Every crisis will pass. And when it does, your reputation will either soar or suffer based on how you handled it.
Consider how Warren Buffett managed his way out of a mess in 1989. At the time, the legendary investor served on the board of directors of Salomon Brothers, an investment bank. An employee engaged in illegal trading and Salomon’s head honchos covered it up.
After a federal investigation, Buffett reluctantly stepped in as interim chief executive. He set a new tone that focused on transparency.
In his first press conference as interim CEO, Buffett promised to stay until he answered all questions. It took three exhausting hours, but he honored his commitment. He also rejected advice from the firm’s lawyers by waiving attorney-client privilege and giving the government the company’s internal report conducted by outside counsel.
Perhaps out of a misplaced sense of loyalty, many managers stand by staffers who break laws or behave improperly. Buffett did the opposite. He disassociated himself with anyone at Salomon involved in the affair and began a congressional hearing by “apologizing for the acts that have brought us here.”
In choosing who would lead the firm over the long run, Buffett knew he needed the surviving seniorteam to accept his designated successor with open arms. That’s why he asked each of the 12 remaining executives for their No. 1 choice—and 10 of them named Deryck Maughan. Within 24 hours, Buffett told Maughan, “You’re the guy.”
Buffett’s actions offer a case study in how to respond to adversity. Rather than dither and try to defend what’s clearly indefensible, admit wrongdoing in your unit and make decisive moves to fix what’s broken.
Communicate openly and honesty with all constituents. Answer all questions forthrightly. To the extent that you’re culpable, say so.