Wharton School Publishing
Learning from Catastrophes: Strategies for Reaction and Response,
by Michael Useem and Howard Kunreuther
“In the years I’ve spent teaching, researching, and observing leadership, I have come to appreciate that some of those in leadership positions display a remarkable inability to apply what they know from the past — whether from their own experience or that of others — when facing newly trying circumstances,” says Michael Useem, co-editor of Learning from Catastrophes: Strategies for Reaction and Response (Wharton School Publishing, 2009). “Leadership failures, in other words, aren’t necessarily due to a lack of knowledge. Rather, they can arise from a kind of amnesia, one that prevents the lessons learned earlier from being employed now.”
Useem notes that the difference between effective and ineffective leadership is often a matter of effectively applying that experience — and that learning from experience can be done without necessarily going through a catastrophe first hand. By observing and appreciating how others have led during a crisis, one can build one’s own leadership template for facing high-risk events.
The essential quality of any set of leadership precepts is that they’re actionable. Having an understanding of the precepts is a first step, but it is also essential that they can be translated into specific steps when the moment calls.
Michael Useem, The William and Jaclyn Egan Professor, Professor of Management; Director, Center for Leadership and Change Management; Academic Co-Director, The Leadership Journey
In the final chapter of this new book, Useem provides leadership guidelines for facing many forms of catastrophic risk. “I term these guidelines ‘experience-anchored leadership precepts,’” he explains, “because they indelibly encode invaluable lessons from past crises.” It is critical, he said, “that leaders master the lessons of the past — where leadership succeeded and where it failed — to avert or surmount crises in the future, and such experience-based anchoring of the lessons can be invaluable for doing so.”
“The essential quality of any set of leadership precepts is that they’re actionable,” emphasizes Useem. “Having an understanding of the precepts is a first step, but it is also essential that they can be translated into specific steps when the moment calls.” Learning from the experience of others requires a “deep dive,” uncovering those leadership principles that lie beneath the effective or flawed actions of the past.
Useem’s chapter in Learning from Catastrophes, for example, examines the failures of leadership at AIG that led to its collapse in September, 2008. As he explains, “AIG’s problems were created by one of its many operations, the Financial Products Division, which employed less than one percent of the company’s overall workforce. But this small unit brought AIG to its knees. Why? First, the director of the unit failed to anticipate catastrophic risk associated with its practices. The director had told shareholders in 2007 (less than a year before the failure) that his unit was using ‘highly conservative’ risk-analysis models. In addition, the AIG chief executive was evidently not adequately supervising the unit and its exposure to market risk. And in turn, the AIG board of directors was not adequately overseeing its CEO. In effect,” Useem concluded, “the failure of AIG is one of leadership shortcomings at three levels.”
From the experience of AIG, Useem draws out actionable leadership principles. “The key word is actionable,” says the author. “We need to help organizational leaders appreciate what to do before a crisis strikes. If they are facing an AIG-like moment, when risk turns to reality, one needs to have strong leadership skills already in place so that effective intervention can be swift, sustainable, and resilient.”
These issues have now entered into the offerings of Wharton Executive Education. “ I draw the leadership principles that we develop in Learning from Catastrophes into several of the open-enrollment programs in which I am involved,” Useem reports, “including Wharton's Advanced Management Program, Executive Development Program, Strategic Thinking and Management for Competitive Advantage, and The Leadership Journey. In these and other programs, I place great emphasis on strengthening the principles of leadership so that they remain actively in mind when a crisis or other leadership moment calls for their immediate application.”
Useem adds, “Leadership is a learned skill set, not a natural one, as I stress in both the book’s chapter and our executive education programs. I also emphasize that it is important for leaders not only to master the skill set but also to train those people who work for them in the art of leadership as well. And in developing the next generation of leaders, whether within the organization or the community, I find that it is very helpful to take those rising leaders into settings — either through direct experience or by learning from others' experience — that entail challenging leadership moments when the stakes are high and where actions are highly impactful. It is through such experience that the leadership principles become most indelible and are thus most at the ready for application when it really counts."
“The point of the book and our Executive Education leadership programs,” Useem sums up, “is to provide readers and participants with what they need so at the end of the book or the program they can say, ‘I’m going back to work tomorrow, and I am now better equipped to take appropriate actions that can avert or mitigate the crises that we may face.”
Download a free chapter of Learning from Catastrophes
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