Nothing reveals the capacity of a leader like a crisis.
True to form, all eyes have turned to the leaders, as is the case in every crisis. Regardless of a leader’s past successes and current posturing, nothing shows the capacity of that leader like a crisis.
Unfortunately, allegations of a cover-up have been leveled against political leaders of several countries. Depending on the country, authorities have been accused of covering up everything from the actual number of infected individuals, infection rate, mortality rate, availability of test kits, to the magnitude of the impact on the economy.
This article draws from a combination of my academic research in crisis leadership and my hands-on global executive management experience. It explores one of the motives and three of the methods of cover-up employed by business leaders who succumb to the pressure of crises.
Optimism Makes the World Go Round
Why the cover-up? My research shows that optimism, ordinarily, a productive human trait, may have a lot to do with it.
By definition, optimism is an expectation that the future holds more positive outcomes than negative ones. Business organizations the world over are a testament to the prevalence of optimism. Without optimism, they wouldn’t exist.
Optimism powers the world of business – Investors risk capital because of optimism. Boards rely on optimism to hire CEOs to develop and execute a strategy that will deliver future growth. CEOs and management teams lean heavily on optimism to create and implement several (and hopefully complementary) strategies to achieve future growth. Hiring managers fight for and on board talents based entirely on an expectation of future performance, AKA optimism. Innovation makes no sense without optimism. Lastly, customers show optimism by buying goods and services with the expectation that they are valuable and useful.
When a Good Thing Goes Bad
It is not surprising, therefore, that decades of research confirm that generally, humans are innately optimistic. "Hope is not a strategy", as the saying goes, but there is no strategy without hope. The business world is replete with examples of visionary leaders who, armed with optimism, created enormous value.
However, my research and leadership experience show that a leader’s brazen optimism may fuel misbehavior when facing a crisis. That is because crisis, by its nature, creates the antithesis of optimism since it threatens or casts doubts on the future. In other words, while optimism sees positive things in the future, crisis introduces negativity into the future - a classic case of cognitive dissonance for the optimistic leader.
The 3 Methods of Cover-Up
When optimistic leaders come under fire during crises, they may become stressed and susceptible to cover-up in one or a combination of the following three ways: suppress, over stress and window dress –
1] Suppress unfavorable information. This is one of the most common weaknesses and misbehavior of optimistic leaders facing a crisis as s/he desires to return the organization to normalcy as quickly as possible. The leader’s desire to swiftly resolve the cognitive dissonance between the bright outlook of optimism and the gloomy future of a crisis results in the withholding of critical information that may be deemed detrimental. However, suppression is usually an exercise in futility because a crisis has a way of shaking out the truth. Eventually, the truth comes out.
When Intel discovered that its Pentium chips were generating erroneous calculations in 1994, it covered it up until the defect degenerated into scandalous international headlines six months later. As a result, the tech company suffered enormous brand damage and incurred almost $500 million in recall costs.
Suppression is usually an exercise in futility because a crisis has a way of shaking out the truth.
2] Overstress favorable information. Optimism may cause leaders to grasp for straws in a crisis and jump on the slightest evidence of good news to overshadow devastating bad news. This optimism-induced weakness leads to a less-than-thorough investigation of the root causes of the crisis, leading to a further deterioration of the predicament.
“Only when the tide goes out do you discover who is swimming naked.” – Warren Buffett
The severe reputation damage suffered by Dell in 2006 could have been minimized had the company dug deeper into the root causes of the Dell laptop that exploded at a conference in Osaka, Japan, that year. Instead, after Dell’s engineers examined the charred laptop and identified the lithium battery supplied by SONY as the culprit, the company’s posture was “Nothing to see here,” arguing that the problem was isolated.
Nice try – One month and some additional laptop explosions later, the laptop manufacturer announced the recall of 4.1 million batteries, the most massive recall of consumer electronics in history. Dell’s brand was burnt, not only by the laptop explosions but more so by the failed cover-up attempt.
3] Window dress with false or misleading information. As bad as suppressing and overstressing information are, even worse, is conjuring up favorable data points from thin air in an attempt to swiftly restore confidence during a crisis. When leaders succumb to the pressure to maintain an optimistic outlook in the middle of chaos, they may be tempted to deliberately contrive an advantageous alternative universe instead of admitting to the crisis-ridden reality. This is the stuff of criminal charges and regulatory sanctions.
Volkswagen’s decision to window dress its diesel engine emissions crisis, uncovered in September 2015, by creating an alternative universe of doctored emission results had severe consequences, not the least of which was the criminal indictments in Germany and the US of then CEO Martin Winterkorn. Thus, management's cover-up of an initial crisis created a more massive crisis.
Leaders, Look-Out for Yourselves
It is noteworthy that from all performance indicators – sales volume, market share, operating profit, brand value, etc. – Volkswagen has all but recovered from the diesel emission crisis. Regrettably, the same cannot be said of the leaders who mishandled the crisis through cover-up.
This development fits a pattern I have observed: These days, leaders who mishandle crises are made to fall on their sword and pay a huge price with their careers while, more often than not, the organization pays the fine (where a regulatory sanction is applicable), licks its wounds, goes shopping for another sword-wielding warrior, and forges ahead.
It is time for leaders to look out for themselves by building their muscles in the critical competency of crisis leadership. Helping leaders develop this vital competency was my primary motivation for doctoral research.
The truth is the first victim of a crisis.
Reflecting on leaders’ propensity to cover-up during a crisis, a top executive who participated in my research and has an enviable list of well managed crises around the world put it succinctly, “Say the truth. Get the facts. Immediately, get the facts, because the truth is the first victim of a crisis.”
In his book about political leaders, Why Leaders Lie, John Mearsheimer argued that “[A cover-up] is acceptable conduct in international politics.” Notwithstanding, one trend is certain: the business world responds vastly differently to a leader’s cover-up than the world of international politics.
Finally, highly stressed optimistic business leaders may, unfortunately, succumb to the pressure of crises to cover-up with devastating consequences. One reason for this is because they do not self-monitor their behaviors during the high-stakes and high-intensity periods of crises. However, building capacity in crisis leadership, before chaos strikes, helps a leader to shine even in the dark hours of a crisis.
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