Organizational Distress, Leadership and Communications

Hy Pomerance

This article first appeared in the International Journal of Coaching in Organizations, 2009 7(2), 84-91. It can only be reprinted and distributed with prior written permission from Professional Coaching

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ISSN 1553-3735

2009

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organizational distress, leadership and communications

HyPomerance

This article focuses on organizations in distress and the various approaches to leadership and communication that are commonly deployed. Topics such as the impacts of distress on productivity, employee engagement, organization effectiveness and overall performance are covered. The author explores key concepts such as the normative emotional cycle that can be expected during times of distress and how leaders are challenged in the area of communication. He discusses three man categories of activity during times of organization distress: transforming mind-sets, building skill sets and aligning tool sets. While not linear, these three can form the foundation of a cyclical plan that coaches can use to organize and reinforce adaptive leadership techniques.

WHat arE tHE KEY oBvIous and suBtlE sIGns oF an orGanIZatIon In dIstrEss?

Ingeneral,anorganizationindistressisoneinwhichtheanxietylevelof themanagementteamand/orBoardof Directors istoohightoleveragethecorecapabilitiesandtoolstoadapttoachange.By capabilities I am referring to the key business processes thatwilldifferentiatethecompany’sabilitytoexecuteitsstrategy.Forinstanceacompany’sabilitytodevelopproductmayrequiremorespeedthanaccuracy.“Tools”refertothetechnologiesthatenablean organization’s core capability. An example is a company’sperformancemanagementprocess.Thisisamanagementtoolthatensuresthecompanyleveragesthefullpotentialof itsemployees.An organization will typically rely on leadership, culture andstrategyasthekeycomponentsof change.

The more obvious sign of distress can be seen in the behaviorof management and the Board of Directors. In my experience,managementwill shift intoa“frozenstate”andresort towhat itknowsbest.Therearesomedifferencesinhowmanagementteamswillbehave,dependingontheindustryandrelativestrengthsof thecompanypriortothecrisis.

Inafinancial servicesfirm,I’ve seen instanceswhere the“frozenstate”ismanifestinaseverereductionininternalcommunications–managementwillgosilent.Decisionmakingbecomesunclearorevenavoided.Accountabilitybecomesmoreambiguousandyoucanexpectverylittleaction.Anotherrealsignof distressisrepresentedbyalackof deepunderstandingof thecauseof thedistress.Ihaveseenanorganizationmisdiagnosethecauseinaneffortto“quickly”remedytheissue,thuscreatingwhatisoftenafalsesenseof securityintheorganization.Thereisatendencytolimitthediscussionand

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problem-solvingefforttoaverysmallnumberof people.Anothernoticeablechangeistheshiftfromamoreconsensusordemocraticculturetoonethatisatop-down,centralized,andhierarchicalwithregardtoitsdecision-makingprocess.

Theneteffectisthatanorganizationindistressisonethatfeels(atmost levels) tense, constrained,andwithouta lotof insightas towhat’s goingon.Seniormanagers feel lost,withouta clear senseof direction; theythink“justkeepdoingwhatI’mdoing.”Atthemiddle of the organization the signs are less obvious and moresubtle,unlessthemediaisinvolved.Thespotlightof themediacanbeacomplicatingfactorforanycompany,especiallythosethatarepublicandexposedtoanalystsandregulators.Themediacancausefurtherstressbecausetheyoftenwillreportaportionof thestorythatrequiresmanagementtorespondbothexternallyandinternally.

WHat arE tHE IMPacts oF orGanIZatIons In dIstrEss, IntErnallY and EXtErnallY?

Thespecificimpactsonorganizationsvarybyorganization.Ingeneral,mostimportantprocessesslowdownbecausetheorganizationwillreverttorulesandabandontheprinciplesthatguideddecisionsinthepast.Teamswill likelybeunderutilizedandlessproductive.In one organization, I recall how management developed theirriskmanagement strategywithout including the riskorganization.Theirdecisionwasbasedon theneed to“contain” thefirestorm.Managementfailedtoleveragethecapabilityof theteamthathadbeendevelopedtoprovidepreciselythatsortof expertadvicewhenitwasneededmost.Youcouldsaythatthisparticularorganization,amultinationalfinancialservicesfirm,decidedthatinordertostabilizethebusinessithadtocentralizedecisionsandkeyprocessesrelatedtorisk.However,giventhelargefootprintandmulticulturaldimensionsof thecompany,therecouldnotbea“onesizefitsall”solution.Theimpact was a very uneven and slow rehabilitation process. Moreimportantly, thecompanywasvery slow to focuson therealcoreissues–thoseissuesthatwereattherootof thecrisis.

Another critical impact on organizations is level of employeeengagement. Engagement refers to employees’ motivation andcommitmenttoanorganization.Theimpactof distressonemployeeengagement can be severe. As engagement drops (that is, thediscretionary effort employees demonstrate when doing their jobs)thegreaterthethreattocompetitiveadvantage.Engagement,oftenassessedthroughformaltoolssuchasemployeesurveys,isakeymetrictokeepinmindwhenmonitoringtheimpactof chronicdistress.

Anothercommonimpactof distressisthedegreetowhichpeoplestopaskingquestions.Thoseemployeeswhotypicallychallengethewaythingsaredoneandpushtheorganizationtowardcontinuousimprovementwilloftenbecomesilent.Whatoftenemergesisashared“what’sthepoint?”of questioningorproblemsolvingattitude.Froma coaching perspective this particular impact can be devastating

The net effect is that an organization in distress is one that feels (at most levels) tense, constrained, and without a lot of insight as to what’s going on.

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to those leaders and managers who are trying to find their voiceand searching for opportunities to take risks. Other impacts onorganizationsmayincludereducedretentionof toptalent,customerdefections,andlossof brandequity,bothinternallyandexternally.

WHat tYPEs oF lEadErsHIP rEactIons to dIstrEss HavE You sEEn?

The typeof leadershipwe sawonWallStreetduring the2008financialcrisisiswhatonecouldcall“unconscious”leadershipinmany instances. Leaders had a difficult time assimilating newinformation into their various business models and leadershipparadigms. The leaders I encountered struggled to restoreequilibrium and engage their people and operations to draw oncorestrengths.Theymissedopportunitiestotakeadvantageof theirbrandandcustomerbasewhentheyretreatedtotheboardroomstodeliberatehowtomanagethroughthecrisis.

Oneof themostinterestingobservationsInotedaboutleadershipreactions to distress is the degree to which the organization iscompelled to“blame”someoneor something for thedistress. Inoneorganizationthatwasparticularlyimpactedbythecollapseof theglobalfinancialmarketin2008,theorganizationwasrumoredtobeona“witchhunt”totakeoutthoseresponsibleforthecrisis.Infact,theycannedsomanyleadersatthetopthattheorganizationhadlittlecontinuityandconfidenceinseniormanagement.Whilethisisanextremecaseof theblamegame,I’veseenthishappenonmuchsmallerscales.Leaderswillwanttoholdothersaccountableforanissueattheexpenseof learningfromthemistake.Thissortof fear-basedenvironmentisoneof thehallmarksof howleaderscan “freeze” an entire business system and therefore add to thedistressof theorganization.

Anotheraspectof this typeof leadershipreaction isa failure toshiftthemind-setfromdespairtohope.Leadersneedtoarticulateafuturestatethatisachievableandsetdirectionfortheorganizationtotake.Thesecanverydifficulttasks,especiallyif thedistressisaprotracted situation. Inamorechroniccircumstanceof distress,I’veobservedseniormanagementtryingtoprotecttheorganization(and sometime its customers) from the facts. In these situationsleaders can inadvertently encourage denial and resistance thatchangeisrequired.

In WHat WaYs arE coMMunIcatIons IMPortant In an orGanIZatIon WHEn crIsIs occurs?

Communicationiscrucialincrisis.Oneof thechallengesthatleadersfaceinacrisisisnotalwaysseeingthefullpictureandthereforenotplanningastrategyof communication.Inanutshell,manyleadersreactorgivetheappearanceof reacting.InalargeUSinsurancecompany I observed aunique communication strategyduring acrisis.Theleadersdecidedtoconductalltheircommunicationsinaface-to-faceforum.Thecrisiswouldnotbewrittenaboutinemails

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ordiscussedonthecompanyintranet.Thenotionthatahightouchdialogueapproachtothecrisiswouldenhancegainingstakeholderbuy-inreallypaidoff.Theopportunitytoheartheissuesfirsthandanddiscusstheminrealtimeallowedthecompanytorealignandimplementtherecoveryplanatamuchfasterpace.

Inthisexample,seniormanagementinvestedtheirtimetravellingtovisitmanagementteamsacrossvariousgeographiesratherthanspendingthetimewritingandeditingmemos.Oneof thecommonissues organizations face in crisis is the tendency for the systemtobecomeinwardlyfocused.Thesuccessfulcommunicationsapproach mentioned above modeled how to stay in touch withcustomersandmaintainahighlevelof customerintimacy.Ibelievetheactof face-to-facecommunicationsisthesinglemostpowerfulstrategythiscompanydeployedtorecoverfasterandwithlessriskthantheircompetition.

The key to cascading information to different levels of theorganizationistoleveragethevoicesandskillsof thosetrustedatthoselevels.Oneeffectivetechniqueistoestablish“communicationcircles”aroundacompany.Thesearesmallgroupsof employeeswhotakeresponsibilitytocommunicate,sometimesinformally,tocreate anetworkof grass rootsmessaging.Leaders I’veworkedwith have successfully established these groups and developedcircles of trust and information flow that can positively impactmoraleandretention.

Is tHErE a sEquEncE oF orGanIZatIonal actIvItY tHat cHaractErIZEs tHE EMotIonal cYclE oF a

crIsIs? HoW Would You dEscrIBE tHat?Yes, I think the there are four types of activities that reflect theemotionalcycleof acrisis.Thefirsttypeof activityis“quickaction”whichreflects theorganization’sneedfor thehero,a leaderwhowillrescuethecompany.Hopeistheprimaryemotionduringthisphase.Theherosyndromeisoftenseen inthemorecharismaticleaderwhohasavisionandcanmobilizeaflurryof activity.Thisstageismostlyfocusedonquickwinsthataren’tsustainableovertimenordotheyresolvetherootcause.

Thesecondtypeof activityisareactiontothefirst“planningandmoreplanning”activity.Thephaseof thiscycleischaracterizedbycalmerandmoremeasuredfeelingsacrossthecompany.Duringthisphase,thingsmoveataconsiderablyslowerpace.Committeesareformedtofocusontherealissue.Rulesareputinplaceandusuallythecompanywillfocusoncostsandpeople.ThefirmmovesintowhatIcallhyper-managementmode.Hereweseeleadersactmoreconservativelywhiletheyplanthefuture.Thereisaperiodwherepeoplefeelmoresupportedandleadersaremorediplomatic.

Thethirdtypeof activityismorecontextualanddependsonthenatureof thecrisis.Theorganizationmayslipintoastateof malaise

The opportunity to hear the issues firsthand and discuss them in real time allowed the company to realign and implement the recovery plan at a much faster pace.

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if the issues are not continually made clear and communicatedthroughouttheorganization.Tohelpresolvematters,thefocusof theorganizationhastobearoundraisingawarenessof whattheissuesareandchanging theattitudesandbehaviorsof acriticalmassof influencers.Inthe“USInsuranceCompany,”theCEOdecided to communicate a new set of leadership requirementsthatcreatedaflurryof initiativesdesignedtofosternewbehavior.In this organization, where the distress was more of a seniormanagement issue around future growth and sustainability of theorganization, leaderswerechallengedtofocusonknowledgetransferanddistributedleadership.Thisleadershipchallengeledtoahostof organizationalinterventionsdesignedtoengageleadersinunderstandingthenewsetof culturalandleadershiprequirementsandwhythoseweresoimportanttothebusinessgrowthstrategy.

Typically,afourthcategoryof activityreflectstheemotionalphaseof hope and sense of the future. These activities are more likeengagement programs that train, educate and build alignmentacross the organization. It’s not uncommon for leaders to cyclethroughanextendedperiodof time(evenuptotwoyears)beforetheyareconfidenttheycandemonstratewhatthefuturewillbelikeandexciteemployeestoparticipateinthemission.

WHat do coacHEs nEEd to KnoW aBout WorKInG WItH sEnIor ManaGEMEnt

durInG tIMEs oF dIstrEss?My experience working with senior management during timesof distressismostlycorrelatedwiththedegreeof trusttheyhaveinmeprior to the crisis. Inone example,where the triggerwastheunexpecteddeathof thecompany’slongtenuredandbelovedCEO,Ifoundmyself facilitatingagrievingprocessacrossanentiresystem.Whatmadethistimeof distressmostchallengingwasthelackof aclearsuccessionplan.Myrolewastohelporganizeacalmandreasonabledialogueamongtheseniorteammemberstoplanaleadershiptransition.(Thiswasaprivatecompanyof about4,000employeeswhoseBoardof Directorswasmadeupof thepartnersof thecompany.)IwasinaplacewhereIwastrustedtooutlinesomeof thekeycomponentsof theplan:people,process,communicationsand focus on clients. I found that knowing something about thegrievingprocesswashelpful inmoving the team todevelopandimplementtheearlystagesof thetransitionplan.Thisexampleillustrateswhyorganizationaldistress canbeviewedasahumanstateexperiencedbythesystemasawhole.

WHat dEraIls sEnIor lEadEr EFFEctIvEnEss durInG tHEsE cHallEnGInG tIMEs?

The first thing that derails leader effectiveness during challengingtimesistheirinabilitytoassimilatenewdata/informationthatmaynotfitwiththeirmind-setorparadigm.Ialwaysaskleaders,“Whatnew information do you have?” “What is the most perplexingthingtoyouaboutthecrisis?”If theresponseisn’tsubstantialor

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clearor,worse, theydon’t seeanythingnew,myrole is toworktohelpthemexpandtheirthinkingandtotakeitin.Thesecondthingthatderailstheleaderisthetendencytomissthefactthattheyareunderthemicroscopeduringacrisis.Theyfailtoseehowtheirbehavior, everymovement, impacts theorganization.Self-awarenesscanoftenbethelynch-pintoleadingthroughacrisis.

WHat arE soME MYtHs or unsuccEssFul BElIEFs or aPProacHEs lEadErs MaY HavE

aBout ModEratInG or rEducInG orGanIZatIonal dIstrEss?

Occasionallyonehearsthatemployeeslearnabouteventsfirstinthemedia,orpressreleases.Onecommonapproachistocommunicatethe“whole” storyonce theproblemand the solutionhavebeenfullyarticulated.Of course,weknowfromthepasttwoyearsinthefinancialindustryhowinformationandunderstandingof problemsevolvesandrequirestime.Leadersneedtocommunicatewhattheyknow (and more importantly what they don’t know), when theyknowitandwhattheyplantodo.Coachesneedtohelpleadersremainvisibleduringtimesof distress.Frequentcommunications,regardlessof howincompletetheinformationis,buildstrustandreducesanxiety.

Therearesomekindsof communicationsthatwillINCREASEuncertaintyamongemployees–acommunicationthatseemstobesayingnothingorisperceivedtobe“corporatespeak”cancreatetoomuchanxietyandparalyzeemployeescapacitytofunction.

WHat can coacHEs and lEadErs do aBout orGanIZatIonal dIstrEss?

Herearethetopthreethingstodoattheenterpriselevelfororganizationaldistress...andwhy:

1. Leaders must keep an open mind about what ishappening, seek information about the crisis froma broad range of sources, and listen to everyone.Remember, in crisis, employees need leaders to “bethere.”

2. Developanetworkof employeeswhocanbothcontroland disseminate information and messages that arecrafted by senior management. This is more importantthanacommunicationsplan.

3. Rely on core values and cultural attributes to leadtheorganization.This is keybecauseemployeesandcustomers will be more inclined to engage in therecovery plan if they “recognize” what leaders aretryingtodo.

In times of distress, our task as coaches is help leaders changemindsets.Employeesarefeelingvulnerableandfearful.Theyhavea bleak outlook on the world. As we know, anxiety, depression

Leaders need to communicate what they know (and more importantly what they don’t know), when they know it and what they plan to do. Coaches need to help leaders remain visible during times of distress.

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andasenseof beingpowerlessareatoxicmix.MartinSeligman(1998) says,“Habitsof thinkingneednotbe forever…individualscanchoosethewaytheythink.”I’veseenleadersintimesof crisistreat theiremployees liketheyaremachines,standingoverthem,applying pressure and scrutiny trying to increase productivity. Inessence, they create an environment where the consequence of steppingoutof linearedireandtobeavoided.Thepsychologyisunderstandablebutflawed.

Theseleadersaretryingtorestoreorderandpredictabilitywhenthecrisis isanythingbut.Thecoachcanhelp leadersrestoreanorganizational environment characterized by learning, adaptingandinnovating.Transformingthemindsetfromfeartoopportunityisthecriticalshiftrequired.

HoW do You KnoW WHEn tHE orGanIZatIon Has acHIEvEd succEss? WHat

arE tHE MEtrIcs, BotH soFt and Hard? Thereareseveralindicationsandmetrics:

• Media coverage improvesand ismorepositive.Thefinancials look better and receive positive reviewsfrom analysts. Spending unfreezes, supporting morehiresandemphasizingareturntobuildingleadershipratherthanstoppingdevelopmentprograms.

• Oneof thekeystosuccessisretentionof toptalent.Organizationsincrisiswillfrequentlysetouttodevelopretentionpackagesandprograms.Thisisamust.Whenindistress,don’tunderestimatetheinclinationof thecompetitiontopoachyourbestandbrightest.

• Another sign that the organization has achievedsuccess isanincreaseinproductivity.Employeeswillrelax,takenormativerisksandincreaseproduction.

WHat arE Your concludInG tHouGHts?WhenIthinkabouttheworkanorganizationindistresshastodo,Ioftencompareittomountainclimbing.Climbersandtheirteamshave long developed strategies to manage constantly changingconditions, uncertainty, fear and anxiety. Their teamwork andclimbing techniques are designed to accomplish five objectives:execute their plans, manage risk, move with speed, do morewith less, and control fear. These five principles sound familiar.Organizationshavethesamechallengeswhentheyfacesignificantchangeandcrisis.

Organizationsincrisisarelikeclimbers;anorganizationrequiresleadershipthatwillcreateconditionssothattheorganizationwillexecutetheplanandstrategy,manageriskstoprotectandpreservetheirassets,stayfocused,reducefear,anddomorewithless.

When I think about the work an organization in distress has to do, I often compare it to mountain climbing. Climbers and their teams have long developed strategies to manage constantly changing conditions, uncertainty, fear and anxiety.

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Likeclimberswhoneedtopackaslittleastheycan,organizationshavetoreducecomplexityandeliminateanythingandeverythingthatdoesn’tcreatevalue(forbothemployeesandcustomers).Doingmorewithlessdependsontheclarityforwhat“doingmore”reallymeans.Likeclimbersfacingconstantchangesinweatherandotherconditions,theorganization’sleadersneedtohelpemployeesstayfocused.Employeeswhoarenowdoingthejobof twoandeventhreepeople (after significant jobcuts)cannotbeas focusedandwillendupdoingbothjobspoorly.

For climbers, trust is everything. In organizations, according toProfessorJohnWhitneyof ColumbiaUniversityBusinessSchool,mistrustdoubles thecostof doingbusiness (Covey,2005).Threeconsistent techniques tomaintainor restore trust are critical: (1)create transparency; (2) keep your commitments; and (3) extendtrusttotheteamsdoingthework.Whendistressedweseetoomanyexampleswheretheorganizationfailsinoneormoreof thesebasicapproaches.

Finally,climbersarealwaysworking tocontainandreduce fear.Feariscontagious.Weknowhoworganizationsindistresscancreatefearandfailtoseetheimpactthatfearhasonproductivityandresults.Thekey toreducing fear isclarityanddecisiveness.What employees in distress need is direction; just because youcan’tseeorhearthefear,doesn’tmeanit’snotthere.Employeesaregenerallywaitingfordirection.Leadersneedtobevisibleandprovidecleardirection.Thelongerleadersdelaycommunication,themoretheyareaddingtothecrisis.

n aBout tHE autHor

Hy Pomerance, Ph.D.

HyPomerancecurrently isHeadof TalentDevelopmentatNewYorkLifeInsuranceCompany.Hedirectsthecompany’sstrategyanddeliveryof talentprograms,successionplanningandorganizationeffectivenesscapability.PomerancehasprovidedexecutivecoachinganddevelopmentadvisoryservicestoFortune100companiesintheinsuranceandfinancialservicessectorsforthepasttenyears.Anexpertinexecutivedevelopment,Pomerancehaspublishednumerousbookchaptersandarticlesonleadershipandculturechange.Hecombinesapracticalandcommercialapproachtobusinesswithbestpracticetalentdevelopmentmethodstoachievemeasurableimpact.HyearnedadoctorateinClinicalPsychologyfromAlbertEinsteinCollegeof Medicine.HelivesinWeston,Connecticutwithhiswifeandtwoboys.

rEFErEncEsCovey,S.M.R.(2005).The speed of trust: The one thing that changes everything.NewYork:FreePress,p.18.

Seligman,M.E.P.(1998).Learned optimism: How to change your mind and your life.NewYork:FreePress.

Email: hy_pomerance@newyorklife.comPhone: 212-576-3965

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