November 2018 | Nano Tools | Leadership
Nano Tools for Leaders® are fast, effective leadership tools that you can learn and start using in less than 15 minutes — with the potential to significantly impact your success as a leader and the engagement and productivity of the people you lead.
Contributors: Michael Useem, William and Jacalyn Egan Professor of Management and Director of the Wharton Center for Leadership and Change Management, The Wharton School, University of Pennsylvania; Howard Kunreuther, James G. Dinan Professor; Professor of Decision Sciences and Business Economics and Public Policy; and Professor of Operations, Information and Decisions; Co-authors of Mastering Catastrophic Risk
Don’t wait until it’s too late: to disruption-proof your organization, every leader needs to take proactive steps for risk management.
Risks to organizations have attracted far more public attention and concern in recent years. Media references to risk rose worldwide from 1990 to 2016 by a factor of 25 — and double that in the United States. Headlines with the word “crisis” and the name of one of the top 100 companies ranked by Forbes appeared 80 percent more often in the 2010s than in the previous decade. As a result, risk has entered the lexicon of virtually every company manager, and the now widely used acronym ERM — enterprise risk management — has become one of the essentials for almost everybody in business.
But that doesn’t mean executives and managers are all better prepared. When attention is preoccupied by immediate concerns and pressing issues, executives and managers tend to ignore small warning signs of impending disaster — sometimes even those staring them in the face — that can morph unattended into genuine threats. To avoid getting caught off guard, recognize and work on the six action steps below. They correspond with the most common reasons some company directors, executives, and managers are unprepared for the likelihood and consequences of extreme events. Even well-intended risk-management strategies can still go wrong if all leaders are not vigilant and proactive.
Use the following steps in discussions and planning sessions with your organization’s executives, directors, and managers. They will help you identify current shortcomings, realistically assess your readiness to respond to disasters, and have actionable plans in place well before a sudden crisis strikes.
When a plane hit the North Tower of the World Trade Center on 9/11, Morgan Stanley’s director of security, Richard Rescorla, asked the Port Authority for immediate guidance. It recommended against evacuating the South Tower, but Rescorla requested that his chief executive approve the instant evacuation of all employees, then spread across 20 floors. Rescorla’s calculus was informed by his own experience with a prior disaster in the same building: the 1993 al-Qaeda truck bombing that killed six people. Fearing how many might have perished if that assault had succeeded in collapsing a building, Rescorla had instituted quarterly evacuation drills.
Rescorla and his staff succeeded in moving most of Morgan Stanley’s 3,700 staff members down the South Tower’s stairwells before the second aircraft hit that tower. Virtually all of the employees managed to exit the building before its collapse at 9:59 a.m. Just six staff members of Morgan Stanley were still inside when the tower finally imploded, among them Rescorla himself and three deputies who had returned to the offices to make sure no others remained inside.
When Hurricane Katrina hit the U.S. Gulf Coast in 2005, Walmart applied its technical understanding of complex global supply chains and its careful tracking of the storm itself to assist the region’s recovery when other institutions faltered: “Make the best decision that you can with the information that’s available to you at the time,” Chief Executive Officer Lee Scott had urged his employees, and “above all, do the right thing.” On that premise, swift decisions followed, including Walmart’s dispatch of 2,500 trucks to deliver food, blankets, and clothing to thousands of hurricane-affected families for weeks after Katrina’s landfall.
In the years that followed, Walmart built on its Katrina experience to strengthen its risk management worldwide for all kinds of disruptions, not just natural disasters, investing in an emergency operations center and a central coordination and response hub. When the U.S. Center for Disease Control confirmed in 2014 that an Ebola-infected traveler from Liberia had landed in the United States, the emergency center sprang into action, monitoring millions of Walmart employees and customers for signs that those who had been exposed to Ebola might be working or just shopping in one of its 11,000 stores worldwide.
Nano Tools for Leaders® was conceived and developed by Deb Giffen, MCC, director of Custom Programs at Wharton Executive Education. Nano Tools for Leaders® is a collaboration between joint sponsors Wharton Executive Education and Wharton’s Center for Leadership and Change Management. This collaboration is led by Professors Michael Useem and John Paul MacDuffie.
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