Crises will come, but well-prepared leaders can weather the storm. In this episode, Wharton Dean Erika James shares insights from her new book on crisis management.
This special series of the Ripple Effect podcast features leading Wharton faculty authors in lively, fast-moving conversations about their research and latest business books.
Preparing for Leadership in a Crisis
Dan Loney: Joining us today is Wharton Dean Erika James, who is co-author of the book The Prepared Leader: Emerge from Any Crisis More Resilient Than Before. Dean James, what are the most important components of a leader dealing with crisis right now?
Erika James: There are five things that people think about in dealing with a crisis. Typically, when we think of crisis management, we think once something has happened, what do we do? It’s the response to an event. But as leaders, we need to think about this notion of signal detection. What are we seeing in the environment that might warn us that our organization is vulnerable to something? We then need to prepare or plan for that potential reality. Then, in those circumstances where we can’t prevent something from happening, we have to respond when we find ourselves in reaction mode.
The fourth thing is to think about business recovery. At some point, the crisis will come to some sort of end, and we’ve got to get our organizations back on track and recover from what we’ve just experienced. Lastly, there’s the learning from the crisis. How do we take time to stop and reflect on what we’ve just experienced? What can we learn to make us a better organization going forward, to make us more capable of dealing with the next threat, or prevent the next from happening?
Loney: How has that played out for you personally? When you came to Wharton, we were right in the midst of the crisis. That’s a unique component in a person’s career to take over such an important role in the time of a crisis.
James: Dan, what you’re describing is my joining Wharton in July of 2020, which was just a few months into the pandemic. The school, at that time, was completely remote. I moved to a new city, started a new role. I interacted with my colleagues, whom I had never met before, for at least six to nine months all on Zoom, never having met anyone in person or spent any time on campus. The thing that I needed to think about was, what can I do to establish myself as a leader, and as someone who was trustworthy, that they could feel confident getting behind as I’m leading this organization that I literally knew very little about because I just had no time or experience with Wharton before coming here.
I think focusing on building those relationships, even though they were over Zoom, identifying ways that would allow me to have credibility, that they could trust me in some ways— those were the important things that I needed to do. Because I was limited to that.
Loney: A lot of people have pivoted coming out of the pandemic, especially in leadership, in making changes and adapting to a new normal.
James: Right. It’s really important that you used the phrase “new normal.” Oftentimes, when people are going through a crisis, what they think about is, how do I get back to normal? How do we go back to the way things were? What I always encourage people to think about is, if you’re going back to something, you have to recognize that the environments, the world, the competitors around you have all been moving forward. If you think about going back, then you’re setting yourself and your organization up for failure. What does the new environment cause us to need to do differently? This is also where learning really comes into play because if we reflect on how we are a different organization, if we reflect on the new skills that we’ve gained, if we reflect on the experiences that we’ve had, we’re more likely to envision a different future that we can drive towards, rather than going back to the way things were.
Loney: In the book, you talk about the importance of the crisis leadership team, of being able to have that core together.
James: Yes. Many companies do not a priori identify a team of people that will carry the organization under unusual circumstances. We tend to rely on our direct reports. Who is our head of marketing? Who is our general counsel? Who’s our head of HR? Because that’s the team that we typically work with. But that team isn’t always the right team to lead an organization through a crisis. Many of those roles and responsibilities are necessary. But there are also things you have to consider that you don’t have to consider in the day-to-day running of a business. So, building the team means identifying a set of skills or competencies or experiences that might not exist on your team of direct reports.
Loney: Are there common mistakes that leaders make when they’re in time of crisis?
James: The biggest common mistake is actually part of human nature. Go back to your 5-year-old self, and you get caught doing something you’re not supposed to do. The first thing you say is, “It wasn’t me.” We immediately want to deny our involvement in something bad. That carries with us even into our adulthood. When we experience a crisis, we assume the crisis is something bad, we don’t want to be associated with it, so we tend to engage in avoidance behavior or denial behavior. All of these things disassociate us from that event. And that’s really problematic, because that’s time and energy that we could be using to identify the appropriate communication and narrative that we want to put around this. That could be time and attention that we could be doing something more proactive to help address the situation, as opposed to denying.
Dealing With the Unexpected as a Leader
Loney: One thing that plays out in different crises is stress. I think there’s a lot within your body, within your mindset, that just amps up the level of stress that you deal with.
James: Absolutely. In the research— and this is longstanding research— what we find is that in times of stress or threat, when people feel particularly vulnerable, they engage in something called threat rigidity. There’s an external threat. Instinctively, our body becomes rigid. We become more narrow in our thinking. We become less creative. We become more restricted to the people with whom we are going to interact. All of that restriction, that rigidity, prevents us from being able to engage in effective problem-solving.
Loney: COVID was obviously something we had never gone through before. Is that element of the unknown something that’s a challenge for a lot of leaders during a crisis?
James: Absolutely, that is the core definition of a crisis. It’s something that we’ve not experienced before. It’s something that we don’t have the resources or the experience or some guidebook with the answers, and what we should do differently. Crises are unique circumstances. And because they are unique, because we’ve not experienced them, we don’t know what to do. Most often, we’re making things up as we go, which is fine. But we’ve got to always reflect, was most recent decision was the right decision? If yes, then let’s keep going. If not, we need to pivot and try something else. There’s this constant feedback loop and experimentation that’s happening when we’re trying to address a crisis.
Loney: Isn’t there also the learning from going through that crisis, so that whether it’s the same crisis happening down the road or something different, you have that experience? You have that knowledge, so that you can be better prepared for that next time.
James: In theory, yes, that’s how it’s supposed to work. But what often happens is we so want to be finished with the crisis. It takes a lot out of you. You’re exhausted. The notion of going back and reflecting and taking those lessons learned that they can be applied to a future event is less likely to happen, because most of us don’t invest in the learning process, which is that fifth stage that I described. Yes, in theory, we should be able to have gone through an experience once, taken those lessons, learned from it so that the next time it happens we’re better prepared. But too many of us don’t go through that “after action review,” which is what they call it in the military.
Loney: A lot of times in companies, employees and managers expect their leaders to be prepared, and they hope that they are prepared. But can we quantify the value of having a prepared leader?
James: It would be a fascinating study, trying to identify what are the variables for which we could quantify preparation in our leaders. But one of the things that we know, for example, is that many crises cost a lot of money. Whether it’s in legal fees, whether it’s in damage control, all sorts of things. You can quantify by looking at how much a particular crisis costs.
I was on Maui when the fires broke out, and you see every day the escalating costs in terms of the human capital. The death toll was rising every day for a period of time. You can see the escalating costs in terms of, financially, how much this is going to cost Maui. Those are metrics by which we can determine the cost of a crisis. It’s unclear yet how we determine how effective a particular leader was because it’s a one-off situation. We don’t necessarily have a control group in those situations. But it would be worthwhile exploring that.
What Will Leadership Look Like in the Future?
Loney: Can technology assist the leader in terms of mitigating problems in a crisis?
James: Again, perhaps. We would hope so. It is a tool that can be used for exactly that purpose. Sometimes people use technologies in ways that are actually more damning than helpful. If they use social media, for example, in ways to cast revenge or to spew antagonism or frustration or anger or hostility for whatever has happened in that crisis, then that is not a very effective use of technology. In fact, it could be more problematic. In The Prepared Leader, we talk about a couple of examples where the CEO has used technology, used social media and other platforms, in ways that cost him his job and the organization a lot of money. If we use technology for purposes of soliciting support and help and guidance and communicating what’s happening on a day-to-day basis and those kinds of things, then, yes, it absolutely is an effective tool.
Loney: I’ve heard you talk about your co-author, Lynn Perry Wooten, and what she’s meant to you as a mentor in terms of your building up your career. For leaders in general, how important is it to have that sounding board, that extra component, to helping build your leadership skills?
James: It’s a great question. It is so vitally important. The notion that it’s lonely at the top, there’s a lot of truth to that. Primarily because there are so few people who can relate to what you are experiencing. When you are the president, when you are the CEO, when you are the dean, there’s no one else within the organization that fully understands the scope and complexity of the work that you’re doing. Add a crisis on top of that, and you realize even more how alone you are. Having someone else in another organization, in another field, who understands that role, I think, is really invaluable.
Loney: I guess that can even go down the chain a little bit. It doesn’t have to necessarily always be the C-suite.
James: That’s absolutely true. I say that we all have a sphere of control that we are responsible for, regardless of your title or role that you play. In that regard, it can be debilitatingly lonely if there is not a network of relationships that you have, either within or outside of the organization, with whom you can bounce ideas, with whom you can vent and be frustrated, and it’s a safe space.
Loney: How do the dynamics of leadership change in the future, especially considering we’re talking more and more about AI?
James: Honestly, at this point, no one knows. We have the capability to produce technology and artificial intelligence to do just about everything. But at the end of the day, we are still human beings. And there is no tool, there is no artificial intelligence, that can replace what comes from human interpersonal contact and interaction. The interpersonal support, the emotional support, the feedback— all of those things that are really human-inspired will continue to become more and more important and more valued in the organization. Five years from now, one year from now, as quickly as things are happening, we’re going to see much more AI. But I still believe that over time, only those things that humans can do, the emotional side, is going to become more important.
Loney: When you look back at your transition coming here to Wharton and having gone through this period of time with the pandemic, did it tweak your mindset about leadership?
James: What’s interesting in my case is I didn’t know Wharton before the pandemic. I came once it was already in a state of flux because of the extenuating circumstances. So, my leadership coming into Wharton was informed by that reality. If I were to say, hypothetically, would I be doing some of the things I’m doing now as Wharton’s leader had the pandemic not happened? Maybe. But there are probably some things I’m doing now because the pandemic happened, that would not have been the case before.
We are all changed by having gone through the pandemic. Even as a new leader coming in when the pandemic was first happening, I am quite confident that my approach to leadership was informed by starting this role in the midst of a crisis.