Five Steps for Embracing Crisis

In this meltdown, people in its center can positively influence the outcome. Those of us watching from the outside can learn to be better leaders

By John R. Ryan

With Wall Street and the economy in upheaval, headlines understandably focus on what went wrong and what to do next. But there's another important and generally overlooked aspect of this financial crisis: the unfortunate but clear opportunity it affords to develop better leaders.

As this crisis unfolds, the men and women in the middle of it still have the chance to positively influence the outcome. Those of us watching from the outside can pick up valuable lessons on how to lead when crisis comes our way, as it inevitably will.

At the Center for Creative Leadership (CCL), we have worked with and studied hundreds of executives who credit crises with transforming them into better leaders. In that work, a number of truths about crisis leadership have emerged. Perhaps the most important one is this: There's no substitute for preparation.

Be Prepared

If you have not prepared mentally and physically for emergencies through practice and drills, your performance will suffer when a crisis actually does occur. That applies to everyone from pilots to school administrators to leaders at all levels of organizations.

Even when you do prepare, however, a crisis can test you severely. Here are five tips for preparing for and coping with a crisis:

•Know yourself. This sounds simple enough. But many leaders are not fully aware of their strengths and weaknesses. In a crisis, your strengths will sustain you, and weaknesses can wreck you. So ask colleagues you trust about how they perceive you. Have them complete 360-degree assessments that evaluate where you're strong and where you can improve. Your self-awareness will grow rapidly.

If Ann Mulcahy had lacked self-awareness, she could not have saved Xerox (XRX) from bankruptcy. Newly installed as CEO, Mulcahy knew enough about herself to make a series of smart moves. As Bill George recounts in his fine book True North, Mulcahy leveraged her chief strength: her ability to build great teams and trust them to do their jobs. She also recognized a big weakness: her lack of expertise in finance and R&D. To compensate, she had her own people tutor her. She also surrounded herself with leaders whose own skills sets balanced hers. The result: an amazing and continuing turnaround at Xerox.

• Be yourself. In a crisis, the pressure to compromise your values can be immense. With employees, shareholders, and the media demanding a response—and your career potentially hanging in the balance—there's a temptation to take shortcuts and discard principles. Think hard about the values that matter most to you and how you've worked to exemplify them throughout your life. The better you know them, the more likely you are to stick by them consciously in times of stress.

Abraham Lincoln spent his entire Presidency in crisis, trying to steer the U.S. through a brutal civil war. Today he's regarded as perhaps the country's greatest President. Why? Because he was an authentic leader: He did his homework, he led by example, and he was always true to himself. A remarkably humble and confident man, Lincoln put his mission to preserve the Union above all else. He brought into his Cabinet some rivals who had forcefully opposed him and even insulted him on the campaign trail. But he reached out to them because he needed their experience and skills to complement his own.

• Expect chaos. Crises set their own timetable, and the systems we put in place to respond to them often prove insufficient. Preparedness is of course essential for dealing effectively with a crisis. So is flexibility. Don't rely too heavily on the way things were done before or get locked into plans that were made in anticipation of things playing out differently than they actually are.

To learn more about the nuts and bolts of crisis leadership, the CCL last year brought together a group of leaders from the front lines of the Hurricane Katrina crisis in 2005. Raymond Jetson worked for the Louisiana Health & Hospitals Dept. when Katrina hit.