Darden Professor's Book on Business Crises Comes at an Opportune Time

July 28, 2010 — The timing couldn't be better. A new book by Erika Hayes James of the University of Virginia Darden School of Business – on how business leaders can prevent, manage, learn from and create opportunity following a crisis – is being published just as oil giant BP grapples with the fallout of the gulf oil spill.

"Leading Under Pressure: From Surviving to Thriving Before, During and After a Crisis" will be presented at the Academy of Management's annual meeting in Montreal on Aug. 8. It was co-authored by Lynn Perry Wooten of the Ross School of Business at the University of Michigan.

James calls BP's management of the crisis in the Gulf of Mexico "disappointing." Leaders in crisis can go into denial, she said. The result is disaster. "Our response to threat is flight or fight," she said. "It's really human nature."

Leaders need to lead before there's a crisis, she said. "They need to learn to frame crisis not as a threat but as an opportunity. Of course, there's a need to deal with the threat and dangers and to deal with them first, but if you stop with that, you lose your chance for the potential that event might bring.''

Good crisis leaders nurture a "huge payoff mentality. … It's believing that some good will come from this," she said. "There's an expectation that going through the challenges of dealing with a crisis will pay off in some respect."

And pay off it did for the Genworth Corp., which in 2008, witnessed the value of its stock decline from the mid-$20 per share to a devastating $1 per share in the midst of the financial crisis. Yet, with leadership by CEO Michael Fraizer and his top management team, the company has bounced back (shares now trading close to $15) and salvaged the trust of key stakeholders. 

Their story of survival can be attributed to Fraizer's practice of many of the key principles in "Leading Under Pressure," including communicating fast and with transparency, narrowing their focus to not only what is urgent, but what is important, and creating a vision of the company, post-crisis. 

James, who has a Ph.D. in organizational psychology from the University of Michigan, is an expert on both crisis leadership and workplace diversity. She will teach a new Darden Executive Education open-enrollment program titled "Women Emerging in Leadership" from Oct. 11-15. In the program, she will incorporate the principles of crisis leadership found in her new book.

She said one of the simplest ways to improve crisis management is to "get a lot of training in how to handle the media." Her book outlines other ways leaders can prepare for a crisis.

"One is to develop a propensity to adapt to change," James said. "Leaders also need to develop a capability to scan and see possibilities" amidst the chaos of a crisis. "You can't just see the face value. You have to have the ability to see possibilities beyond the obvious."

Having the right team supporting the besieged leader is critical. "There must be an expectation of mutual trust and respect," James said. "You need a team you support and a team that supports you. You need that trust."

When facing a crisis, the best leaders are able to make sense of the situation early on and separate the noise of the crisis from what really matters – the people who are adversely affected by the situation or the leader's response to it. Another important early step is to take the perspective of key stakeholders, James said. Others will experience the crisis differently than the leader and unless she or he can empathize with them, they are unlikely to identify response strategies or make decisions that will meet their needs or expectations.

A last bit of advice is to be human. "Show grace and integrity during a crisis," she said. "Demonstrate compassion."