Leadership in troubled times
Jan 02 2013
But the same war hero with all his charisma and popularity lost the 1945 general election to Labour’s Clement Atlee. His wife told Winston that it might be a “blessing in disguise”. Churchill is said to have replied, “Very well disguised indeed.” What made Churchill successful in wartime caused his downfall in times of peace and reconstruction.
Why was he a successful leader in times of upheaval and war? Because he defined his mission sharply and narrowly: “I have only one aim in life, the defeat of Hitler, and this makes things very simple for me.” After accomplishing that mission, life was complex and Churchill failed to navigate the waters of British politics successfully. During war and turmoil, people tend to unite under a charismatic leader. They are willing to overlook his character flaws. But in times of peace and harmony they are more likely to choose a leader who is a consensus builder.
The challenges of leadership in troubled times and crisis are no different in the corporate world. It calls for courage and fortitude and reliance on the moral compass. The global pharmaceutical giant Merck faced a crisis in 2004. Five years after the launch of its blockbuster drug Vioxx in 1999, it had to pull it off the market. Vioxx was a painkiller, which treated primarily acute arthritis patients. It had to take the drug off the shelves in September 2004 after it was revealed that its use increased the risks of heart attacks and strokes. The drug had clocked $5 billion in sales and almost two million Americans were buying it when Merck decided to withdraw.
It took courage and leadership on the part of Merck’s CEO Raymond Gilmartin to withdraw such a commercially successful drug. Soon after Merck's voluntary worldwide withdrawal of Vioxx, Gilmartin fell on his sword and retired. In 2007, he taught us the Vioxx case study at Harvard Business School (HBS) and narrated firsthand how tough the decision was and yet how rightly and in a timely manner it was made.
In 2010, Toyota Motor, the largest automaker on the planet faced a severe crisis. It had to announce the recall of millions of cars. It was described by Toyota as a “moment of unprecedented crisis”. "I am deeply sorry about the inconvenience and concern caused to our customers and others," a grim Akio Toyoda, the company’s president and chief executive, said at a news conference at the company's headquarters in Nagoya, Japan. And because they were honest, transparent and repentant they emerged stronger from the crisis.
In 2002, the world saw the implosion of one the oldest and best known accounting firms: Arthur Andersen. Following the failure of Enron, its auditors Andersen were in the eye of a storm. On February 4, 2002, the former Federal Reserve chairman Paul Volcker was hired to introduce widespread reforms at Andersen and restore its reputation. While they were looking at measures to bring back Andersen to its feet, events were rapidly overtaking everything.
On March 14, 2002 the US justice department charged Andersen with deliberately destroying evidence relating to its audit of Enron whilst an investigation was already underway. There was more bad news for Andersen with every passing week. Finally, on 15th June Arthur Andersen, the US arm of the accounting giant, was found guilty of obstructing justice by shredding evidence relating to the Enron scandal. It agreed to cease auditing public companies by August 31. And what contributed to the unravelling of this once-great firm was the exodus of its talent and its clients.
Usually when a crisis hits a company, the natural tendency of a disingenuous leadership is to go into a denial mode: “Nothing to do with me”’. Sometimes they can go into a “Deny it mode” and the refrain is “We did not do anything wrong”, “We cannot comment on why it happened”. “We did our job”. When the groundswell of public opinion and media reactions damage the brand, poor leaderships spend millions of dollars on PR consultants, media handlers and on a “we are innocent, we are victims” campaign. But the regulatory and legal process invariably catches up with the wrong-doing and negligence. The next phase is to find and punish scapegoats. “Oh our product or service is without blemish, our processes are flawless, sorry a few of our workers and inspectors fell asleep on the assembly line, and guess what? We have fired them. End of the story: no remorse, no atonement, and no apologies!
If a crisis is handled dishonestly-as we have seen in far too many cases in India- the brand experience turns out to be an empty boast. Nirmalya Kumar, a professor of London Business School has this advice, “Our research has identified “four Cs” that should guide companies in troubled times: be candid, contrite, compassionate and committed.” When a company is in the midst of a crisis, spending money on spin doctors is akin to beefing up one’s obituary. Talent and customers will soon abandon a sinking ship that has a dishonest captain on board.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)