A Leader's Framework for Policing Protest

Closing the Gap Between Business and Geopolitics

By Mike Rosenberg

As Stratfor's readers are well aware, we are living in turbulent times. Looking out across the many different crises and hot spots around the globe, it seems as if the world's geopolitical situation is the least stable it has been since the end of World War II. But as a professor of business strategy, it appears to me that the men and women running many of the world's large and medium-sized businesses are either unaware of these threats or simply choose to ignore them.

Consider our supply chains. We have developed incredibly complex supply chains that span the Earth, involve dozens of countries and assume that free passage of the seas is a given. We have positioned many back and front office functions in faraway places connected to us only by telecommunications networks that could be interrupted by conflict. We have even housed many of our companies' most precious technological capabilities in distant corners of the world where, in times of war, governments could expropriate them, our intellectual capital, and even our engineers.

What strikes me is that the worlds of geopolitical analysis and business rarely interact with each other. Before we can search for a solution to this problem, however, we have to understand why it arose in the first place.

The Death of the Country Manager

The first factor to drive a wedge between the two was a decision by many international corporations to adopt a matrix structure in their global business operations. Though there are many advantages to this type of organization, it also has a serious setback: the elimination of the country manager.

Not long ago, most international companies had people in place to oversee operations at the national level. These country managers, who in turn reported to geographic chiefs at the regional and global levels, were typically only two or three ranks removed from the CEO. They were widely respected in their firms for their local knowledge, and they would often meet the CEO personally on in-country visits and in regular meetings at company headquarters. Much like ambassadors, country managers played a two-way role, representing their firm in the country while also explaining the nation's environment to their organization's personnel. And in many cases, executives from the country itself filled the country manager role, further cementing the flow of information in both directions. If a firm was particularly large or important, country managers even became part of the nation's business elite and were invited to events that gave them access to other business leaders, government ministers and representatives of civil society.

But starting in the late 1980s, this classic structure of business was gradually replaced by the matrix structure, which typically comprises global business units, global corporate functions and giant geographical areas of responsibility. Senior executives, in turn, became responsible for expansive international business groups, managers overseeing multiple parts of the world, and still others operating global corporate functions such as finance, human resources, information systems and supply chains. Some companies even have the added dimensions of global customers, practice areas and technologies to take into account.

Under this new model, a local manufacturing plant, for example, now has a general manager who might report to the global operations or supply chain teams. National sales teams, meanwhile, report to the regional sales directors of their companies' different business units. When firms need someone to serve as their legal representative in a specific country, they task one of these people with that role in addition to his or her primary duties.

The problem with this approach is that these people normally don't have the same level of seniority that country managers once did, whether in the nations themselves or inside their own firms. This has considerably weakened the ability of large corporations to foresee and deal with major disruptions to day-to-day operations on the ground. For instance, general managers may lack the political access needed to stay aware of critical issues. Even more concerning, they may not have the clout within their company to alert the CEO and board members of the risks on the horizon that they do manage to get wind of. To make matters more complicated, the people who are of a high enough rank to call attention to such threats are now responsible for overseeing enormous geographic areas, such as the EMEA region — Europe, the Middle East and Africa combined. Expecting one person to be up to speed on so many countries, scattered across several time zones, is simply unrealistic.

One consequence of this matrix model is clear: The warnings that reach regional executives have grown weaker, so much so that they can easily be drowned out by more pressing concerns elsewhere. In order for local plant managers or national sales directors to break through the noise, they have to shout as loudly as they can — and risk gaining a reputation as the proverbial boy who cried wolf if they misread the signs in front of them.

A Shortsighted View

The corporate emphasis on thinking about the short term hasn't helped, either. Sure, by necessity many companies need to produce quarterly reports and consider the time value of money. Most managers also serve short tenures, at least compared with the lifespans of their companies. But from a geopolitical standpoint, taking such a narrow view of the future makes it extremely difficult to think about the long-term trends that can eventually lead to important changes in the global business landscape.

Many despots, for example, begin as patriots hoping to lead their countries to a better future. Only after 10, 20 or even 30 years in power do some succumb to their own cults of personality, or allow their family members to enrich themselves at the nation's expense. Fascist and xenophobic political movements likewise take time to move from the fringe to the mainstream, and it often takes a savvy observer to distinguish between an extremist fanatic and a visionary leader with the potential to alter national politics a decade or two down the line. The ability to notice these trends in the making requires a long-term perspective, which, with a few exceptions, is sorely lacking in today's business environment.

Not Trained for This

Part of the problem is that many business leaders simply aren't trained to read the geopolitical landscape. The vast majority of MBA students have undergraduate backgrounds in engineering, science, finance or business — only a handful come from political science or history programs. In the former fields, the deep contemplation of unfortunate or catastrophic scenarios is often discouraged. Trained to look at events through modern decision analysis and financial modeling techniques, many managers tend to discount the negative value of an unlikely crisis outcome far in the future.

These leaders, who are comfortable with hard numbers and facts, rise through the ranks of their organizations because of their analytical abilities and leadership skills. Though they may be well informed about the events taking place in their countries, many find complex historical and cultural analysis to be tedious at best. Instead they prefer more pragmatic and action-oriented strategies, rather than a reflective and diplomatic approach, which routinely leaves them without the deep understanding required to interpret political developments within and across societies. In fact, the only executive on a typical management team who is trained in politics to some degree tends to be in corporate affairs, a department that can have global responsibilities in today's matrix business structure. And more often than not, these executives are paid to make the case for the company's presence in a particular country or region — not to bring bad news back home.

Fortune Favors the Bold

To be fair, the success-driven business culture of the West hasn't exactly encouraged executives to learn the nuances of geopolitical forecasting. In most companies, people are rewarded and promoted for making things happen, not for expressing doubt and advising caution in the face of slow-burning threats. The way this plays out in moments of crisis is that, should companies find themselves on the wrong side of history, business leaders' reputations and positions normally don't suffer. For example, if a company spends years investing in a country and maintains close ties with its dictatorial government, only to then lose everything in a revolution, the managers involved in that decision-making process are rarely held accountable for what is viewed as a political problem instead of a business choice. By contrast, managers who argue against investing in a country when it is fashionable to do so or advocate pulling out of that country long before a crisis erupts often suffer immediate consequences.

In his extensive writing on World War I, Harvard history professor Niall Ferguson made the case that in July 1914, bond markets in London were still acting as if war was not imminent. His point was to show how tough it is for companies to plan on the unthinkable when "business as usual" is the safest professional bet one can make. But in today's ever-changing world, it's time for senior management to break the habit and better understand the geopolitical environment around it.

11 Insights into (strategic) crisis management

Dora Horjus

Executive director COT, instituut voor veiligheids- en crisismanagement

Marco Zannoni & Dora Horjus

"Bad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them” (Andy Grove, former CEO of Intel).

This quote touches the very core of crisis management. Crisis situations can determine the continued existence and the (new) future of organisations. We set out the 11 most important tips for good crisis management.

1. Build crisis capability Being prepared for crisis is a choice. It
is precisely those companies who have everything in order that
invest in crisis management. They know how resilient or well-prepared their organisation is in terms of leadership, decision-making under pressure
and situational awareness. Training and exercises focus on what is not available in the organisation and enhance what is.

2. Take the lead Leadership starts before a crisis. By encouraging a culture in which mistakes can be reported, malpractice is addressed and (near) misses are
actively monitored and learned from. In times of crisis, the crisis operation needs calm and determined leadership. Leadership creates trust and provides clear directions for people. This is what is important to us now and how we will get
ourselves out of this situation.

3. Start with a diagnosis Any approach to a crisis should start with a razor-sharp diagnosis. What’s (really) going on? What crisis are we managing and what is the seriousness of the situation? This means you have insight into the facts, the parties, the impact being experienced and the factors and people complicating or simplifying the situation. This has to be a shared picture of the situation so that you
don’t have one team member managing a technical incident while another sees it as a sector-wide crisis.

4. Deciding in times of uncertainty Critical decisions can escalate or de-escalate a situation. For example, the closure of branches, the resignation of top management and the payment of claims. Critical decisions are rare, always have major consequences and are usually a case of ‘choosing between two evils’. They can only be taken properly if you are aware of the (often controversial) options and the impact of your decision on all stakeholders. Don’t forget to pay attention to critical decisions that may be taken by others (authorities, investors, etc.).

5. Focus on impact What impact is the crisis having on those directly involved and for the organisation itself? These are the two key questions to be examined. How is the situation affecting your license to operate? How can you retain it? And how can you help those directly involved? Take measures to reduce or even avoid the impact in the short and long term.

6. Discover the special nature Each crisis has its own characteristics: a slow or speedy progress, the involvement of authorities and the high or low knowledge of the issues. It is important that you have an eye for the specific nature. This is not an easy search process. Start with what you have prepared or with what you have in-house like procedures, plans, knowledge & expertise within the organisation. As a crisis leader remember to look at what is really needed to manage the special nature of the particular situation.

7. See the situation as it is Organisations who have a common practice of monitoring and setting guidelines have an advantage in times of crisis. Monitoring should be active, arranged and disciplined. A media analysis is a good starting point. Enhance this with stakeholders’ reactions (customer care centres, supervisory bodies and signals from within the organisation). Take good account of the ‘game changers’ (for example proof of foul play) and the actions of influential stakeholders.

8. Work as a team Any crisis managed unilaterally by lawyers, technicians or for example communication professionals is doomed to go wrong. Success needs the integral approach of these disciplines. Set up a multi-disciplinary team under your leadership. This team will act based on the same situational picture, the same leading principles and the same priorities.

9. Work with a time line A crisis doesn’t disappear after two days, but is defined by a long, persistent period (the ‘recovery and aftermath’). A time line is an
essential tool in the early stage to identify critical moments such as the expiry of statutory terms, a weekend and possible decrease of victims. Later you will use the time line to anticipate moments when a situation might flare up. Consider the start of criminal proceedings, one year remembrance, the findings of an investigation, the political discussions. Many of these moments can be predicted, require capacity and focused preparations.

10. Act and tell Your organisation will only survive if you do the right things and communicate in that precise order. Behaviour and actions create a reputation and not the other way round. Your measures will be under a magnifying glass. This means you have to be aware of who communicates with who and when. You have to communicate in the proper order and with the right messenger. The golden rule is: pay particular attention to preparing your very first performances (for staff, press, politicians, investigation committee) down to the minutest details. Every word counts.

11. Gain and restore trust Each crisis marks the start of a loss of trust of customers, staff, supervisory bodies, investors, media and others. This reduces
your license to operate and limits your ability to do what your organisation wants. Therefore it is in everyone’s interest that you (re) gain trust with perseverance and a consistent (read: reliable) approach. Close each crisis with two questions: is everyone’s trust restored and what can we learn and in particular improve in our organisation?

In their day-to-day life the authors in this publication provide leadership within the COT | Institute for Safety Security and Crisis Management, based in The Netherlands. Both have in recent years frequently provided advice during crises in the private and the public sector.

Managing People on a Sinking Ship

by Amy Gallo

When your business is facing declining sales, a potential buy-out, or even certain closure, how do you manage people who are likely panicking about their future? Can you keep your team’s motivation and productivity up? The short answer is yes: Even when it’s clear that a company’s in trouble, there are ways to help team members stay focused, deliver results, and weather the storm.

What the Experts SayIn a crisis, you may think you need a whole new set of management approaches. But don’t throw out your Management 101 book quite yet. Kim Cameron, a professor at Michigan’s Stephen M. Ross School of Business and author of Positive Leadership: Strategies for Extraordinary Performance, has studied organizations that are downsizing or closing and he says that, instead of abandoning best common practices, the most skilled leaders reinforce them. “Good management is good management. Treating people well, helping them flourish, and unlocking potential are all good practices regardless of the environmental circumstances,” he says. Amy Edmondson, a professor at Harvard Business School and author of “Strategies for Learning from Failure,” says that of course it’s not easy to “keep people enthused, engaged, and working hard when they know the company may not be around.” But it’s not impossible either. Here are six principles to follow when your organization starts to feel like a sinking ship.

Look for opportunities to turn things aroundSometimes it’s clear that the end is near. Your manufacturing plant is slated to close. A larger company has bought your business unit. But in other situations, there may be a glimmer of hope. “There is often a short window of opportunity to do something differently,” Edmondson says. If there’s a chance of saving the company, focus your team on doing two things. First, seek input from customer-facing employees. Their front-line perspective could provide valuable insight into how your company needs to change. Second, do small experiments with alternative business models. Edmondson suggests you ask, “What kinds of products and services would customers welcome that we don’t offer?” The goal is to alter the organization’s course away from the one that got you into this mess.

Give your team a larger purposeTo keep people focused, give them something to work toward. “Identify a profound purpose that is more important than the individual benefit,” says Cameron. People want to believe their work matters in any situation. This can be tough when the company’s success is no longer the goal but you might select something that employees value personally — leaving a legacy or proving critics wrong. Cameron studied the manager leading a GM plant that was going to close in two years. To inspire employees who knew the end of their time with GM was near, he told them to do their very best so that senior leaders would be sorry when closing day came.

Provide reasonable incentivesFind ways to reward good work. After all, if the company is failing and employees are going to collect a paycheck anyway, why wouldn’t they spend their last three months on Facebook? “It’s the leader’s job to answer the question: What’s in it for me?” says Edmondson. Make clear what they will get if they do their best in this trying time. Will they learn a skill that will help them find their next job? Will the acquiring company be keeping some staff? How will the experience help them grow professionally? “If you can’t find a way to truthfully explain why they should help you get the job done, you’re out of luck,” says Edmondson.

Show people they matter as individualsDon’t just offer the same things to everyone, however. People want to still be seen as individuals. Tailor your message and the incentives to specific team members. Whenever possible, give them personal attention and care. When news of the crisis hits, meet with your employees one-on-one. Cameron suggests you say something like, “We want you to flourish and will do our best to take care of you even though we may not be here in the future.” Find out what matters most to them and do your best to meet those needs. There may be some people who can’t handle the uncertainty; in those cases, do what you can to help them find a position at another company.

Be honest and authentic — alwaysBoth Cameron and Edmondson are adamant that being transparent is crucial in these circumstances. “Whatever you know, share it with your employees,” says Cameron. Edmondson agrees: “Be as honest as you possibly can.” Don’t try to protect people from the truth or ignore what’s happening. “You can’t not talk about reality,” says Edmondson. And don’t say anything you don’t mean. In tough situations like these, people are on high alert for lies and inauthentic messages.

Don’t ignore emotionsPeople are going to be upset, afraid, and angry. Don’t pretend that these feelings don’t exist. Instead, make room for them. “You don’t want to dismiss emotions. It only drives them underground and makes them more deeply felt. It’s important to acknowledge feelings, especially negative ones,” says Edmondson. Tell people that you’re available to talk whenever they want. Encourage people to get together without you so that they can say things they might not want to express in front of a boss.  “The best practices I’ve seen are lots of huddles — people getting together and just having conversations about what’s going on,” says Cameron. Don’t play the role of psychologist though. If people need more specialized support to deal with what’s going on, refer them to outside help, such as trained outplacement counselors.

Principles to Remember

Do:

• Focus people on a meaningful goal
• Be 100% honest about what you know — share any information you can
• Encourage your team to get together without you to talk about what’s happening

Don’t:

• Expect that people will perform if you’re only giving them a paycheck — give them more meaningful incentives such as professional growth
• Treat people the same — remember they’re individuals with different needs and goals
• Pretend that something bad isn’t happening — be transparent and welcome expressions of emotion

Case study #1: Take care of your teamFor thirteen years, Michael Feeley worked as a recruiter at a staffing firm in New York City. He managed a small sales force and a temporary staffing division and he loved his job. “The company came first for me. I was a loyal and trusted employee,” he says. However, soon after the economic crisis in 2008, the company struggled to maintain its hiring fees and retain clients. Senior leaders decided to cut salaries in the hopes of keeping the operation afloat. They looked for a company that could possibly acquire them.

During this crisis, Michael took a transparent and supportive approach with his team. “Honesty was the only way to live and work through it,” he says. He told his team everything he knew and did his best to support them. He spent time listening to their fears and trying to give them confidence and comfort. “I wanted them to feel good about themselves and the work they had to do every day,” he says. To keep them motivated, he was clear that he was living through the same thing. “We were all in the same boat and the people I worked with wanted to know that I was right there with them — fears and all,” he says.

As a manager, Michael felt compelled to take care of his team. “I had a deep and sincere obligation to be useful and to know what they thought, felt, and wanted to do in this emergency,” he says. He focused on the facts that he thought would help them stay engaged: the company delivered a product that was well respected in the marketplace; the owner had always looked out for his employees; and the organization had survived difficult times in the past.

Despite all best efforts, however, the office did eventually close. Michael and his team members were lucky. “We were fortunate, even in a tough job market, to transition into work pretty quickly,” he says. And many, including Michael, were able to find jobs that better suited them. “That is one of the positive things that came out of the situation — people were clear about what they did and did not want to do,” he says.

Case study #2: Create an “us vs. the world” attitudeMarc Lawn was managing a global team of 100 people when sales at the company started declining. He says the business, which sold products to companies in the tech and media space, had lost touch with its customers and had ignored important changes in the way they made purchases. When it became clear that the company was in real trouble, Marc spent time with each person on his team explaining the situation and determining who might be incapable of handling the ambiguity. “Some people don’t cope well with uncertainty,” he says, so he helped those people — 12 total — find new roles outside the company.

For the people who stayed, Marc cultivated an “us vs. the world” attitude. He explained that this was an unprecedented challenge for the company and that they would not be able to succeed without all of them. “The objective of the group was to prove everyone wrong and show that we could save this thing,” he says. He focused his team’s attention on the near-term and encouraged them to accomplish specific tasks in small, manageable chunks. To ensure momentum, he celebrated successes and rewarded every job well done. When he spoke with members of his team, he conveyed a message: “Anything is possible, no matter how grim the situation, with the right skills, and with a team ready to fight for each other.”

The company was able to survive by getting rid of one part of the company and acquiring a new business unit. “Last year, the business had a record year, which shows that you can make it work with a ‘no regrets’ attitude,” he says.