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The year 2020 will go down in the history books forever.

This year is riddled with so much emotion. (It has all of the elements of perfect storytelling; I have a feeling there is enough trauma, drama, ridiculousness, and entertainment here that someone may even make a Broadway play out of it many years from now. Who knows?)

But in all seriousness, I want to start this blog post by channeling my inner Brené Brown and acknowledge that I don’t really know what to say, nor do I have all the answers. The fact is that so many of us – too many of us – have endured pain, loss, heartbreak, and unfathomable change over the course of 2020. There is nothing I can say to make that pain go away. All I hope I can do is acknowledge that what you are feeling is real and hope you know that it is okay to feel whatever you may be feeling.

As we enter the new year, we don’t quite know what will come next. But we do know that as more and more people get the COVID-19 vaccine, we can start to reimagine how we will move forward and thrive in 2021.

In reflecting on this past year, our team at Logos Consulting Group thought about the biggest lessons learned in 2020 and what the most important skills will be in 2021.  Here are the five key skills we identified:

Be Ready to Adapt

Near the beginning of the COVID pandemic, my teammate Katie Garcia talked about the importance of adaption. She said, “our ability to adapt is a testament to the resiliency of the human spirit.” She added that we need to be on, “adaptation alert as circumstances change, and when the pandemic finally ends, organizations must be prepared to adapt yet again in a post-COVID-19 world, whatever that will look like.”

Regardless of what lies ahead, we need to tackle it with the resiliency that has helped us through this past year. (Read more about adaptability here).

Be Prepared

Dwight D. Eisenhower once said, “In preparing for battle, I have always found that plans are useless, but planning is indispensable.”

Good planning is an iterative process that helps us understand first and foremost the problem we are dealing with, as well as the risks. Good planning encourages us to take risks seriously. Good planning helps us foresee the foreseeable and be ready to tackle the unforeseeable. Good planning helps us adapt. And good planning prepares us for the pain when we realize that we didn’t plan enough.

2020 has taught us the necessity of good preparation, even in the face of the unknown. As we enter a new year, we need to be ready to tackle what is to come and take the pain when it is needed.

Be Authentic

As we look to lead our people in 2021, we need to be present, consistent, and authentic for our teams – in our behaviors, and with the signals we send.

Leadership expert Dr. Patrick Donahue talks about authenticity in his new book: The Power of Genuine Leadership: How Authentic Leaders Earn Trust. One of the key lessons in his book is that authenticity without guidelines is irresponsible; that authenticity without empathy is careless; and that humility is much more than a willingness to be vulnerable. To build trust requires authenticity, and authenticity is a combination of consistent communication, consistent coaching, and consistent respect over time. (You can read more about his new book by clicking here).

We need to be authentic as we face and lead through the uncertainty before us. And that requires both authenticity and empathy. As Dr. Donahue notes, “There is a common denominator between being a leader in the corporate world and in athletics – you need to be there for your team.”

Sometimes being there for your team means being there from the bench. Hall of Fame Soccer player, Abby Wambach said, “if you’re not a leader on the bench, then you’re not a leader on the field.” Be authentic and there for your team.

Practice Empathy

To empathize is to feel with someone. To be there for our team and for those we lead, we need to feel with them through the hurdles we will face in 2021.

Brené Brown talks to us about the nature of empathy in the animated video below. She reminds us that true empathy is the ability to connect with someone’s emotions, even if we may not have experienced the same struggle the other person is facing.

One of the things we saw time and again this year was the power of empathy in leaders and organizations. A good example of this analyzed by another one of my teammates, Yinnan Shen. Yinnan highlighted the empathy and leadership demonstrated by Arne Sorenson, the Marriott President and CEO when he delivered incredibly tough news to his employees around COVID-19. (You can read the article here).

If we want to show our people that we care for and are there for them, empathy is essential.

Empathy is the lifeblood of connection.

Stay Connected

2020 demonstrated to us the significance of connection and the toxicity of division. Recovery will not come unless we unite people together around a common goal.

2021 will require us to be connected (both literally and figuratively).

While many of us are burnt out from back-to-back Zoom meetings and jonesing to regroup in person as soon as possible, we need to remember that 2021 will be another year of change.

Next year, we must maintain connection to those who matter most to us, the corporate world calls them our stakeholders, at home we call them family.

We must find innovative ways to sustain and build connection while some people are able to regroup in person, while others are not yet able to. This means being prepared to adjust business plans (once again) and being prepared to flex your empathy muscle, because your people will need to know they are still connected to you and what you represent.

We don’t exactly know what will come next, but I have a feeling that 2021 will be a great year. And I hope you do too.

 

 

By: Helio Fred Garcia @garciahf and Maida K. Zheng @maidazheng
Logos Consulting Group

“I call the head of Exxon. I don’t know, you know, ‘How are you doing? How’s energy coming? When are you doing the exploration? Oh, you need a couple of permits?'” Trump told supporters at a rally in Arizona on Monday. “I say, ‘You know, I’d love [for] you to send me $25 million for the campaign.’ ‘Absolutely sir, why didn’t you ask? Would you like some more?’”

This quote, as reported by the Washington Post is important for several reasons.

What President Trump suggested was not only a possible violation of federal law, (we can save that for another time) – he, in one statement, put Exxon Mobile in a reputational crisis while at the same time signaling big organizations that he would be happy to accept large campaign donations and that he would “wink, wink, wink” take care of them later. Trump’s tendency to imply a connection is a pattern that Helio Fred Garcia describes more fully in his book: Words on Fire: The Power of Incendiary Language and How to Confront It.

From a crisis management perspective, the first rule is to fully understand the risk, and to mitigate that risk quickly. In this case, the risk is that someone might interpret the comment as referring to an actual call with the Exxon CEO, who would then seem compromised.

The crisis communication strategy is to take control of the narrative and obtain the first mover advantage. If you don’t have the first mover advantage, you must respond and take control of the narrative within the “Golden Hour of Crisis Response,” a metaphor from emergency medicine. The Golden Hour refers not to a particular period of time, but to the observation that incremental delays in responding to a crisis – whether a medical emergency, a flood, or a more routine corporate setback – has greater than incremental impact on the outcome.

However, if an organization is first to define the nature of the crisis, its motives, and its actions, as Exxon Mobil did here, the result is that the organization will likely demonstrate caring and end up controlling the narrative. By capturing the first mover advantage, Exxon also deprived their adversaries of the chance to form a harmful narrative against the organization.

Upon hearing the statement from President Trump, Exxon Mobil immediately responded, posting on Twitter that, “We are aware of the President’s statement regarding a hypothetical call with our CEO…and just so we’re all clear, it never happened.”

This was an important and timely move on Exxon’s part. They named it a hypothetical call, thereby defining the nature of the crisis. And they made clear that the call never happened. If they hadn’t acted as quickly and clearly, they would have lost control of the narrative, leading to negative consequences.

Effective Crisis Response as a Competitive Advantage

Effective crisis response is a competitive advantage; ineffective crisis response causes a competitive disadvantage and can even put an enterprise’s existence into jeopardy.

Whether an organization survives a crisis with its reputation, operations, and financial condition intact is determined less by the severity of the crisis than by the timeliness and effectiveness of the response.

Two Oxford University researchers demonstrated the extent to which effective and ineffective crisis response affects a company’s enterprise value.[1] Rory F. Knight and Deborah J. Pretty studied the stock price performance of prominent publicly-traded corporations that had suffered significant crises. They calculated each company’s stock price performance attributable to the crisis – stripping out market movements and other factors unrelated to the crisis that might have affected the stock price, and thus calculated what they called the ‘‘cumulative abnormal returns’’ for each company.

Knight and Pretty found that companies that mishandled crises saw their stock price (calculated as cumulative abnormal returns) plummet an average of ten percent in the first weeks after a crisis, and continue to slide for a year, ending the year after the crisis an average of 15 percent below their pre-crisis prices.

Companies with effective crisis response, on the other hand, saw their stock fall an average (cumulative abnormal returns) of just 5 percent in the weeks following a crisis, about half the initial decline of companies that mishandled the crisis. More significant, companies with effective crisis response saw their stock price recover quickly, and remain above their pre-crisis price thereafter, closing an average of 7 percent above their pre-crisis price one year after the crisis (Exhibit 1).

In other words, the tangible difference between effective and ineffective crisis response was, on average, 22 percent of a company’s market capitalization. Knight and Pretty assess the reasons for this disparity and conclude that the most significant factors are not the scope of financial damage or reduction in cash flows caused by the crisis. Rather, the most important determinant of a company’s ability to recover and increase its market capitalization after a crisis is the management team’s response. Knight and Pretty conclude that positive stock performance:

“. . . springs from what catastrophes reveal about management skills not hitherto reflected in value. A re-evaluation of management by the stock market is likely to result in a re-assessment of the firm’s future cash flows in terms of both magnitude and confidence. This in turn will have potentially large implications for shareholder value. Management is placed in the spotlight and has an opportunity to demonstrate its skill or otherwise in an extreme situation.” [2]

Exhibit 1: Effective vs Ineffective Crisis response

Source: Knight and Pretty (1997)

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Lessons of the Past

Looking to a relevant historical example, Exxon suffered immense reputational and organizational damage following its ineffective crisis response during the 1989 Exxon Valdez oil spill.

Exxon suffered significant loss of reputation and eventually a great deal of financial loss – because the public perceived that its primary concern was not the harm that the spill caused.

Fifteen years after the spill a federal appeals court upheld a lower court judgment of $4.5 billion against the company (in addition to the more than $3 billion it had previously paid for cleanup and related costs). The Court said its purpose in upholding the award was to achieve ‘‘retribution and justice.’’ The New York Timesopined that such a judgment and such a purpose were entirely appropriate given Exxon’s seeming indifference in the initial phase of the spill.[3]

This perception of indifference is the single largest contributor harm in the aftermath of a crisis, especially when there are victims.

Companies, governments, and leaders are forgiven when bad things happen. But they won’t be forgiven if they’re seen not to care that bad things have happened. This is a lesson that many leaders fail to understand or to act on in the initial early phases of a crisis.

Exxon’s early response to the Exxon Valdez spill demonstrated lack of both situational awareness and self-awareness. They also demonstrated a lack of leadership discipline and command focus. In both cases leaders fell into one of the common missteps in a crisis: denial. Former General Electric CEO Jack Welch describes the need to get past denial quickly. In a Wall Street Journal Op-Ed piece soon after the flood, Welch said:

“One of the marks of good leadership is the ability to dispense with denial quickly and face into the hard stuff with eyes open and fists raised. With particularly bad crises facing them, good leaders also define reality, set direction, and inspire people to move forward. Just think of… Churchill during World War II. Denial doesn’t exactly come to mind – a forthright, calm, fierce boldness does.”

Effective leaders demonstrate this forthright, calm, and fierce boldness early. They see crisis response not as an interruption in their stewardship of a company, but as the test of that stewardship. And as the exodus of CEOs in 2004 and 2005 showed, ignoring a crisis won’t make it go away, but it may result in the CEO going away.

It seems that Exxon has learned this valuable lesson because on Monday, Exxon’s stocks were XOM, -1.99%, and after providing the clarification, their stock rose to 0.69%. The numbers don’t lie, and reputation management is indicative of the numbers being reflected in the stock market.

Guidance for Leadership

Exxon clearly learned from its crisis response failures around the Exxon Valdez spilled. Exxon — now known as Exxon Mobil, was ready when Trump put the company and its CEO in the media and social media cross-hairs.

So, what can CEO’s do when faced with a crisis? Here is a CEO checklist for crisis response preparedness:

  1. Have a clear sense of what constitutes a crisis, and know how to mobilize energy and resources quickly:
  • Develop an early warning mechanism/rapid response capability.
  • Designate a senior executive as responsible for crisis preparedness and response.
  • Make this executive accountable and provide sufficient resources to conduct a thorough analysis of vulnerabilities, crisis response strategies, and crisis implementation.
  • Pre-authorize this executive to take initial response steps without going through usual corporate approval processes.
  • Test the system with wargames, tabletop exercises, and other processes that challenge leaders to make tough decisions and act quickly.
  1. Remember that the best plan won’t help if executives don’t know what to do or when do it. Recognize when business as usual needs to be suspended. A quick test:
  • Will those who matter to us expect us to do or say something now?
  • Will silence be seen by our stakeholders as indifference or as an affirmation of guilt?
  • Are others talking about us now, thereby shaping the perception of us among those who matter to us; is there reason to believe they will be soon?
  • If we wait do we lose the ability to determine the outcome?

If the answer to any of these questions is yes, then it is time to respond. If the answer to all four is no, then you have time to monitor the situation and prepare a response in case any of those answers change to a ‘yes.’

  1. Control the agenda: don’t let the media, adversaries, or the rumor mill define your situation.
  2. Keep in mind the Golden Hour of crisis response: incremental delays cause greater-than-incremental harm to reputation.
  3. Remember your stakeholders. What would reasonable people appropriately expect a responsible organization to do when faced with this? The answer to this question should guide your response.
  4. Develop messages and tactics with a goal in mind: How do you want your key stakeholders to think and feel, and what do you want them to know and do?
  5. In a crisis, assure both self-awareness and situational awareness:
  • Coordinate all functions of the crisis response with frequent meetings/conference calls.
  • Correct mistakes early.
  • Understand what your stakeholders, adversaries, the media, and others are saying about you.
  • Keep your focus on the goal: influencing stakeholders. Decisions become clear when you keep your stakeholders in mind.

[1] The Impact of Catastrophes on Shareholder Value: A Research Report Sponsored by Sedgwick Group, by Rory F. Knight and Deborah J. Pretty, The Oxford Executive Research Briefings, Templeton College, Oxford, 1997.

[2] Knight, R.F. and Pretty, D.J., ibid., p. 7.

[3]‘‘Time for Exxon to pay,’’ Editorial, The New York Times, January 30, 2004, p. A24.