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« Leadership via 4th Generation Objectives: Part IV | Main | Positive Crisis: The Dysfunctional Corporate Family »


Robin Nourmand

First of all, thank you, Tom, for the thoughtful blog that you have put together. The structure of the "Categories" and weekly posts is both helpful and enticing.

I'd like to push back on this post a little bit to make sure I understand and hopefully add to the discussion.

I agree with you on the importance of conflict, crisis, radical change etc. My general question is about how an organization must balance being reactive and proactive when confronting crisis. Specifically, if the culture is becoming one of crisis management, how do you share focus between solving the current crises to preventing the next one?

Quite arguably, the Sarbanes-Oxley response to the Enron, et. al. crises, has created a crisis in its own right. Obviously, businesses should not model themselves after government, but I believe it can be typical for poorly-run organizations to "solve crises" by increasing reporting/paper/clutter (much like the engineering cost summaries that plagued Paradyne). Obviously, it is the wise leader who sees that such responses exacerbate the crisis. But when that is the mentality in an organization, how can one executive turnaround a culture of complacency - a culture that inhibits creative problem solving? How does that executive light a fire in his or her managers to ensure that they spot, diagnose and attack the next crisis themselves without waiting for direction from the top?

I'm sure you have examples! :-)

Nicholas Vakkur

The information contained in this posting is especially relevant, not merely to professional corporations but to our private life and to society as a whole. Today it seems that in the modern world crises of one form or another surround us almost always. In fact, given the capabilities of modern technology and the news media, crisis situations that exist on the other side of the globe are brought into our very living room, as they unfold.

Modern technology in business has meant, in part, that information of all types is available on a 24/7 basis. One positive aspect of this increased availability is that firms and managers are subject to a much greater level of scrutiny than perhaps ever before in the past. As a result, one potential outcome may be that “crises” of one form or another may become more commonplace. This may be expected in part because the media, along with the investor public, ensures that information that is reported as if it represented an actual crisis will more readily gain widespread public attention. Therefore, there exists an incentive for crises to be “manufactured”. A second reason, perhaps more salient, that crises in modern business may be increasingly commonplace, relative to the past, is that the increasing demand for more and better information subjects managers to increasing scrutiny, making it less likely that managerial misdeeds or blunders will be successfully covered up.

The Enron debacle and the subsequent fall of the global giant, in which nearly $100 billion in equity value was wiped out almost overnight, was in part made possible, or at least facilitated, by this newfound rapid access to information. Near immediate access to firm-specific negative information caused what amounted to a bank run, leading to a loss of trust in Enron’s business model. The firm then rapidly lost customers, and financial revenues fell accordingly.

The Enron crisis underscores the fact that crises in the modern business firm no longer represent exclusively private, individual failures that impact the elite, but are more and more commonly seen as potential sources of social catastrophe, as they destroy jobs, ruin careers, and harm entire industries. Therefore, business concerns are increasingly interpreted as social concerns, which means that political remedies are more commonly applied in solution. Sarbanes Oxley is a very recent and prominent example of this phenomenon, in which the threat of market instability was confronted by legislators, eager to avoid further business crises.

Therefore, it is very difficult for me to envision business problems exclusively at the micro level (e.g. within the individual firm). The increasing reality today is that the once real separation between the “private” and “public” sector, connoting what was once a very real division between government bureaucrats and capitalist tycoons, is increasingly becoming blended such that each now shares an increasingly prominent role in what once previously was exclusively the others domain.

Therefore, crises are very real, both in corporations but increasingly so in society. All of civilized society has a vested interest in ensuring that the important and necessary processes listed in this section are applied in seeking the solutions to those dilemmas. Crises in modern business are not only more common, they are less and less viewed as the exclusive domain of the “private” sector or Adam Smith’s invisible hand. Instead, the social welfare of society as a whole demands that effective solutions be devised which confront the challenges provided by the business sector head on, realistically, and effectively.

The only way this may be accomplished is by attacking each crisis at its sources utilizing the methodology that is laid out clearly in this section. This information is directly useful, realistic, and capable of being applied to nearly every type of crisis- at multiple levels.

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