LEADERSHIP IN CRISIS

It is commonly said that the true leaders can be tested during the dark threatening periods
known as crisis. Crisis is known as a sequence of sudden, unplanned and unexpected events
leading to instability in the organization and major unrest amongst the individuals. 1 These are
the times when unfortunate ones are looking for someone to blame and are on a hunt to find
where leader’s weaknesses lie. Also the times firms go through difficulties with motivating and
uniting employees around a clear direction, precise objectives and an inspirational vision
commonly relying on toxic control based leadership.

When it comes to leader’s response we need to take into account two different types of crisis;
routine and novel crisis. 2 Routine events are the known risks for which organizations can plan
and develop procedures (for example: liquidity plans for financial institutions, as well as
disaster recovery and security plans for companies across industries).3 Novel crisis can be a
mix of two or more negative unexpected events which occur at the same time and have unusual
frequency and impact. They are too big or unusual to be imagined and organizations typically
don’t have plans for such events. The best example for novel crisis are terror attacks such as
9/11. According to Deloitte Advisory director in the Cyber Risk Services practice at Deloitte
& Touche LLP online poll, respondents were asked which event their organizations were least
prepared for, terror topped the list at 36.4%, followed by a cyber breach at 18.3%.4

Every crisis is different and every organization handles crisis differently, there is no single rule
that can be applied to all organizations. However, there are a few steps often used by
organization leaders. This might sound oddly extreme but we can look at business crisis as
natural disasters and managers as governments. When the business crisis strikes leaders need
to be capable of aggregating everybody’s capabilities, competencies, and capacities to achieve
a single purpose, still taking into account the fact that they have individual authorities and

1
Unknown author, Role of Leaders / Managers in Crisis Management, Management Study Guide available at:
https://www.managementstudyguide.com/role-of-leaders-in-crisis-management.htm
2
Arnold M. Howitt and Herman B. Leonard, “Managing Crises: Responses to Large-Scale Emergencies,” CQ Press, February
11, 2009.
3
In “Managing Crises: Responses to Large-Scale Emergencies,” some crisis situations are categorized “as routine
emergencies, not because they are “easy” but because the predictability of the general type of situation permits agencies
to prepare in advance and take advantage of lessons from prior experience—even when circumstances are quite severe.”
4
Woo R, (2011), Deloitte & Touche LLP, Crisis Leadership, available at:
https://www2.deloitte.com/us/en/pages/risk/articles/crisis-leadership-guiding-the-organization-through-uncertainty-and-
chaos.html(March 5th, 2018)
responsibilities.5 When a natural disaster strikes governments need to know the power of
emergency intuitions, financial resources, the severity of the damage and how to approach it.
To conclude, crisis is a crisis, and a leader is a leader no matter who they are leading.

First of all, leaders should have a wide knowledge of their organizations and it’s environment,
hence they need to know what is going on, what is the problem they’re dealing with? And what
needs to be done to go back to normal? They need to get to the core of the problem, figure out
what caused it and ways to fix it! This isn’t done overnight and it takes time so leaders need to
act promptly, not hurriedly, and most importantly avoid panicking! This will help imposing
order on a chaotic situation. However, leaders need to bear in mind that they should be fast
with the response, but the response needs to be very well thought through! Leaders who can
act directly, but still remain calm and maintain their sense of perspective, are the ones that will
help the organization survive. It is very hard to manage expectations during crisis, specifically
addressing the size and the scope of them. Leaders must be smart with their words, honest, not
afraid to speak to the magnitude of the situation, but careful not to create panic! Crisis is not a
static event, it changes and evolves constantly. Leaders need to carefully observe adaptability
of their responses and keep loose! They cannot be stuck with the same single strategy if it isn’t
showing effective results, hence their first response may not be your final response.

We can divide role of leaders in three stages: pre-crisis, crisis, post-crisis. “What’s important
is to think of crisis management in terms of a cycle—moving from preparation to response to
recovery and then around again—applying lessons learned from one stage to the plans and
processes that support the other stages.”6 When we talk about pre-crisis stage, leaders have the
deepest knowledge on the organizations and foresee the early signs of crisis, try to fight it,
prevent it, or warn employees on what is coming. This stage is also known as Signal Detection.
Motivating employees is crucial during these times, letting them have a voice in this situation,
encouraging effective communication at the workplace, increasing their feeling of importance
and purpose, do everything possible to overcome the crisis. When crisis actually hits someone
should lead from the front, with calmness and confidence. Leader have two segments to bare
in mind; internal and external organizational actors. They should have full control of the

5
Berinatto S., (2010) Harvard Business Review, Leading Throug a Major Crisis, available at:
https://hbr.org/ideacast/2010/10/leading-through-a-major-crisis.html (March 1st, 2018)
6
Woo R, (2011), Deloitte & Touche LLP, Crisis Leadership, available at:
https://www2.deloitte.com/us/en/pages/risk/articles/crisis-leadership-guiding-the-organization-through-uncertainty-and-
chaos.html(March 5th, 2018)
internal actors such as employees, without avoiding any problems because the issues neglected
in the initial stage might be a huge concern in the future. These are the times when
communication needs to be at its peak. Leaders should be aware of all steps employees are
taking and create an honest trustworthy climate. During this period motivating employees to
believe both in themselves and the organization is a mandatory task. Leaders charisma can be
very helpful during crisis, being a strong pillar of support for the team members. Employees
should be able to fall back on their leaders. There is also a very important external dimension
including stakeholders, media and other external parties. Leaders need to come out confident,
meet and great everyone and explain the whole situation, sometimes even develop a strong
relationship and ask for help. Crisis are no time to play safe, leaders need to strive hard to come
out of tough times as soon as possible. It is time to gain back the lost trust, reform the
organizations mind-set, looking back on drawbacks and vulnerabilities of the organization, and
most importantly learning from crisis to effect change. there is the post-crisis stage when
leaders need to look back, reflect and talk about lessons learned, making sure that the same
mistakes aren’t repeated. James identifies five leadership competencies which facilitate
organizational restructuring during and after a crisis. When it comes to external actors’
organization needs to make sure to relive organization’s image. 7

There are 4 operating principles used to manage crisis: leading decisively, driving towards
actionable intelligence, actively communicating, and continuously framing the crisis. 8

• Leading decisively: Often when we think about leaders, first actor that comes to our
mind is the CEO. However, CEOs may not always be ideal leaders when it comes to
novel crisis because it could distract them from the day-to-day responsibilities. Crisis
needs to be treated on a broader basis, with involvement of chief risk officer, chief legal
officer and a crisis manager all coming together.
• Drive toward actionable intelligence: During crisis there is a lot of he said she said
kind of information coming from various both relevant and irrelevant sources. Leaders
need to know how to navigate through this confusing data and intelligence. But those
sources must be qualified, as misinformation can be as prevalent as information.

7
Unknown author, Role of Leaders / Managers in Crisis Management, Management Study Guide available at:
https://www.managementstudyguide.com/role-of-leaders-in-crisis-management.htm
8
Woo R, (2011), Deloitte & Touche LLP, Crisis Leadership, available at:
https://www2.deloitte.com/us/en/pages/risk/articles/crisis-leadership-guiding-the-organization-through-uncertainty-and-
chaos.html(March 20th, 2018)
 • Continuously frame the crisis: Sometimes of the original plan no longer fits the
original frame, leaders need to remake the plan. They must constantly observe crisis,
especially now days with the explosion of internet as the main media, having most of
the source available very quickly.
• Actively communicate: During a crisis, it’s crucial to constantly communicate with
both internal (owners, employees, stakeholders) and external actors (lenders, media,
public). Crisis leader manager need to have honest, transparent and consistent
information, while keeping a record of facts in order to be able to quickly respond to
potential lawsuits or other scandals.

A recent McKinsey study9 shows companies’ leadership in terms of gender diversity, and
whether women’s leadership behaviours can provide a competitive edge during the crisis.
Based on the study, organizational dimensions that proved to be very successful during the
2008 financial crisis were: “Leadership team” (the ability of leaders to guide an action),
“Direction” (the ability to define the aim of the company heading and the resource
requirements), “Inspiration” (the ability to present a better optimistic vision). The results
showed that companies with more than 3 women in top management score higher on these
dimensions.

A reputational crisis, also known as a public relations crisis, is often related to product defects
or tampering, criminal acts, labor disputes or disclosure of confidential information. A physical
crisis is often based on a physical risk to people or a business such as natural disasters, fires,
industrial accidents, power outages, terror attacks, workplace violence and vehicular
accidents.10 Many argue that crisis should be approached as an opportunity, an opportunity to
showcase an institution's character, its commitment to its brand and institutional values. Let’s
look at a good example of handling crisis PR crisis. The Pepsi Corporation went through a
crisis in 1993 which started with claims of syringes being found in cans of diet Pepsi.11 Pepsi

9
Desvaux G., Devillard S., Sancier-Sultan S. (2009). Women Matter, McKinsey & Company, available
at:https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Women%20matt
nd
er/Women_matter_dec2009_english.ashx (Mar 2 , 2018)

10
Bisk A. (2010), Crisis Management, University of Notre Dame: What Good Leaders Need to Know and Do, available at:
https://www.notredameonline.com/resources/leadership-and-management/crisis-management-what-good-leaders-need-
nd
to-know-and-do/#.Wp6APmaZPBJ(Mar 2 , 2018)
11
Holmes P. (1993.), How the Pepsi Syringe Hoax Fizzled (1993), Holmes Report, available at:
https://www.holmesreport.com/latest/article/how-the-pepsi-syringe-hoax-fizzled-(1993) (March 20 , 2018)
th
made a deal with stores not to remove the product from shelves while it was getting the
production process investigated. Pepsi then posted a video including a production process to
show that syringes didn’t come from the factories. A second video showed surveillance from
a store where a woman was caught inserting a syringe into a can. The PR did a really good job
proving to the public the false rumours. But Pepsi didn’t stop here, after the crisis it ran a
several campaigns thanking the public for their trust.

To conclude, being a leader of a company in crisis is like being a coach of a football team that
is loosing the match in the second half. There is still time to win, but you have work fast, smart
and have a prepared strategy! Going through crisis is not a one mans work, rather a team work.
As a leader, there are going to be times when one feels like every decision they make is wrong
and nothing seems to work the way they planned. During these times leaders are the ones being
pointed at for organizations mistakes, who’s every step is being judged and observed by the
entire public. Once Winston Churchill said, “If you’re going through hell, keep going.”
Although companies usually cannot anticipate crisis, leaders have the responsibility of
knowing the future moves on getting out of the crisis stronger! There are several different
management processes and strategies as well as the importance of the gender diversity, that we
discussed in this seminar. Crisis leadership is considered effective and successful once crisis is
turned into an opportunity and organizations gains benefits.

Literature:

- Arnold M. Howitt and Herman B. Leonard, “Managing Crises: Responses to Large-

Scale Emergencies,” CQ Press, February 11, 2009.
- Desvaux G., Devillard S., Sancier-Sultan S. (2009). Women Matter, McKinsey &
Company, available at:
https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/
Our%20Insights/Women%20matter/Women_matter_dec2009_english.ashx (Mar 2nd,
2018)
- Bisk A.(2010), Crisis Management: What Good Leaders Need to Know and Do,
available at: https://www.notredameonline.com/resources/leadership-and-
management/crisis-management-what-good-leaders-need-to-know-and-
do/#.Wp6APmaZPBJ (Mar 2nd, 2018)
- Unknown author, Role of Leaders / Managers in Crisis Management, Management
Study Guide, available at: https://www.managementstudyguide.com/role-of-leaders-
in-crisis-management.htm (Mar 4th, 2018)
- Berinatto S., (2010) Harvard Business Review, Leading Throug a Major Crisis,
available at: https://hbr.org/ideacast/2010/10/leading-through-a-major-crisis.html
(March 1st, 2018)
- Woo R, (2011), Deloitte & Touche LLP, Crisis Leadership, available at:
https://www2.deloitte.com/us/en/pages/risk/articles/crisis-leadership-guiding-the-
organization-through-uncertainty-and-chaos.html (March 5th, 2018)
- Holmes P. (1993.), How the Pepsi Syringe Hoax Fizzled (1993), Holmes Report,
available at: https://www.holmesreport.com/latest/article/how-the-pepsi-syringe-
hoax-fizzled-(1993) (March 20th, 2018)