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July 14, 2014 12:09 pm
When the lucrative business of advising on mergers and acquisitions was in the doldrums, consultants spread the idea that crisis management was “the new M&A”. They wielded news stories such as BP’s Gulf of Mexico oil spill, Rolls-Royce’s disintegrating Qantas engine, and Toyota’s jammed accelerator pedals to frighten clients into contracts aimed at helping them cope with such disasters.
As M&A activity has revived, so has its primacy as a money-spinner for advisers. But “crisis” remains a bombshell in the boardroom. It is even modish to talk about business being in a constant state of crisis. The real art of leadership, though, is not being able to react to acute crises, which are rare, but to learn from such situations how to manage normal business uncertainty.
Plenty of companies have realised that fixed plans and strategies must be accompanied by a willingness to be agile, open and responsive to change. The language of the start-up is spreading to large groups. General Electric now teaches a test-and-learn programme for product development called FastWorks, conceived with Eric Ries, entrepreneur and author of The Lean Startup.
Yet for the most part, according to Ranjay Gulati, “the way we teach leadership has a definitive tone to it”, as though certain precepts will hold for all circumstances. To shake this orthodoxy, he teaches his students at Harvard Business School about Ernest Shackleton, the explorer who had to improvise to rescue his team when their ship was trapped and crushed by Antarctic ice 100 years ago. In the latest Harvard Business Review, Prof Gulati and co-authors have also examined the “other” Fukushima nuclear power plant, Daini – sister to the notorious stricken Daiichi facility.
Daini was saved from the after-effects of the 2011 earthquake and tsunami in part thanks to Naohiro Masuda, the site superintendent, who led a successful effort to shut down Daini’s four reactors safely. Though he could probably not have rationalised it in this way at the time, Mr Masuda proved to be a skilful “sensemaker”.
When humans cannot make sense of a situation that is beyond their experience, they become anxious and disorganised, even ditching basic principles that could help them escape the crisis.
“What holds organisation in place may be more tenuous than we realise,” wrote Karl Weick, an expert in organisational behaviour, in his 1993 analysis of the collapse of sensemaking during the 1949 Mann Gulch wildfire in Montana, where most of an expert team of firefighters died. Though the circumstances were extreme, “the recipe for disorganisation in Mann Gulch is not all that rare in everyday life. The recipe reads: thrust people into unfamiliar roles, leave some key roles unfilled, make the task more ambiguous, discredit the role system, and make all of these changes in a context in which small events can combine into something monstrous.”
The post-tsunami situation at Fukushima, where staff were panic-stricken, and the way forward was unclear, had some of these ingredients. Mr Masuda’s skill was not to deny the life-threatening danger, which was clear to all, but to foster a collective understanding of what needed to be done to survive it. By openly making sense of the crisis – scribbling his interpretation of the few data he had on a whiteboard in front of his terrified staff – he encouraged them to cope with inevitable changes of plan. Shackleton, similarly, had to adapt his ideas for leading his men out of peril on the floating ice, when it became clear his first plan would not save them. These are the sorts of “pivots” that start-ups – and, increasingly, large companies – must make when they discover one route of business development blocked.
Few leaders will confront the immediate aftermath of a tsunami; even fewer will be marooned on floating polar ice. But all are vulnerable to unexpected events that could force them to change course and trigger some of the responses Prof Weick identified at Mann Gulch.
As these vivid tales suggest, managing in a crisis is not just about planning. Leaders and their teams who become too wedded to one approach may be doomed. They must promote a reality in which their team can believe. But by discussing and testing other options along the way, they also have to keep enough uncertainty alive to enable their teams to pivot to a better plan before it is too late.
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