leadership in a (permanent) crisis · ing global competition, energy constraints, cli-mate change,...

Leadership in a (Permanent) Crisis

by Ronald Heifetz, Alexander Grashow,

and Marty Linsky

harvard business review • july–august 2009 page 2

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When the economy recovers, things won’t return to normal—and a

different mode of leadership will be required.

It would be profoundly reassuring to view thecurrent economic crisis as simply anotherrough spell that we need to get through. Un-fortunately, though, today’s mix of urgency,high stakes, and uncertainty will continue asthe norm even after the recession ends. Econo-mies cannot erect a firewall against intensify-ing global competition, energy constraints, cli-mate change, and political instability. Theimmediate crisis—which we will get through,with the help of policy makers’ expert techni-cal adjustments—merely sets the stage for asustained or even permanent crisis of seriousand unfamiliar challenges.

Consider the heart attack that strikes in themiddle of the night. EMTs rush the victim to thehospital, where expert trauma and surgicalteams—executing established procedures be-cause there is little time for creative improvisa-tion—stabilize the patient and then providenew vessels for the heart. The emergency haspassed, but a high-stakes, if somewhat less ur-gent, set of challenges remains. Having recov-ered from the surgery, how does the patient pre-

vent another attack? Having survived, how doeshe adapt to the uncertainties of a new reality inorder to thrive? The crisis is far from over.

The task of leading during a sustained crisis—whether you are the CEO of a major corpora-tion or a manager heading up an impromptucompany initiative—is treacherous. Crisis lead-ership has two distinct phases. First is that emer-gency phase, when your task is to stabilize thesituation and buy time. Second is the adaptivephase, when you tackle the underlying causes ofthe crisis and build the capacity to thrive in anew reality. The adaptive phase is especiallytricky: People put enormous pressure on you torespond to their anxieties with authoritativecertainty, even if doing so means oversellingwhat you know and discounting what you don’t.As you ask them to make necessary but uncom-fortable adaptive changes in their behavior orwork, they may try to bring you down. Peopleclamor for direction, while you are faced witha way forward that isn’t at all obvious. Twistsand turns are the only certainty.

Yet you still have to lead.

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Hunker Down—or Press “Reset”

The danger in the current economic situationis that people in positions of authority willhunker down. They will try to solve the prob-lem with short-term fixes: tightened controls,across-the-board cuts, restructuring plans.They’ll default to what they know how to do inorder to reduce frustration and quell theirown and others’ fears. Their primary modewill be drawing on familiar expertise to helptheir organizations weather the storm.

That is understandable. It’s natural for au-thority figures to try to protect their peoplefrom external threats so that everyone canquickly return to business as usual. But in thesetimes, even the most competent authority willbe unable to offer this protection. The organi-zational adaptability required to meet a relent-less succession of challenges is beyond anyone’scurrent expertise. No one in a position of au-thority—none of us, in fact—has been here be-fore. (The expertise we relied on in the past gotus to this point, after all.) An organization thatdepends solely on its senior managers to dealwith the challenges risks failure.

That risk increases if we draw the wrong con-clusions from our likely recovery from the cur-rent economic downturn. Many people surviveheart attacks, but most cardiac surgery patientssoon resume their old ways: Only about 20%give up smoking, change their diet, or get moreexercise. In fact, by reducing the sense of ur-gency, the very success of the initial treatmentcreates the illusion of a return to normalcy. Themedical experts’ technical prowess, whichsolves the immediate problem of survival, inad-vertently lets patients off the hook for chang-ing their lives to thrive in the long term. Highstakes and uncertainty remain, but the dimin-ished sense of urgency keeps most patientsfrom focusing on the need for adaptation.

People who practice what we call adaptiveleadership do not make this mistake. Instead ofhunkering down, they seize the opportunity ofmoments like the current one to hit the organi-zation’s reset button. They use the turbulenceof the present to build on and bring closure tothe past. In the process, they change key rulesof the game, reshape parts of the organization,and redefine the work people do.

We are not talking here about shaking up anorganization so that nothing makes sense any-more. The process of adaptation is at least asmuch a process of conservation as it is of rein-

vention. Targeted modifications in specificstrands of the organizational DNA will makethe critical difference. (Consider that humanbeings share more than 90% of their DNAwith chimpanzees.)

Still, people will experience loss. Some partsof the organization will have to die, and somejobs and familiar ways of working will be elim-inated. As people try to develop new compe-tencies, they’ll often feel ashamed of their in-competence. Many will need to renegotiateloyalties with the mentors and colleagueswhose teachings no longer apply.

Your empathy will be as essential for successas the strategic decisions you make about whatelements of the organizational DNA to dis-card. That is because you will need people’shelp—not their blind loyalty as they followyou on a path to the future but their enthusias-tic help in discovering that path. And if theyare to assist you, you must equip them withthe ability to perform in an environment ofcontinuing uncertainty and uncontrollablechange.

Today’s Leadership Tasks

In this context, leadership is an improvisa-tional and experimental art. The skills that en-abled most executives to reach their positionsof command—analytical problem solving,crisp decision making, the articulation of cleardirection—can get in the way of success. Al-though these skills will at times still be appro-priate, the adaptive phase of a crisis requiressome new leadership practices.

Foster adaptation. Executives today facetwo competing demands. They must executein order to meet today’s challenges. And theymust adapt what and how things get done inorder to thrive in tomorrow’s world. Theymust develop “next practices” while excellingat today’s best practices.

Julie Gilbert is evidence that these dual taskscan—indeed, should—be practiced by peoplewho do not happen to be at the very top of anorganization. As a vice president and then se-nior VP at retailer Best Buy from 2000 to early2009, she saw a looming crisis in the com-pany’s failure to profit from the greater in-volvement of women in the male-orientedworld of consumer electronics. Women werebecoming more influential in purchasing deci-sions, directly and indirectly. But capitalizingon this trend would require something beyond

Ronald Heifetz

([email protected]), Alexander Grashow ([email protected]), and

Marty Linsky

([email protected]) are partners of Cambridge Leadership Associates and the coauthors of The Practice of Adaptive Leadership (Harvard Business Press, 2009). Heifetz, the founder of the Center for Public Leadership at Harvard University’s John F. Kennedy School of Government, and Linsky, a member of the Kennedy School faculty, are the coauthors of “A Survival Guide for Leaders” (HBR June 2002).

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a smart marketing plan. It would demand achange in the company’s orientation.

Getting an organization to adapt to changesin the environment is not easy. You need toconfront loyalty to legacy practices and under-stand that your desire to change them makesyou a target of attack. Gilbert believed that in-stead of simply selling technology products tomostly male customers, Best Buy needed to ap-peal to women by reflecting the increasing in-tegration of consumer electronics into familylife. So Gilbert headed up an initiative to estab-lish in-store boutiques that sold home theatersystems along with coordinated furniture andaccessories. Stores set up living-room displaysto showcase not just the electronics but alsothe entertainment environment. Salespeoplewere trained to interact with the previously ig-nored female customers who came in withmen to look at systems.

Gilbert says that championing this approachsubjected her to some nasty criticism frommanagers who viewed Best Buy as a retailer oftechnology products, not experiences. But fo-cusing on the female purchaser when a manand a woman walked into the store—makingeye contact and greeting her, asking about herfavorite movies and demonstrating them onthe systems—often resulted in the couple’spurchasing a higher-end product than theyhad originally considered. According to Gil-bert, returns and exchanges of purchases madeby couples were 60% lower than those madeby men. With the rethinking of traditionalpractices, Best Buy’s home theater businessflourished, growing from two pilot in-storeboutiques in mid-2004 to more than 350 fiveyears later.

As you consider eliminating practices thatseem ill suited to a changing environment, youmust distinguish the essential from the expend-able. What is so precious and central to an or-ganization’s identity and capacity that it mustbe preserved? What, even if valued by many,must be left behind in order to move forward?

Gilbert wanted to preserve Best Buy’s strongculture of responding to customers’ needs. Butthe company’s almost exclusively male cul-ture—“guys selling to guys”—seemed to her abarrier to success. For example, the phrase “thejets are up” meant that the top male execu-tives were aboard corporate aircraft on a tourof Best Buy stores. The flights gave them achance to huddle on important issues and

bond with one another. Big decisions wereoften announced following one of these trips.After getting a call with a question about fe-male customers from one such group visiting aBest Buy home theater boutique, Gilbert per-suaded senior executives never to let the jetsgo up without at least one woman on board.

Because you don’t know quite where you areheaded as you build an organization’s adapt-ability, it’s prudent to avoid grand and detailedstrategic plans. Instead, run numerous experi-ments. Many will fail, of course, and the wayforward will be characterized by constant mid-course corrections. But that zigzagging pathwill be emblematic of your company’s abilityto discover better products and processes. Takea page out of the technology industry’s play-book: Version 2.0 is an explicit acknowledg-ment that products coming to market are ex-periments, prototypes to be improved in thenext iteration.

Best Buy’s home theater business was oneexperiment. A much broader one at the com-pany grew out of Gilbert’s belief that in orderto adapt to an increasingly female customerbase, Best Buy would need to change the roleof women within the organization. The com-pany had traditionally looked to senior execu-tives for direction and innovation. But, as Gil-bert explained to us, a definition of consumerelectronics retailing that included womenwould ultimately have to come from the bot-tom up. Appealing to female customers re-quired empowering female employees at alllevels of the company.

This led to the creation of “WoLF (Women’sLeadership Forum) packs,” in which women,from store cashiers to corporate executives,came together to support one another and togenerate innovative projects by drawing ontheir collective experience. In an unorthodoxattempt to neutralize the threat to Best Buy’straditionally male culture, two men paired upwith two women to lead each group.

More than 30,000 employees joined WoLFpacks. The company says the initiativestrengthened its pipeline of high-potentialleaders, led to a surge in the number of femalejob applicants, and improved the bottom lineby reducing turnover among female employ-ees. Gilbert, who recently left Best Buy to helpother companies establish similar programs,was able to realize the dual goal of adaptiveleadership: tackling the current challenge and

Adaptive Leadership in Practice

Best Buy

| A senior vice president helped the company adapt to the reality that women increasingly make consumer electronics purchasing decisions.

Beth Israel Deaconess Medical

Center

| The new CEO helped a dysfunctional organization created through the hasty merger of two Harvard teaching hospitals adapt to modern health care challenges.

Egon Zehnder International

| The founder fostered a leadership style that helped the executive search firm adapt to the rise of online recruiting and competitors’ IPOs.




building adaptability. She had an immediatepositive impact on the company’s financialperformance while positioning the organiza-tion to deploy more of its people to reachwider markets.

Embrace disequilibrium. Without urgency,difficult change becomes far less likely. But ifpeople feel too much distress, they will fight,flee, or freeze. The art of leadership in today’sworld involves orchestrating the inevitableconflict, chaos, and confusion of change sothat the disturbance is productive rather thandestructive.

Health care is in some ways a microcosm ofthe turbulence and uncertainty facing the en-tire economy. Paul Levy, the CEO of Beth IsraelDeaconess Medical Center, in Boston, is tryingto help his organization adapt to the industry’sconstant changes.

When Levy took over, in 2002, Beth IsraelDeaconess was a dysfunctional organization inserious financial trouble. Created several yearspreviously through the hasty merger of twoHarvard Medical School teaching hospitals, ithad struggled to integrate their very differentcultures. Now it was bleeding red ink andfaced the likelihood of being acquired by a for-profit company, relinquishing its status as aprestigious research institution. Levy quicklymade changes that put the hospital on a stron-ger financial footing and eased the culturaltensions.

To rescue the medical center, Levy had tocreate discomfort. He forced people to con-front the potentially disastrous consequencesof maintaining the status quo—continued fi-nancial losses, massive layoffs, an outrightsale—stating in a memo to all employees that“this is our last chance” to save the institu-tion. He publicly challenged powerful medi-cal factions within the hospital and madeclear he’d no longer tolerate clashes betweenthe two cultures.

But a successful turnaround was no guaran-tee of long-term success in an environmentclouded by uncertainty. In fact, the stabilitythat resulted from Levy’s initial achievementsthreatened the hospital’s ability to adapt to thesuccession of challenges that lay ahead.

Keeping an organization in a productivezone of disequilibrium is a delicate task; in thepractice of leadership, you must keep yourhand on the thermostat. If the heat is consis-tently too low, people won’t feel the need to

ask uncomfortable questions or make difficultdecisions. If it’s consistently too high, the orga-nization risks a meltdown: People are likely topanic and hunker down.

Levy kept the heat up after the financialemergency passed. In a move virtually unprec-edented for a hospital, he released public quar-terly reports on medical errors and set a goal ofeliminating those errors within four years. Al-though the disclosures generated embarrassingpublicity, Levy believed that acknowledgingand learning from serious mistakes would leadto improved patient care, greater trust in theinstitution, and long-term viability.

Maintaining the right level of disequilibriumrequires that you depersonalize conflict, whichnaturally arises as people experiment and shiftcourse in an environment of uncertainty andturbulence. The aim is to focus the disagree-ment on issues, including some of your ownperspectives, rather than on the interested par-ties. But the issues themselves are more thandisembodied facts and analysis. People’s com-petencies, loyalties, and direct stakes lie behindthem. So you need to act politically as well asanalytically. In a period of turmoil, you mustlook beyond the merits of an issue to under-stand the interests, fears, aspirations, and loyal-ties of the factions that have formed around it.Orchestrating conflicts and losses and negotiat-ing among various interests are the name ofthe game.

That game requires you to create a culture ofcourageous conversations. In a period of sus-tained uncertainty, the most difficult topicsmust be discussed. Dissenters who can providecrucial insights need to be protected from theorganizational pressure to remain silent. Exec-utives need to listen to unfamiliar voices andset the tone for candor and risk taking.

Early in 2009, with Beth Israel Deaconessfacing a projected $20 million annual loss afterseveral years of profitability, Paul Levy held anemployee meeting to discuss layoffs. He ex-pressed concern about how cutbacks would af-fect low-wage employees, such as housekeep-ers, and somewhat cautiously floated whatseemed likely to be an unpopular idea: protect-ing some of those low-paying jobs by reducingthe salary and benefits of higher-paid employ-ees—including many sitting in the auditorium.To his surprise, the room erupted in applause.

His candid request for help led to countlesssuggestions for cost savings, including an offer

Keep your hand on the

thermostat. If the heat’s

too low, people won’t

make difficult decisions.

If it’s too high, they might

panic.




by the 13 medical department heads to save 10jobs through personal donations totaling$350,000. These efforts ultimately reduced thenumber of planned layoffs by 75%.

Generate leadership. Corporate adaptabil-ity usually comes not from some sweepingnew initiative dreamed up at headquartersbut from the accumulation of microadapta-tions originating throughout the company inresponse to its many microenvironments.Even the successful big play is typically a prod-uct of many experiments, one of which finallyproves pathbreaking.

To foster such experiments, you have to ac-knowledge the interdependence of peoplethroughout the organization, just as compa-nies increasingly acknowledge the interdepen-dence of players—suppliers, customers, evenrivals—beyond their boundaries. It is an illu-sion to expect that an executive team on itsown will find the best way into the future. Soyou must use leadership to generate moreleadership deep in the organization.

At a worldwide partners’ meeting in June2000, Egon Zehnder, the founder of the execu-tive search firm bearing his name, announcedhis retirement. Instead of reflecting on the 36-year-old firm’s steady growth under his leader-ship, he issued a warning: Stability “is a liabil-ity, not an asset, in today’s world,” he said.“Each new view of the horizon is a glancethrough a different turn of the kaleidoscope”(a symbol of disequilibrium, if there ever wasone). “The future of this firm,” Zehnder contin-ued, “is totally in the hands of the men andwomen here in this room.”

From someone else, the statement mighthave come across as obligatory pap. But EgonZehnder built his firm on the conviction thatchanges in internal and external environmentsrequire a new kind of leadership. He saw earlyon that his start-up could not realize its full po-tential if he made himself solely responsiblefor its success.

Individual executives just don’t have the per-sonal capacity to sense and make sense of allthe change swirling around them. They needto distribute leadership responsibility, replacinghierarchy and formal authority with organiza-tional bandwidth, which draws on collectiveintelligence. Executives need to relax theirsense of obligation to be all and do all and in-stead become comfortable sharing their bur-den with people operating in diverse functions

and locations throughout the organization. Bypushing responsibility for adaptive work downinto the organization, you clear space for your-self to think, probe, and identify the next chal-lenge on the horizon.

To distribute leadership responsibility morebroadly, you need to mobilize everyone to gener-ate solutions by increasing the information flowthat allows people across the organization tomake independent decisions and share the les-sons they learn from innovative efforts.

To generate new leadership and innovativeideas, you need to leverage diversity—which, ofcourse, is easier said than done. We all tend tospend time with people who are similar to us.Listening and learning across divides is taxingwork. But if you do not engage the widest pos-sible range of life experiences and views—in-cluding those of younger employees—you riskoperating without a nuanced picture of theshifting realities facing the business internallyand externally.

Creating this kind of environment involvesgiving up some authority usually associatedwith leadership and even some ownership,whether legal or psychological, in the organi-zation. The aim, of course, is for everyone to“act like they own the place” and thus be moti-vated to come up with innovations or take thelead in creating value for their company fromwherever they sit.

Zehnder did in fact convert the firm into acorporation in which every partner, includinghimself, held an equal share of equity and hadan equal vote at partners’ meetings. Everyone’scompensation rose or fell with the firm’s overallperformance. The aim was to make all the part-ners “intertwined in substance and purpose.”

Zehnder’s collaborative and distributed lead-ership model informed a strategic review thatthe firm undertook just after his retirement. Inthe short term, the partners faced a dramaticcollapse in the executive search market; theirlong-term challenge was a shifting competitivelandscape, including the rise of online recruit-ing and the initial public offerings of severalmajor competitors. As the firm tried to figureout how to adapt and thrive in this environ-ment, Zehnder’s words hung in the air: “Howwe deal with change differentiates the top per-formers from the laggards. But first we mustknow what should never change. We mustgrasp the difference between timeless princi-ples and daily practices.” Again, most sustain-

An executive team on its

own can’t find the best

solutions. But leadership

can generate more

leadership deep in the

organization.




able change is not about change at all butabout discerning and conserving what is pre-cious and essential.

The firm took a bottom-up approach tosketching out its future, involving every part-ner, from junior to senior, in the process. Itchose to remain a private partnership. Unlikerivals that were ordering massive downsizing,the firm decided there would be virtually nolayoffs: Preserving the social fabric of the orga-nization, crucial to long-term success, wasdeemed more important than short-term fi-nancial results. In fact, the firm opted to con-tinue hiring and electing partners even duringthe down market.

Rooted in its culture of interdependence,the firm adapted to a changing environment,producing excellent results, even in the shortterm, as it gained market share, maintainedhealthy margins, and sustained morale—amajor source of ongoing success. Adaptivework enabled the firm to take the best of itshistory into the future.

Taking Care of Yourself

To keep yourself from being corralled by theforces that generated the crisis in the firstplace, you must be able to depart from the de-fault habits of authoritative certainty. Thework of leadership demands that you managenot only the critical adaptive responses withinand surrounding your business but also yourown thinking and emotions.

This will test your limits. Taking care of your-self both physically and emotionally will becrucial to your success. You can achieve noneof your leadership aims if you sacrifice yourselfto the cause.

First, give yourself permission to be both op-timistic and realistic. This will create a healthytension that keeps optimism from turning intodenial and realism from devolving into cyni-cism.

Second, find sanctuaries where you can re-flect on events and regain perspective. A sanc-tuary may be a place or an activity that allowsyou to step away and recalibrate your internalresponses. For example, if you tend to demandtoo much from your organization, you might

use the time to ask yourself, “Am I pushing toohard? Am I at risk of grinding people into theground, including myself? Do I fully appreci-ate the sacrifices I’m asking people to make?”

Third, reach out to confidants with whom youcan debrief your workdays and articulate yourreasons for taking certain actions. Ideally, aconfidant is not a current ally within your orga-nization—who may someday end up on theopposite side of an issue—but someone exter-nal to it. The most important criterion is thatyour confidant care more about you thanabout the issues at stake.

Fourth, bring more of your emotional self tothe workplace. Appropriate displays of emo-tion can be an effective tool for change, espe-cially when balanced with poise. Maintainingthis balance lets people know that althoughthe situation is fraught with feelings, it is con-tainable. This is a tricky tightrope to walk, es-pecially for women, who may worry aboutbeing dismissed as too emotional.

Finally, don’t lose yourself in your role. Defin-ing your life through a single endeavor, nomatter how important your work is to you andto others, makes you vulnerable when the en-vironment shifts. It also denies you other op-portunities for fulfillment.

Achieving your highest and most noble aspi-rations for your organization may take morethan a lifetime. Your efforts may only beginthis work. But you can accomplish somethingworthwhile every day in the interactions youhave with the people at work, with your fam-ily, and with those you encounter by chance.Adaptive leadership is a daily opportunity tomobilize the resources of people to thrive in achanging and challenging world.

Note: Some of the information in this article wasdrawn from “Paul Levy: Taking Charge of theBeth Israel Deaconess Medical Center,” HBS caseno. 9-303-008 and “Strategic Review at Egon Ze-hnder International,” HBS case no. 9-904-071.

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