In a business environment, the word “crisis" can have multiple connotations—be it the loss of key employees, loss of key customers, organizational changes, professional improprieties and even economic factors, or external events that the organization has no control over. For India, with the terror attack on its financial capital Mumbai and the recent corporate governance failure at Satyam Computer Services Ltd, crisis has taken on a whole new meaning.

Illustration: Jayachandran / Mint

As we pick up the pieces and try to move forward, there is a growing realization about the need for strong leadership, be it at the level of companies, society or government. But before this, there is a need to understand that every organization in the world, regardless of size or industry, is at risk of a crisis. The belief of organizations that they are insulated from external events makes their leaders underprepared not only for dealing with crisis situations when they occur, but also—and more importantly—for leading organizations in such times with a vision that they can be positively transformed by the experience.

In a crisis situation, what is paramount is instilling confidence. Whatever the crisis may be and whatever the problems it creates, it takes a true leader to rise to the occasion and do the job required. Such a leader makes this happen by seeing the bigger picture, assuring action, and yet understanding that resolving the crisis will require a number of smaller acts by many people. We will always remember the dignified yet unwavering stance that Ratan Tata took (when terrorists laid siege at the Taj Mahal hotel in Mumbai on 26 November), refusing to be cowed down and promising the world that he would do his utmost to deal with and recover from the crisis that was unfolding before him.

And how do leaders achieve this? The best crisis leaders channelize their efforts into building a foundation of trust which includes not only the organization but also its stakeholders. It is this foundation that enables the organization to get through difficult times, to contain crises when they occur and to leverage these situations as a means for introducing change and, ultimately, a better organization.

Critical steps

Crises, especially those imposed by external circumstances, require a rallying of people within an organization. Or sometimes, leaders with foresight herald necessary change and instil a sense of urgency in order to bring about a better future.

Whatever be the case, leaders can successfully deal with and respond to a crisis situation by taking some critical steps. Experts at Magellan Health Services, Inc., the leader in behavioural health disease management in the US, analysed the leadership skills of successful managers in crisis situations, in the wake of the 9/11 tragedy:

Address fear and allay anxiety: Providing a supportive workplace and acknowledging employee concerns will ensure that leaders gain the respect and confidence of their people. Morale and productivity will benefit, and as a result, there will be higher employee retention and loyalty to the organization after the workplace returns to normal. Simple expressions of concern and a willingness to help employees with their tasks could be a way to dispel any apprehensions employees may have.

Be visible, calm and confident; be up to date with critical information: Crisis situations call for leaders to put aside their own personal fears and feelings and maintain a calm and confident appearance in front of employees. In an environment where people are emotionally upset and confused about the future, provide them with critical information regarding the situation and its effects, if any, on the organization.

Rudy Giuliani, the then mayor of New York city, was omnipresent in the way that he needed to be during 9/11—prioritizing his time and effort to maximum effect. The fact that he had answers—or was able to say plainly what he did not know—was very calming. Leaders need to remember that employees appreciate being told the truth and can even be involved in any process that the company undertakes to counter the adverse effects of the crisis.

Keep the communication channels open: Whether employees have been affected directly or indirectly, crisis leaders always ensure that the lines of communication are open for each individual. Address any apprehensions that they have and encourage employees to talk about their concerns. In large organizations, a good source of employee communication is through Internet and Intranet sites. Such a continuous exchange of thoughts is likely to result in a faster recovery for the organization.

Allow for expression of emotions but rein in negative behaviour: Because people show their emotions in different ways, leaders, in tune with their employees, allow them to communicate their emotions in different, non-intrusive ways, be it a display of badges, mementos or other forms of patriotism in their work areas. However, even though anger and frustration is justified, there is a need to ensure that this expression remains non-violent and keeps the workplace safe. Another important focus area should be prevention of harassment and abuse of other people.

The conclusion

It is the leaders within an organization that hold the fate of their company in their hands during a crisis situation. How they react to the crisis is going to impact not only how the public sees the company, but how the company’s employees and customers see the company. At the end of the day, any crisis management plan will be useless without effective leadership skills.

Aditya Vikram Birla’s sudden death from cancer in 1995 robbed India of a visionary industrial leader who left his empire to his 28-year-old son Kumar Mangalam Birla. The years ahead, however, dispelled all doubts about his leadership skills as the young Birla steered the group to success, basing his decisions on a working model guided by a strong focus on delegation of power.

The key to achieving such success in a crisis is sharing maximum information with minimum delay. Therefore, companies need to invest in leadership development that focuses on crisis management and effective communication. Whatever be the strategy, leaders need to remember that a crisis is a human event. Even the most effective communications will not make the organization appear caring and competent if actions do not match words. What is necessary is “doing the right thing", especially in how the organization treats the people affected by the crisis.

A prime example is bond trader Cantor Fitzgerald, Lp., a company that lost almost 90% of its staff in 9/11. Howard Lutnick, the CEO, survived because he was taking his son to kindergarten. In the weeks that followed, Lutnick took some tough decisions, such as cutting off pay cheques for those who had died. But he won back the trust of Cantor families by convening town meetings, phoning hundreds of family members and writing 1,300 condolence letters. He also promised to dedicate 25% of the company’s profits to the families for five years and to pay bonuses and 10 years of health care.

Organizations thus need to provide their leaders with both the authority to make decisions and act during a crisis situation, as well as provide them with the resources they need to plan for, respond to and recover from company crises.

Most importantly, the vision guiding a crisis strategy needs to be forward-looking, focusing on turning adversity and disaster into success. Leaders who understand the importance of this will be regularly sharpening their crisis leadership skills, knowing fully well that they may be called upon to deal with one of the toughest moments of their careers without any warning.

Anjali Bansal heads the India practice of Spencer Stuart, an executive search consulting firm, and is based in the firm’s Mumbai office.

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