Monday, July 12, 2010

Leadership Lessons in Disaster Recovery

BP and Toyota

No career is without its hiccups. No company goes straight up and to the right. Every successful executive and every company that’s been around has been to the brink of disaster at some point. What distinguishes the great ones is the way they handle it. Few are proactive and decisive. They recover. The rest, well, don’t.

Survivors see disaster as a wakeup call, an opportunity to learn and change. The rest try to sweep it under the rug, sugarcoat the truth, or make believe it isn’t really happening. Here are three anecdotes about companies and executives in crisis. Executives, leaders, managers, indeed everyone, listen up. Your time will come. You can count on it.

Toyota, once the king of quality, has recalled over 8.5 million cars and trucks over the past six months due to a laundry list of quality and reliability problems. And in J.D. Power’s annual Initial Quality Survey of new vehicles, Toyota fell to a dismal 21st place overall. I’d call that a wakeup call.

The situation is even more dire for embattled oil giant BP. The gulf oil spill has cost the company $100 billion in market valuation and the price tag for cleaning up the mess will likely be upwards of $20 billion. Throw in the global destruction of the BP brand and you can bet that top executive heads will roll when the leak is finally stopped and the crisis abated.
Each example provides a takeway for how companies and individuals can best recover from disaster:
  1. Leave no stone unturned in determining how to restructure. Nothing is sacred. Don’t decry lost efficiency, productivity, profits, or anything you have to sacrifice to get back on track. You can deal with that later. If you don’t fix what’s wrong, there won’t be any later.
  2. Wakeup calls can save your career, your company, your industry, but only if you actually wake up. That means being honest with yourself about your failure. That takes humility, courage, and perseverance, not coincidentally, all basic qualities of successful leaders.
  3. The sooner you realize what’s going on, the quicker you react, the better the recovery. Almost every company (and everybody) reacts tenuously or takes a wait-and-see approach. In virtually every case, that’s a bad idea. Be decisive and be quick about it. If you need to cut, cut early and cut deep. You can build back up as conditions improve.

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