Much has been said and written about the recent global financial and economic crisis. We heard about the governments, companies and executives who made short-sighted decisions with disastrous consequences. We read the often tragic stories about how the crisis ruined the fortunes of innocent people. And we know about the lingering impact of the crisis on investment, business growth and market confidence.
But from where we sit as educators at Ivey, there has been scant discussion and even less analysis of the role that leadership played in this crisis. What were some leaders thinking? Why didn’t more people, executives and employees alike, speak up? What compelled some organizations to take such foolhardy risks? On the other hand, why did some organizations survive and even prosper in the wake of this storm? What did their leaders do better than others? What lessons can we take away from this abundance of experience – both good and bad?
Over the past year, a group of Ivey faculty sought answers to these questions. We engaged more than 300 business, public sector and not-for-profit leaders in a series of candid and open discussions. We wanted to find out if better leadership could have made a difference during the crisis. And indeed, we discovered that it not only could, but did make a difference in many organizations. Some business and public sector leaders foresaw the turmoil, positioned their organizations to avoid problems, and emerged stronger from the experience.
In Ivey’s newly released report, Leadership on Trial: A Manifesto for Leadership Development, Professors Jeffrey Gandz, Mary Crossan, Gerard Seijts and I share what we learned from these wide-ranging discussions (Ivey Launches Leadership on Trial). We present our conclusions in the form of a public statement of principles: “a manifesto that addresses what good leaders do, who they are, and how they can be developed in organizations.” Our objective was to leverage the experiences gained during the crisis to underscore the central role of these principles – before, during and after a crisis. As we believe, good leadership is not only important in avoiding and managing crises, it is crucial to ensuring that organizations grow, prosper and make a positive contribution to society over the long term.
For example, one of the most critical failings of the organizations that fared badly during the crisis was a culture marked by a lack of “constructive dissent”. In other words, many of these organizations, especially their executive teams, were afflicted by groupthink1. Groupthink occurs when team members achieve consensus without critically testing, analyzing, and evaluating ideas.
The many reckless and often disastrous decisions taken at senior levels in financial and other organizations during the crisis illustrate the power of groupthink to distort reality. Lulled into a false sense of superiority by past successes, these executive teams came to believe that they would never lose. They viewed their actions and decisions as rational and right, while everyone else was wrong. Consequently, the opinions of others outside the team were not valued and often denigrated. Inside the team, members avoided controversy because they wanted to be seen as team players.
As an executive in the telecom and high-tech industries during the bust and the bursting of the dot-com bubble, I witnessed firsthand how easy it is to fall into the trap of groupthink. When employees are anxious about their jobs or executive teams are continually confronted with problems, there is a tendency for teams to get so wrapped up in the immediacy of the issues that people simply go with the flow. In tough times, that is always dangerous.
In addition, groupthink can be equally dangerous in times of growth and innovation. For example, hubris can set in with the launch of a successful product or service. Some executives and their teams can come to believe that their organizations are unstoppable. Complacency takes over. Emerging developments are ignored and new trends are overlooked. Inevitably, there is a wake-up call. A competitor introduces an even better product or service. Customer expectations change. Sales decline and profits drop. Only then do people in organizations start to debate, to dissect, and to share new ideas anew. It doesn’t have to be this way.
One of my most important objectives in any leadership position is to welcome dissent, discussion and controversy. I strive to engender an organizational culture that values different opinions and perspectives. I know that this is the only way to incubate ideas and solutions, then develop them and put them into action. When everyone on the team feels engaged through an atmosphere of openness, honesty and transparency, problems are anticipated, opportunities are discovered, and the best decisions are reached.
Overall, our research over the past year showed that some of the leaders at the epicentre of the crisis fell short in three critical areas. First, they were not competent, especially in analyzing and managing risk. Second, they were not people who demonstrated good character. Third, they lacked commitment to good leadership both in how they guided their organizations and in how they lived up to their responsibilities to society.
By contrast, the leaders who rose to the challenges presented by the crisis were capable and intelligent. They understood their people, their organizations and their industries. They were strategic – able to anticipate trends and emerging developments and to position their businesses to meet these future opportunities and threats. In addition to these competencies, the best leaders during the crisis had developed strong and positive character traits. Based in virtues such as courage, compassion, and integrity, their character became clear in their values – or the beliefs that influenced their behaviours.
Finally, the good leaders were committed – committed to the challenging and rewarding work of leadership day in and day out. They recognized that commitment meant sacrifice. And their commitment included an unrelenting determination to contribute to the good of the organization they serve, the people who follow them and the communities in which they operate.
Leadership on Trial: A Manifesto for Leadership Development elaborates fully on the competencies, character and commitment of good leaders. It concludes with a “call to action” to senior leaders in the business community; to professionals in the field of organizational and leadership development; to boards of directors; to next-generation leaders; and, to those like ourselves who are involved in management education in universities and colleges. At Ivey, we will certainly answer this call. Our commitment to this research and our willingness to put leadership education itself on trial is a decisive step, and one that is in keeping with our values at Ivey. We will continue to act decisively to improve business education. But, we need others to act too.
The composer John Powell said, “The only real mistake is the one from which we learn nothing.” We have answers now to the many previously unanswered questions about the mistakes leaders made during this latest global economic crisis. We also learned some valuable lessons from the successes of the leaders who emerged unscathed. Equally important, we learned that crises are not inevitable. They can be avoided. And we should do everything in our power to make sure that they do not occur.
Irving L. Janis, Victims of Groupthink (Boston: Houghton Mifflin Company, 1972), 9.