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When the Going Gets Tough ... (continued)

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LEADING IN A CRISIS

“If we had to capture everything in one word, it would be leadership,” says Irving Wladawsky-Berger, Visiting Lecturer at MIT Sloan and chairman emeritus of IBM's Academy of Technology. “Leadership is all about leading people, helping people do what they need to do to get through the crisis. When you are in uncharted waters, and suddenly there is a storm — and in this particular crisis, we have a perfect kind of storm — the past doesn't help you very much. Almost by definition, this perfect storm doesn't look like what we had in the past. That's where leaders come to the fore and differentiate themselves. Everyone is scared, and no one knows what is going on. Someone has to shape, define, and frame what is going on so everyone else can understand it. Good leaders do this particularly well.”

But are there enough good leaders and decision makers to go around? Anderson estimates that about 20 percent of all leaders are up to the task of a great crisis. They must communicate well — and wisely — to their employees, their customers, and their boards. And they also need to “lead from the front,” says Jeff Shames, SM ’83, Executive in Residence at MIT Sloan and the former chairman of MFS Investment Management.

“You have to lead in the downturn. If you have to cut pay, you better take the biggest pay cut;, and if you have to cut costs, cut costs in your own sphere,” advises Shames. “You can't have everyone travel coach if you're not willing to travel coach.”

Shames has led by example. In the stock-market downturn of 2002, MFS saw its first layoff in the company's then 70-year history. Of the 3,000 employees at that time, 150 lost their positions with the financial services firm, a last-resort move after the company had cut back on travel, benefits, and matching defined contributions. For Shames, whose company had been included among FORTUNE Magazine's top 100 places to work for several years running, it was the handling of those workers who lost jobs that made the difference.

“It was about treating people with respect,” explains Shames. “We were one of the last companies in our business to do this, and we made the Fortune 100 list again after the layoff, based on a survey of our employees. People had great respect for how we handled the layoff. In my mind, it's how you treat people; those who are leaving and those who are staying.

“People know times are bad but won't accept it,” says Shames. “They want somebody who is going to lead by example with good plans and strategies. They want to know why things are happening and what's going to lead them to better times.”

TOOLS OF THE TRADE

In both good and bad times, people simply want more from their leaders, notes Deborah Ancona, Seley Distinguished Professor of Management and faculty chair of the MIT Leadership Center. “So leaders will get more of the credit or more of the blame. When people are trying to explain large deviations in their world … we have the romance of leadership as an explanatory variable.”

Even in dire times, Ancona says that leaders have tools at their disposal to turn around events, citing sensemaking, vision, and communication as three critical components. She recalls a story told during an on-campus visit by Xerox Corporation CEO Anne Mulcahy after she was selected to run the company by the board of directors in 2001. Xerox was in trouble, with debt in excess of $17 billion and stock that had fallen from $64 to less than $4.50 per share.

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