Actually and figuratively, the horror of September 11 came right out of the blue. What enterprise could possibly have had such an event on their horizon? But it is the job of the executive to manage whatever the business environment serves up. This article looks at some of the management issues that surround a September 11-like event.

First, the best preparation for an uncertain future is, and always has been, a properly managed enterprise. Executives do not control business conditions; nor are they usually that much better than anyone else at predicting them. But executives do control how they manage their enterprises; and in the aftermath of a September 11-like event, that can make all the difference. Proper management practice may be dull as dishwater from day to day, but when things go abruptly and seriously wrong, and the stakes are survival or failure, proper management practice always stands out and usually makes a decisive difference.

The principles of proper management practice are age old, but they can never be repeated often enough: a relentless focus on the organizing principle of a business-ongoing earnings growth and wealth creation; accounting integrity; competitiveness; knowing and taking care of the customer; product quality and service; aggressive spending control; ethics; fairness; flexibility; responsiveness; nimbleness; prudent finance; wise risk management; planning; strong banking and investment community relationships; organization; motivated staff; management depth; succession; and constant innovation. That is about it! Proper management practice is not complicated, but you cannot take many days off.

In the aftermath of September 11, notice that even within specific industries, some firms are faring much better than others. Management, or the lack of it, probably explains more of the differences than anything else. Be wary of executives who are quick to blame the events of September 11 for everything that is wrong with their business prospects. You cannot predict a September 11-like event, but you can run your enterprise properly.

Second, work is one of the most important things in a person’s life. For many, it may rank second only to family. Work provides income, standard of living, security, status, identity, friendship, support and recreation. Executives should not underestimate just how important what goes on at work is to a person. Nor should they underestimate the link between feeling good about work and job performance.

The enormity of events on September 11 shocked people to their core. It shattered long-held notions of safety and control. It was one of those rare events when everyone will forever know exactly where they were when it happened. The only comparable event in my lifetime is the assassination of President John F. Kennedy in 1963. The attack on Pearl Harbor in 1941 and the stock market crash in 1929 were such defining events for my parents’ generation.

In a September 11-like event, people instinctively want, and indeed expect, to hear from their leaders. That includes those who lead the enterprises they work for as well as their political leaders. This is especially the case for people whose industries have been directly and meaningfully affected. In the case of a September 11-like event, the airline and hotel industries come particularly to mind.

A timely executive communication showing concern, providing reassurance and dealing thoughtfully and honestly with the likely effects should be seriously considered. As well, to the extent possible, enterprises should be considerate of employees who might be struggling with special needs. For example, after September 11 some may have needed time to get back in the swing of air travel while others might have had family directly affected. Sensitivity goes a long way; enterprises that get out in front of their employees’ needs and fears are unlikely to regret it. Executives should not use their limited knowledge of the event as an excuse not to communicate. With employees, in many respects the effort is more important than exactly what is said. Besides, with a September 11-like event, everyone knows everything is at least in flux, if not uncertain, anyway.

Third, executives need to get an immediate handle on what needs to be done right away. Has the ability to operate been seriously impacted? If so, how and what can be done about it? In a situation where the resources to respond are in tight supply (with September 11, available office space in the New York area is a good example), getting off the mark quickly can be critical. How have customers been affected? Customers are the lifeblood of an enterprise and their expectations are often greatest precisely when those expectations are most difficult to meet. Customers will not forget special efforts on their behalf under extraordinary circumstances. In times of turmoil, getting and keeping in touch with customers, especially key customers, cannot be underestimated. Are the enterprise’s cash flows secure? If not, arrangements need to be made. Enterprises that know their cash needs and have a realistic plan to deal with them are more impressive to lenders than enterprises that are continually surprised by the money they do not have. Are major decisions pending? If so, can and should they be deferred until executives get a better fix on the future.

 “What Malthus entirely missed, of course, as do doomsayers in general, is the unending supply and impact of human ingenuity and creativity”

Fourth, the one certainty about a September 11-like event is that business conditions will immediately get much worse. Executives should respond by tightening both operating and capital spending. However the bad news unfolds, an enterprise is always better off if spending is tightly controlled. The temptation to take a wait-and-see attitude to a spending crackdown in the aftermath of a horrific shock will always be great. After the fact, it is a strategy that will usually be regretted. Denial in the face of shock is a natural human instinct; executives should get through the denial phase of adjustment quickly and focus on what they can do right now to improve things. Aggressively going after spending qualifies. Executives should not wait for clarification on just how bad the bad news will be. There is a time for dawdling and hesitation, but spending when business conditions are going south fast is not one of them.

Capital spending should get particular scrutiny. Capital spending often takes a back seat to the operating side, but it can be a source of big savings. Unnecessary capital spending is a root of excess capacity; excess capacity is a dead weight around an enterprise in a slowing economy. Capital spending comes with interest and other costs. Such costs hit the bottom line hard. Cuts in capital spending should be front and centre in any response to a September 11-like event. Such cuts include permanent changes in receivables and inventories as well as plant, equipment, machinery and development.

Fifth, no quality is more important in an executive than the capacity to make good decisions under pressure. Executives are not likely to find many situations more pressure-packed than a September 11-like event. Executives that can keep their head and effectively lead through a September 11-like event are treasures. This will tell a board much about an executive.

Perspective speaks to balance, relative importance, the long term and the big picture. Executives with perspective are not likely to be easily distracted. Because they can put events in perspective, they are able to focus on their task, properly running an enterprise and positioning it for any eventuality.

The more extreme the event, the more important it is that executives maintain perspective. Towards that end, it is crucial that executives develop a reasoned sense of long-term consequences and implications. Executives must get beyond the immediate headlines, which can easily panic and exaggerate their response at the worst possible time and at considerable cost to prospects and position.

Consider some of the prominent business media coverage shortly after September 11. The Economist (Sept. 15-21, 2001) featured “The Day the World Changed”; in BusinessWeek (Oct. 8, 2001), it was “Understanding a New World of Uncertainty and Risk”; Fortune (Oct. 15, 2001) asked “Has there ever been a time like this for American business?” These are splendid business periodicals that are a must on any executive’s reading list. But even they should be taken with a grain of salt. Just how really new is the world after September 11? If nothing else, the New Economy hype of the 1990s should have given executives a heightened wariness of the word “new.” It seems to me that in business history, there truly is, in the words of Ecclesiastes 1:9, “No new thing under the sun.” That insight suggests a perspective that an enterprise should adopt to manage through an event like September 11.

For developing perspective, I recommend two books to executives: 10,000 Years of Economic Crises: The Doomsday Myth, by Charles Maurice and Charles W. Smithson (Hoover Press, Stanford, California, 1984) and Why Things Bite Back: Technology and the Revenge of Unintended Consequences, by Princeton historian Edward Tenner (Random House, New York, 1997). Maurice and Smithson focus on the history of resource shortages, from the food crises of the Stone Age through the whale oil crisis of the 1850s to the energy crisis of the 1970s. Time and again, Maurice and Smithson show the doomsayers to be wrong as long as societies are willing to adapt, change and let markets motivate and work. The ultimate doomsayer, Thomas Malthus, and his argument that the world was doomed to permanent subsistence because population grows geometrically while food capacity grows arithmetically, gets considerable coverage from Maurice and Smithson. What Malthus entirely missed, of course, as do doomsayers in general, is the unending supply and impact of human ingenuity and creativity. You will never get the future right if you miss the boat on advancing technology.

Tenner tells an engaging story of why and how things are never as they seem at first. An executive will benefit enormously from a healthy cynicism about first appearances and conventional wisdom. The essence of the study of history is understanding the flow of events. Executives will find an appreciation of historical method a great help as they struggle to steer an enterprise in the aftermath of a September 11-like event.

Sixth, executives are paid to put shareholder money to work in ventures where expected returns compensate for risk exposure. Senior management is not a station for someone who has lost his/her taste for calculated risk. Executives frozen in the headlights of their own fear can quickly do a lot of damage to an enterprise. No executive’s nerves are immune to an event like September 11; regardless, it is crucial that executives get on with the job. Boards should be alert to the effects of an event such as September 11 on those who run their enterprises; they should be ready with the help needed to get struggling executives back on track. The poet Robert Frost is instructive, “There is nothing that I’m afraid of like scared people.” Good advice for boards monitoring executives after a September 11-like event.

Managing the risk agenda is a key executive responsibility. In the aftermath of an event like September 11, executives should determine how the risks have changed. Quantification is desirable even if it is very rough. Executives should be particularly alert to product markets, costs, competitors and counterparties where the jeopardy may have changed appreciably. The best way to manage risk is by being proactive; the worst way is to find that the risk profile has changed when the risk is no longer a risk but a grim reality.

Seventh, an age-old adage of business planning goes roughly like this: “A good scare beats a good plan any day.” The turn-of-the-century American novelist and editor Edgar Watson Howe was more elegant: “A good scare is worth more to a man than good advice”. An event like September 11 certainly qualifies as a good scare. Business conditions were meaningfully softening in the months before, and many enterprises were undoubtedly behind the curve in adjusting to that reality. The shock of September 11 may prove to be the jolt needed to get enterprises out in front of the curve again. If the abrupt change in business conditions caused by a September 11-like event does not shake enterprises up that are in need of a shakeup, who knows what would?

Eighth, executives are often involved in managing a portfolio of securities. The management of an enterprise’s pension and money market funds is an executive responsibility; in addition, most executives have their own personal funds.

A catastrophe like September 11 creates chaos in financial markets. Executives should focus on two reliable principles of investment practice: Those who sell into a panic usually regret it, and over long periods of time, well-diversified portfolios are tough to beat. Diversification and a cool head pay off big time.

You do not get to choose your issues when you enter the executive suite. As they always will in the midst and aftermath of an event like September 11, executives will have decisions to make; and as always, those decisions will make all the difference. Such a horrible event is not an excuse not to manage. It is precisely when good management is needed most.

About the Author

John S. McCallum is Professor of Finance at the I. H. Asper School of Business, University of Manitoba, and former Chairman of Manitoba Hydro. Contact