range of factors, from disaster contingency plans to the actions of well-trained managers, enabled Morgan Stanley—the largest tenant in the World Trade Center—to come through the disaster with relatively little loss of life. Six of Morgan Stanley's 3,700 employees who worked in the World Trade Center died in the attacks.
Employee welfare first
Management's decision to put the physical and emotional welfare of employees before all else during the crisis, said Scott, also gave the company a newfound sense of unity and purpose. "Phil [Philip J. Purcell], our chairman, said that September 11 marked the end of the merger between Morgan Stanley and Dean Witter," Scott said. "We were more of a single firm…from having been in the foxhole together."
Scott was in the middle of a talk to the National Association of Business Economists at 3 World Trade Center when the first plane struck one of the twin towers next door. "It felt and sounded like a bomb," he said. A short time later, he watched as the second plane turned and banked into the Tower 2. "That plane hit right where our people are," said Scott, referring to Morgan Stanley's retail security department.
But in the twenty minutes between the first and second plane crashes, Morgan Stanley had implemented an evacuation plan put into place after the 1993 terrorist attack on the World Trade Center. "It turned out we had most of our people off the high floors before the second plane hit," Scott said.
Meanwhile, employees in charge of operations, having been drilled in what to do in the event of disaster, walked twenty-two blocks to Morgan Stanley's backup site and turned on the computers. "By 9:20 A.M., the backup site was activated," said Scott. "By 9:30 A.M., senior management had relocated to another backup site that became our command facility."
One of the earliest and best decisions he made, Scott said, was turning one of Morgan Stanley's credit card call centers in Phoenix into a toll-free emergency hotline as a first step in locating the company's 3,700 missing employees. The number was posted on national television by 11:00 A.M. "We had the first national emergency number of any organization, including the federal government," he said. "By 1:30 P.M., the center had received more than 2,500 calls."
Another decision for which Scott is grateful was a broadcast clip that he and Morgan Stanley's chairman made in which they called the disaster "a human tragedy, not a financial one." He added quietly, "That became the tag line for everything we did. Having a message and a tone that was very consistent was important to us."
Getting back to business quickly, but in a way that was realistic for the company, was also important, Scott said. "The U.S. Treasury was pushing for the markets to open as soon as possible. We knew that to open too soon would be devastating." Reassuring clients and keeping in close touch with both the Treasury Department and the Federal Reserve Bank were top priorities, he said.
Lessons from disaster
Preparedness counts, said Scott, in ticking off the lessons he has learned from the disaster. "We had 2,500 people in Tower 2, but lost only six people because of the evacuation plan we had put in place." Drills are economically and psychologically important, he said, adding that employees often ask these days about when the next drill will take place.
The importance of communication in a crisis cannot be overestimated, emphasized Scott. "There is no way you can over-communicate in a crisis. You have to communicate constantly to keep people feeling safe and connected."
Communicating with employees, however, didn't mean making pronouncements. "People's 'bullshit' meters were on high alert, so there could not be any business as usual," he said.
Operating in small teams and "making decisions every five minutes in an environment of uncertainty and trauma" provided important insights, Scott said. Many of the decisions he and other senior managers made in those first days and weeks of the crisis were the kind that normally would have involved six to twelve months "of painful meetings and bruised egos," he said.
"But a shared sense of purpose in a crisis encouraged levels of compromise that let you make decisions more rapidly. It was inspiring to see what happens when you set firm schedules and stick to them."
Creative thinking in a crisis is crucial, said Scott. With New York City phone lines useless within an hour of the attacks, senior managers at Morgan Stanley accessed a dedicated phone line to their London office, which in turn allowed them to call their Chicago office.
Coping with fear and anxiety
Morgan Stanley hired over 300 grief counselors to help traumatized employees cope with their emotions—and to coach managers on how to respond to employees' ongoing reactions as well as their own, he said.
| If you wait for a crisis to begin to lead, it's too late. |
| —Robert Scott |
"We have had to address the fears of people who weren't ready to return to work or who wouldn't work on a skyscraper's high floors again." Managers have been encouraged to grapple with employee issues on a case-by-case basis whenever possible, and to decide what can reasonably accommodated and what cannot, said Scott.
Deciding how much of his personal fears and anxieties to share with employees was an ongoing "tug-of-war." "I usually found some sort of compromise between raw emotion and stoicism," said Scott. He and other senior managers found that their willingness to share their fears was welcomed by employees.
Ongoing challenges include how to keep a sense of community among employees in dispersed settings, and beefing up security, he said. Morgan Stanley lost a million square feet of space in the disaster; the company is now using three backup sites and is in the process of leasing new space. Leadership has meant, in part, said Scott, coping with the "extreme stress" of finding permanent homes for displaced employees and dealing with rumors, building evacuations, and other security issues.
Being surrounded by colleagues "whose judgment I totally trusted" mattered greatly, said Scott. "You need good, able people in a crisis," he said. "And you need to make an investment in people long before a crisis ever hits. If you engender trust and loyalty, your people make it easier for you to lead."
Asked what decision, in retrospect, gave him the most peace of mind, Scott paused for a moment. "I am most proud that the clear, collective, first priority of senior management was the well being of the people who work for Morgan Stanley."
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