Leaders need a lesson in crisis management

Recent events in the global economy have proved that many of our leaders are ill-equipped to deal with and manage crises. Since the onset of the financial meltdown in 2008 we have needed leaders who can deal with uncertainty and have the ability to discover opportunities for recovery and growth.

Now, as concerns reach new heights, it seems clear that our leaders are failing on these accounts. Decisions are delayed, uncertainty is fostered rather than eliminated and the resulting short-term thinking undermines recovery. This leadership crisis, which is running in parallel to the financial crisis, highlights important lessons about how we should educate our future business and political leaders. Within the business school curricula there is a blind spot that may well hamper the way future leaders are able to handle a crisis.

Business education and the MBA are associated with the idea of striving for excellence and enhancing one’s strengths. The ideal of leaders as the drivers of organisational and employee growth has been the underlying philosophy of business education for some time. There is nothing wrong with such an approach because we want our students to be the best leaders they can. Such a philosophy is in line with the typical business school student profile: self-confident and possessing an awareness of the strengths needed to succeed in business. These are praiseworthy qualities, but in the light of recent events the perception remains that too strong a focus on such a teaching philosophy can make students blind to failures that they may encounter in the future.

We may have created too much of a positivity bias wherein we think the achievement of excellence is the only state one can learn from. Such thinking has led to a situation where the most successful leaders are held up as an example from which to learn, at the cost of knowing nothing or very little about how leaders react and take charge when confronted by failure. Combine this with the experience of most business school students, whose participation in class exercises is usually focused on learning from their best rather than their worst results, and it should come as no surprise that students fall short in terms of crisis management.

The positivity bias in our curriculum enhances students’ self-confidence and abilities to promote effective leadership when times are good and growth is the default, but it does not help them in working towards confident and decisive leadership in times of crisis, when the default is decline.

An awareness of how failure develops combined with experiencing such negative situations should be a part of the curriculum if we want our future leaders to react to and manage crises better.

Crises are characterised by a high degree of uncertainty, so students need to understand the nature of uncertainty. Such an understanding may
help them break away from habitual patterns of leadership and encourage small steps towards a
fresh template. Incremental change might not sound overly ambitious, but it may help deal with uncertainty in more effective ways through frequent assessment of decisions. Such small steps could help future leaders to increase awareness so that they do not reach the point of no return.

To increase experience of failure, a climate must be developed where not only are students’ best performances evaluated but their weakest. Periods of reflection when personal failures are discussed and put into perspective should complement the existing focus on the most successful examples of leadership. Students must understand that in the uncertain business world successful leadership may be the exception rather than the norm.

As the current crisis illustrates, interdependent relationships developed with other parties often have a more significant impact than initially anticipated. So business leaders need to be familiar with their strengths and weaknesses so they can adjust to fluid situations in a dynamic global economy.

David De Cremer is professor of behavioural business ethics at Rotterdam School of Management and visiting professor at London Business School.