Crisis tests leadership in any organization, but studies have shown that effective crisis leadership is still a mystery for many. Logical thinking suffers in special situations like emergencies, and practising beforehand increase the survival rate. Could the same logic apply to crisis situation in companies? In crisis the decision-making needs to be fast and decisive, with respect to the values and culture of the organization. Communication in crisis is a key element for success, and the lack of it guarantees failure. A crisis in an organization is the result of ineffective leadership and the paralysis of making decisions.
Authors: Jenni Lampinen & Brett Fifield
Narrowing your View
Leadership today is prone to habitually lead based on key performance indicators, those being the daily metrics of share price, revenue and costs, when leading through crisis needs another approach. The approach needs to be the long-term view, where anticipation of what comes next is key for success. (McNulty & Marcus 2020.)
In today’s working life the leader needs to be able to adapt their leadership approach to fit the organization, situation and position that they are in. Crisis situations need crisis leadership. Exceptional leaders are capable of managing both their professional and personal life and they are able to maintain self-control and discipline in all situations. (Patel 2017.)
Identifying Crises is Key to Recovery
While identifying the reason for crises is difficult, it remains the most important element towards recovery. Identification is elementary for understanding what the cause for the crisis is and understanding what the situation of the organization is. Without proper identification and thorough understanding of the situation, any attempts to shift competence or capacity are prone to fail. A solid help to identify crises is to understand the history of the crises in the organization. Crises can have long-lasting effects, so without understanding and taking them into account, the leadership will be less successful in preparing for the future.
Figure 1. The stages of responding to crisis (Lampinen 2020)
Focus on the Customer
When crisis is in full speed, the tendency is that the focus shifts to the internal issue. With the focus shifting in trying to fix the issue, the focus on the customer is lost, which impacts the business results. As business results start to flail, the urgency of fixing the issue grows. Elementary to the success of the stabilization phase is the resetting the focus, where leadership pays a key role. Activities need to be heavily prioritized to the ones that are critical for the company and leadership needs to ensure the ability to execute the prioritized tasks. New activities should be started only, if they are highly prioritized and development projects should be critically assessed and even put on hold.
When painful decisions are not made on time, later on the decisions will become even more painful (Rubanovitsch 2020).
After the stabilization phase, the new normal needs to assessed and understood. Understanding the new normal becomes the most important element for future success, as much as understanding the history and learning from it. A common mistake is to think that the situation will revert to the same, as it was before the crisis. This is unlikely, as crises always have an impact on the organization. As a part of understanding the new normal, capacity needs shifting and new competencies need to be introduced. The strategy and ambitions need to be revisited by the leadership. Trying to cut corners and skip one of these steps, means that a true understanding of the crisis is not there. Of course, it is a natural reaction to any human being to try to fix a problem as fast as possible and that is what makes crises so complex to understand.
Avoid the Pitfalls
The pitfalls of crises are that before identifying the crisis, decisions are already taken to shift competence, change the organization or start development projects. All of the actions shift the focus away and in worst-case cover or blend in the signals of the crisis so much, that they pass unnoticed to the leadership team. It is important for the leadership team to be able to understand what is going on in their organization, while at the same time being consistent on the messages they forward to the organization.
Figure 2. The relationship between transparency and noise (Lampinen 2020)
During this whole process, effective communication and transparency are of key importance. Problem is, that effective communication and transparency is not easy and the lack or overabundance of it create more chaos and “noise”. Fast-paced decisions that are needed in crisis often lead to less communication and transparency and the organization cannot keep up. Not being able to keep up leads to panic, rumour mills and paralysis, or in other terms; noise that impacts decision-making and transparency (Figure 2).
Practise makes Perfect
During the crisis, leadership faces many moments of choice, where painful decisions need to be made. If there is no consensus in the leadership team on the way forward, the chaos will increase and the crisis will deepen. This is why understanding the past crises is so important, as they help map the possible future ones. Crisis scenarios need to be mapped already at times of calm and leadership needs to reach a consensus already at this stage. When the crisis hits, leadership is better prepared and able to execute according to the plan. Wrong decisions will also be made, but that is inevitable, as practising for all possible scenarios is impossible. Only by practising together beforehand, does the survival rate improve. A common mind-set among leadership ensures consensus, which prevents paralysis, as paralysis deepens the crisis. Trying to find a consensus once the crisis is already happening, slows down the identification, stabilization and the recovery.
The COVID-19 pandemic has been a valuable lesson for us all and every leader can learn from it in leading through crisis. The golden rules of crisis leadership apply much more than ever before; listen and consult the experts, dare to make big decisions, be transparent and communicate openly in consensus. (Kallio 2020, as cited in Sommers 2020).
Lampinen, J. 2020. The true test of leadership is how you lead in times of Crisis. Master’s thesis. LAB University of Applied Sciences, Faculty of Business and Hospitality Management. Lahti. [Cited 27.5.2020]. Available at: http://urn.fi/URN:NBN:fi:amk-2020052614041
McNulty, E. & Marcus, L. 2020. Are You Leading Through the Crisis … or Managing the Response? Harvard Business Review. [Cited 24.5.2020]. Available at: https://hbr.org/2020/03/are-you-leading-through-the-crisis-or-managing-the-response
Patel, D. 2017. 11 Powerful Traits Of Successful Leaders. Forbes. [Cited 28.2.2020]. Available at: https://www.forbes.com/sites/deeppatel/2017/03/22/11-powerful-traits-of-successful-leaders/#40bde315469f
Rubanovitsch, M. D. 2020. Modernin johtajan käsikirja: Älä ole pomo. Finland: Hämeen Kirjapaino Oy.
Sommers, S. 2020. Valmiina kriiseihin. Kauppalehti Fakta 5/2020.
Jenni Lampinen is studying in the International Business Development program at LAB University of Applied Sciences
Brett Fifield is a Principal Lecturer in International Business at LAB University of Applied Sciences.
Illustration: https://pxhere.com/fi/photo/1573329 (CC0)
Reference to this article
Lampinen, J. & Fifield, B. 2020. Leadership is put to a test in times of crisis. LAB Pro. [Cited and date of citation]. Available at: https://www.labopen.fi/lab-pro/leadership-is-put-to-a-test-in-times-of-crisis/