Barclays’ Bob Diamond. JP Morgan’s James Dimon. Yahoo’s Scott Thompson. Sure, you might pity them. But you should still learn from their mistakes
It’s been a difficult few weeks for the bosses leading big businesses. Annual general meetings have seen shareholders rejecting executive remuneration packages. Facebook’s much anticipated IPO was critically panned. Yahoo’s CEO was forced to step aside after lying on his CV. And the scandals engulfing JP Morgan and Barclays have poured public attention on the way in which their CEOs went about tackling their respective crises.
The higher you get up the company ladder, the brighter the spotlight on you – not just from colleagues and clients, but shareholders, the press and an increasingly global audience.
Every leader, be it the CEO of a major multinational or a start-up entrepreneur, will at some point find themselves in a situation where they are feeling the heat. There’s a stigma attached to failure, and a perceived weakness when things go wrong.
But there’s also a widely held belief that you only find out how good a leader you are when you’re really up against it. What defines us is the courage we show in dealing with the situation, effectively and consistently.
So looking back over recent months’ leadership mishaps, here are my top tips for leading under pressure:
1. Perception is critical to your course of action
It’s critical to understand how you are perceived by those you are facing up to, and to grasp what your track record says about you as a leader.
In the case of the Barclays and JP Morgan CEO’s, Bob Diamond and James Dimon, both led institutions tainted with the stigma of the 2008 financial crisis. Both bosses faced a public whose tolerance was already at an all-time low with banks. Then JP Morgan announced $2bn losses due to rogue trading and Barclays put aside £300m to handle the rate-fixing scandal.
Diamond’s reaction was to immediately waive his annual bonus, saying he wanted to act as a “good corporate citizen”.
Dimon’s reaction has been somewhat more inexplicable. His repeated use of the phrase “the buck always stops with me” has been seized upon in the press, mainly due to his constant refusal to be drawn into committing to hand back the $23m in salary and bonuses which he was awarded for 2011 – a year in which the company’s stock dropped 22%.
2. Identify the line of least resistance
“Sorry” might be the hardest word but it remains the most direct route to public forgiveness. A genuine apology will have this word right at the core. But it is critical you are authentic in your response. Be honest about the facts and don’t avoid the issue.
You are far more likely to be forgiven for errors in judgement if you understand your strengths and have a clearly considered plan to recover the position that best suits you.
In the Barclays case, wrongdoings were admitted, record-breaking fines were accepted, bonuses waived and a culture change promised. But it was soon evident that this was insufficient to appease the general public, and specifically shareholders, who will ultimately foot the bill for the banks indiscretions.
First the chairman, and then Diamond and his COO, announced they were standing down, a decision seen by many as inevitable.
3. Avoid the blame game
In what is likely to become a textbook example of the ‘blame game’, Facebook’s catastrophic IPO looks set to be played out in the courts for years to come. It was one of the most anticipated share offerings ever, but descended into one of the worst-performing IPOs in American history after a technical error at the Nasdaq stock exchange saw share prices plunge in early trading.
It’s clear from initial documentation submitted as part of over 40 consolidated lawsuits that Facebook and CEO Mark Zuckerberg have placed the blame firmly with Nasdaq. The company’s bankers Morgan Stanley, meanwhile, have come under repeated criticism for making “materially false and/or misleading” filings in connection.
Passing blame is a recipe for a long and protracted defensive battle. Finger-pointing is unseemly, regardless of whether the wagging finger is at someone within your own organisation or at a third party.
4. Skip the cover-up: the truth will always out
The classic cover up is simply a one-way ticket out the door. Yahoo CEO Scott Thompson didn’t just try to assign blame but, fatally, tried to cover up his error. Instead of saying, ‘I made a mistake,’ the cover-up became the centre of the saga after a simple Google search uncovered that Thompson had lied about his academic degree.
Thompson claimed that he had never reviewed his own CV. He told senior Yahoo executives that a junior intern at the executive search firm who placed him at his previous employer, PayPal, had made the error. Of course, executive search firm Heidrick & Struggles were having none of that, and got in touch with Yahoo providing the company with the original inaccurate information it had received direct from Thompson himself.
Thompson left Yahoo just a week after the controversy erupted, bringing an end to a four-month tenure which saw him claim a $6.5m payout- a decision that will do his future career prospects no favours.
5. See through the changes you propose
An apology is nothing without an action. If you apologise and say you’re going to see through a change in culture, or that you will behave differently, and then don’t, you are risking the issue returning to haunt you. You also compromise the trust and respect you have earned in being allowed to correct the original error.
James Dimon, for example, has pledged a change in banking culture. It’s a story we heard time and again in the aftermath of the 2008 global economic crisis.
He is relying on his personal reputation to survive the latest scandals; Dimon was voted 2011’s CEO of the year having turned around JP Morgan after it had to accept $25bn in government-backed loans. If he fails to see through on his promises, he will almost certainly end up going the same way as Mr Thompson and Mr Diamond.
6. Prepare now for your future crisis
Leadership is about continually learning and attempting to stay ahead of the game. Whether you are managing a dynamic start-up or corporate giant, at some point mistakes and errors in judgement will happen. Fact! It’s what you do when things go wrong that you will discover your true abilities as a leader.
If you hit a crisis in the future, remember that your entire career has been building up to and preparing you for this day. Establish and build a reputation for fairness, honesty and decisiveness. This will serve you well in the eyes of those you may one day be facing.
An effective leader is surrounded by a team who are supportive and compliment his or her talents. Doing what is best by the team and stakeholders in an authentic and honest manner will best prepare you for when you face the music.
Bradley Starr founded and built Miller Starr, before exiting to MRM Worldwide (Interpublic) and joining its global executive board, with joint responsibility for over 2,000 staff in 35 offices. In 2003 he received the HK McCann Leadership Award for outstanding business leadership. Bradley’s latest venture, Bizantra, is an all-in-one complete management system for start-ups and small businesses.