On March 27, 2020, we conducted two webinars on Leading Through the COVID-19 Crisis. At the beginning of each webinar, we asked participants how this crisis is different from other crises they’ve encountered and in what ways this crisis is putting unique demands on their leadership.
The short of their responses? This is a monstrous challenge, and the characteristics of the crisis that make it different are:
- Fast-changing
- Indefinite period
- Highly ambiguous
- Hitting everyone — all regions, all customers, all suppliers — all at once
What we heard from webinar participants is that the fundamental leadership challenges are these:
- High uncertainty
- High stakes
- Feeling overwhelmed — by avalanches of sometimes contradictory data, by the enormity of the unknowns, by the enormity of the challenge
- Feeling highly stressed — by threats to their businesses, as well as threats to their health and the health of their employees and family members
So, given these challenges, how do we get through this situation? How do we move forward when the way forward is not at all clear? How do we make decisions in real-time under high stress when the situation is moving this fast?
THE LEADERSHIP MINDSET
The place for leaders to start is with their own mindset. Here, they can learn from other leaders who have survived unimaginably challenging crises. Among these leaders is Jim Stockdale. He was the senior U.S. Naval officer held in captivity in a Vietnamese prison during the American war in Vietnam. He was beaten mercilessly during his seven years of captivity, as were his fellow American prisoners. What was his mindset? How did he maintain his sanity, as well as lead his fellow American prisoners?
Stockdale’s leadership mindset was characterized by two prominent themes. First, be brutally honest about the circumstances. Giving people false hopes would be detrimental. Second, combine brutal honesty with a rational basis for hope. Never lose faith that you will prevail in the end.
Years after being released, Stockdale said, “I never lost faith in the end of the story. I never doubted, not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”
Stockdale can serve as inspiration for the rest of us — we should never lose faith at the end of the story. What we are going through now may prove to be a defining experience for many of us. We will get through this in good measure because of our faith that we shall prevail in the end.
But what about the brutal honesty part of the Stockdale mindset? When asked who did not survive the prisoner of war experience, Stockdale responded, “Oh, that’s easy, the optimists. Oh, they were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”
So, the lessons for leaders confronting the COVID-19 crisis are these: Through this crisis, your mindset will be your most precious asset. Don’t panic. But don’t tell fairy tales to yourself or to your people. Be brutally honest with those you lead, while at the same time, conveying the hope that you and your team shall, in the end, prevail.
PROCESS AND PEOPLE
With the Stockdale mindset in place, we’re ready to take the next steps. In a challenge such as the one we’re confronting — where we don’t fully understand a situation that continuously changes — we have to put our faith in process and people.
Let’s start with people. Getting the right people on the team that is going to get this situation figured out maybe your most important step. Figuring out the kinds of expertise you need will be the easier part — you’ll want people with expertise in finance, technology, communications, medicine, supply chain, human resources, and real estate.
But within each of those areas, assuming you can pick from sets of people with high levels of functional expertise, what characteristics should you look for? The more ingenuity and creativity you expect of your teams, the more you’ll want to be biased on the side of youth and diversity. Yes, you’ll need senior people who bring perspectives born of extensive experience, but you’ll also need the energy, fearlessness, and willingness to experiment that you see in younger people. You’ll also want people with diverse backgrounds — a quick way to kill innovation is to staff a team with people who have similar backgrounds and mindsets.
In terms of team size, the rule of nine is a useful starting point — although there can be far more people charged with addressing an issue, try to hold individual teams to nine or fewer core team members. If, for example, financial survival is an issue, then the core team charged with setting a direction for the larger survival effort should be small enough that it can be agile and can move fast.
Providing direction and oversight should be a senior executive team, which will formulate and delegate problem-solving tasks to the more functionally minded teams.
The process your teams will undertake needs to be grounded in your company’s values and in an overall goal. Taking the time upfront to ensure that you have clarity about your goal and values can save much heartache down the road.
In providing guidance to your teams, you’ll want to set reasonable expectations and provide guidance for the kinds of discussions you expect. In routine situations, reliable, correct, efficient answers are a reasonable expectation. But in an unprecedented situation such as the COVID-19 crisis, much of what your teams will be doing will be an experiment in real-time. So you’ll want to emphasize the importance of holding candid discussions, where there is psychological safety and open minds, not advocacy. You’ll want to be clear that what you are looking for is best efforts, a willingness to experiment, and rapid learning.
Expect that new issues will arise and that important priorities will be in conflict. Place your confidence in your process and your people. Rework the problem continuously until you sense that you’ve nailed it.
STRATEGY
A global recession is all but guaranteed. A recession has been baked into equities pricing in the U.S., and in our webinar polling, Asians have told us they anticipate precipitous declines in April revenues.
Recessions shuffle the deck more than boom times do. Gains or losses tend to show up early, and gains or losses made during recessions tend to endure.
In a recession, ensuring survival comes first. The checklist for doing so includes these steps: Project a worst-case scenario to determine if your company can survive without running out of cash. Secure sufficient lines of credit to sustain the company. Eliminate unnecessary spending. Work with suppliers to improve credit terms. Cut projects with dubious prospects. Consider shutting down businesses that are losing money or operating on ultra-slim margins.
If you think you can get beyond mere survival, maintain a long-term perspective. In doing so, consider this: it’s a myth that downturns are when most companies fail. The reality is that most businesses fail after a downturn — primarily because their actions have been inadequate to position their companies for growth. So while we need to be realistic — survival has to be our primary goal — downturns present strategic opportunities for growth. The best companies do more than just survive; they position themselves to thrive in the future upturn. Smart executives don’t panic; they place counterintuitive bets to outperform the market.
Among the counterintuitive bets would be the protection of strategic expenditures. Indiscriminate slash and burn is a big mistake. Instead, focus on rooting out operational inefficiency, but don’t sacrifice strategic initiatives that can build long-term competitive advantage. Harvest ideas that have been percolating; overcome the tendency in a downturn to say that resources, time, and energy are not available. Consider mergers or alliances that offer a sharing of costs and openings to new markets.
Again, the fundamental point here is this: unless you are in dire straits and mere survival is in question, take a long-term perspective and adapt your business to the current situation.
MORE ABOUT PEOPLE
Look before you lay off. Downsizing in a downturn can do more harm than good. Companies with few or no layoffs perform significantly better than those with large numbers of layoffs. Clearly, companies with falling revenues and shrinking profits need to act. But unless the eliminated jobs remain unreplaced for at least six to 12 months, there will not be a financial payback. If at all possible, instead of a broadly based downsizing, protect your key brains, and use downtime to enhance skills.
TAKE CARE OF YOURSELF
This is going to be a marathon, not a sprint. So take care of yourself — you are critical to your family, your team, and your company. Anxiety and constant surprise and problem-solving are exhausting. Stress and disrupted sleeping patterns only weaken your immune system. Periodically step into activities that you find rejuvenating.
THERE IS HOPE
We are all in this together. Collectively, there is an abundance of talent and energy focused on finding a way out of this crisis. We will figure this out. We will get through this crisis.
SOURCES
We have drawn on the wisdom of a number of sources for this article. Among these sources are:
- “And If the Good Times Stop Rolling? Dealing with a Downturn,” by Tom Brown
- Dr. Dutch Leonard of Harvard Business School
- “Look before You Lay Off,” by Darrell Rigby, Harvard Business Review
- “Moving Upward in a Downturn,” by Darrell Rigby, Harvard Business Review
- “Seize Advantage in a Downturn,” by David Rhodes and Daniel Stelter
- “Taking Advantage of a Downturn,” by Sarabjit Baveja, Steve Ellis, and Darrel Rigby, Harvard Management Update
- The “Protect Strategic Expenditures” section (by Robert Kaplan and David Norton) and “Discounts Can Be Dangerous” section (by Jeffrey Stibel and Peter Delgrosso) in “Unconventional Wisdom in a Downturn”
- Winning in Turbulence, by Darrell Rigby
If you wish to know more about the webinars we conduct or our leadership programs, please visit the John Clements Leadership Institute page.
