The very idea that Lehman Brothers could go under was unthinkable—until it happened.
Sheer unpreparedness for Lehman’s collapse threw everyone—from C-suite leaders and directors to entry level employees and interns—into survive mode, triggering a self-preservation mentality much like that which takes control in “fight, flight or freeze” situations. The image of employees leaving Lehman’s headquarters carrying their possessions in banker’s boxes prompted panic that—thanks to both human preservation and ‘breaking’ cable news—spread quickly from the financial sector to every industry, penetrating the defenses of the largest of companies and forcing the U.S. economy into a recession that sent shockwaves across the globe.
It’s been a transformative journey over the past 10 years, as directors, CEOs and their teams have worked to rebuild what was lost and set goals for the next decade—a journey that, upon reflection, raises many important questions, like, why were leaders blindsided by this financial downturn? What, if anything, should they have done differently to guide their organizations through the fallout? And, what lessons can leaders draw from this experience to prepare for future crises?
Three distinct lessons come to mind:
Address the Lion in the Camp
During any crisis, the strongest and most immediate reaction is to enter survival mode. As the fight or flight instinct kicks in, leaders must know how to reach and connect with their people at their most primitive level.
Consider the following analogy: if a lion has breached your community’s defenses, your people must be the first to know. Only then can they be vigilant in their attempts to protect themselves—and each other—against the threat and extract the lion from the camp. Even when the defenses are breached (as they were in 2008) or a dangerous predator is at large, people do not want to be told—and should not be told— “everything is going to be fine,” especially when all signs point to the contrary. If leaders choose to ignore the lion (or pretend it’s not there), no amount of empty words or false promises will matter. Employees will hear it roar.
Leaders often wait to communicate during a crisis—especially when questions outnumber answers. And unfortunately, when they do, too many leaders rely on a scripted narrative that—as it is written and refined—becomes more and more devoid of personality, sincerity and candor. But keeping quiet will only amplify confusion and push employees to rely on external gossip, which will invariably paint an inaccurate picture of where the real situation stands, feeding anxiety and confusion. Leaders can stop employees from spiraling further into crisis mode by clearly and frequently communicating what has happened and what is needed in the short- and long-term to get back on track.
Honest communication—no matter how dire or uncertain the situation—allows leaders to bring internal stakeholders and employees up to speed on their company’s current strategy and chart a path forward. Acknowledge the lion, talk about it, and plan to deal with it.
Recovery Time is Critical
When navigating a crisis, leaders must remember that regaining former glory is not an overnight effort—especially when the crisis is the result of a systemic failure, as it was in 2008.
After the immediate fallout of the 2008 crash, slow recovery was an added challenge for leadership teams—especially as pressure to grow revenue, increase share price, retain assets and address customer, investor and employee expectations mounted, and “quick fixes” did little to chip away at the problems.
I was working at Bank of America as the institution was navigating its recovery from 2008. I recall the quarterly town halls that Brian Moynihan and his executive team delivered; quarter upon quarter of loss reserves, risk compliance programs, and the slow march to recovery. Ten years on from 2008 and Brian Moynihan, with solid and steady performance, has just now earned Barron’s endorsement and that of arguably the most reputable analyst in the sector.
Rather than trying to spin the best narrative, C-suite leaders should be honest about progress during the recovery period—no matter how long it takes to bounce back. Transparency lays the groundwork for regaining trust and addressing vulnerabilities after a systemic failure. Brian Moynihan and Bank of America are evidence of this.
The Team Must Be Ready to Run—and Swim
Sometimes in a crisis, the question isn’t how much can you plan—it’s how fast can you pivot?
The financial crisis happened not because there wasn’t planning, but because leadership teams were not prepared to navigate a systemic collapse. No-one was. To lead through future crises, leaders must hone their team’s ability to be responsive and nimble; they need to mobilize their people with speed and agility.
Scenario planning, the process of developing flexible predictions and plans of action to prepare for potential future outcomes, is an essential business function. It is also a critical component to out-maneuvering the competition. By helping employees anticipate and “train” for future challenges, scenario planning keeps teams in peak condition—equipped to respond to a change or a crisis with confidence, a clear mind and a flexible approach.
If business leaders captained sports teams, they would want a team of trained athletes who know how to play their positions. However, the captain also needs to be able to move people around as needed. Moving a player from being a goal scorer to a goal keeper is an essential shift that you need to know you can make. In the game of business, strategies can shift quickly. Having players who can respond to the changing game and bring their best possible performance is key. This is a hallmark of success—and will differentiate those leaders and companies who will flourish when the game changes, especially when the regular rules don’t apply, and there is no certainty on what challenges lie ahead.
Ten years after the collapse of Lehman Brothers, leaders around the world have rebounded, rebuilt and, in many cases, made significant strides toward a brighter future. If they remember and act on the lessons learned from the 2008 crisis, they will be well prepared to thrive during exciting and uncertain times ahead.