Book Excerpt: 7 Lessons for Leading in Crisis

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Then he went against the advice of the company's lawyers and public relations specialists and agreed to provide complete transparency to the U.S. government, even if the information could be used against the company in a criminal prosecution.

Buffett understood the company would almost certainly face criminal indictments if it continued to stonewall investigations by the U.S. Treasury and Justice departments. That would have precluded Salomon from bidding in government auctions and put the company into bankruptcy. By putting his personal credibility on the line, Buffett spared Salomon from criminal indictments and was able to restore its operations. Salomon shareholders were fortunate that Buffett was so willing to step into this messy situation and keep the firm from going under. That's what courageous leaders do when faced with a crisis.

...Denying reality has destroyed more careers and organizations than incompetence ever did. Instead of asking yourself why it is so difficult for other leaders to face reality, ask yourself instead, "Why is it so hard for me?"

The first reason is that people always prefer good news or a quick fix. Rarely are they willing to acknowledge that their organization is facing a crisis. Crises often start out in relatively benign ways, and then seemingly minor events escalate into major ones. Unless leaders face reality early, they can easily miss the signals of the deeper crisis that is waiting ahead. Until its leaders acknowledge the crisis, their organizations cannot address the difficulties.

Many people find reality is just too horrible to face or they are too ashamed, so denial becomes a convenient defense mechanism. If you feel yourself getting defensive, ask yourself, "What am I defending against? How might denying reality make the situation worse?"

DON'T SHOOT THE MESSENGER

In January 2009 I was chairing a panel on "Crisis, Community, and Leadership" in Davos, Switzerland, when panelist Jamie Dimon, J. P. Morgan's CEO, shared this vignette: "At a management meeting a woman got up and said, 'If you're a leader, you need one person who tells you the truth every time something goes on.'" To which Dimon noted, "If you have ten people around you and only one of them is telling you the truth, you have a real problem, because everyone has to do it."

Why aren't there more truth tellers in organizations? The reason is that they are afraid of getting in trouble with a boss who won't accept bad news. Leaders who are approached by a bearer of bad news may wind up shooting the messenger, because reality is just too painful to face. Look at what happened to Enron's Sherron Watkins when she took her concerns about financial misstatements to chairman Ken Lay. She was not only rebuffed but ostracized within the firm. No wonder many employees hesitate to tell the truth to their bosses.

Sadly, most organizations operate more like Enron than J. P. Morgan. Instead of building an organization of truth tellers, many leaders surround themselves with sycophants who tell them only what they want to hear, rather than sharing the stark reality. Without a culture of openness and candor, leaders are highly vulnerable to missing the signals of big problems ahead.

By the time they acknowledge how deep their problems are—or outsiders like government agencies, consumer watchdog groups, or the media do it for them—it is too late. Then they find themselves forced to defend their companies against charges that are even worse than reality.

I used to tell people at Medtronic, "You'll never get fired for having a problem, but you will get fired for covering one up. Integrity is not the absence of lying. Rather, it is telling the whole truth, so that we can gather together the best people in the company to solve the problem."

It is important to publicly express appreciation to the truth tellers so others in your organization will follow suit. Only with a culture of candor and openness can organizations cope with crises and act in unison to get on top of them.

Bill George is professor of management practice at Harvard Business School and author of the new book, 7 Lessons for Leading in Crisis. The former chair and CEO of Medtronic, he currently serves on the boards of ExxonMobil and Goldman Sachs and previously, Novartis and Target.

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