Responsible Leadership in Crisis Situations

Theoretical Grounding in Virtue Ethics

Mario Šilar & Alejo Sison

– SAMRISK Seminar –Norwegian School of Management

Oslo, April 12 & 13, 2010

Contents

1. Introduction2. 1st Part: Case Study – Hurricane Katrina3. 2nd Part: Theoretical Framework – Virtue Ethics4. Conclusions5. Questions

Introduction“Within a matter of days or weeks, a crisis can redefine radically the entire

reputation of a person or an organization”.

• Mainstream Crisis Management Paradigm vs. Virtue Ethics Crisis Management (cope with complexity, take into account the perspective of the acting person).

• Mainstream Paradigm:– Strong attention on the methods and techniques for crisis anticipation and

response.– Structural and technological oriented.– Top heavy structure.– Planning based on a static/control model.– Seeking understanding through uncertainty reduction.

Introduction

Types of Crises not all-inclusive (Devlin, 2007):

1. Nonphysical Damage Crises1.1 Product Issue: Credibility, Defective, Safety, Tampering.1.2. Negative public perception of the Organization.1.3. Market Shift1.4. Financial Cash Problem1.5. Industrial Relations1.6. Adverse International Event1.7. Workplace Violence

2. Physical Damage Disaster2.1. Acts of Nature (e. g., Earthquake, Tornado, Flood, Hurricane)2.2. Accidents (e. g., a fire, leak, lengthy power outage)2.3. Intentional acts (e. g., a bomb, arson, serial killer)

First PartHurricane KatrinaLouisiana and Mississippi, August 29, 2005Aftermath:• City: 80% under water City: 80% under water • >1000 people died or had to be rescued>1000 people died or had to be rescued• Major roads: destroyedMajor roads: destroyed• Difficult to get in/out (people, supplies)Difficult to get in/out (people, supplies)• Superdome (bad conditions)Superdome (bad conditions)

First Part

Main Problems:Main Problems:• Construction of the cityConstruction of the city• Evacuation plansEvacuation plans• Confusion – ChaosConfusion – Chaos• FEMA (Federal Emergency Management Agency) failuresFEMA (Federal Emergency Management Agency) failures• Rebuilding the city Rebuilding the city

• “… “… if the (American) government would have responded like Wal-Mart has if the (American) government would have responded like Wal-Mart has responded, we wouldn’t be in this crisis” (Sheriff Harry Lee of Jefferson responded, we wouldn’t be in this crisis” (Sheriff Harry Lee of Jefferson Parish, New Orleans).Parish, New Orleans).

• ““The only lifeline in Kenner was the Wal-Mart stores. We didn’t have looting The only lifeline in Kenner was the Wal-Mart stores. We didn’t have looting on a mass scale because WM showed up with food and water so our people on a mass scale because WM showed up with food and water so our people could survive” (Phillip Capitano, mayor of the New Orleans suburb of could survive” (Phillip Capitano, mayor of the New Orleans suburb of Keener).Keener).

First Part

Wal-Mart Response. Some numbers:Wal-Mart Response. Some numbers:• Provided Free Resources immediatelyProvided Free Resources immediately• Reopened stores: 126 closed (within 10 days all (-15)) Reopened stores: 126 closed (within 10 days all (-15)) • Speed and effectively (before FEMA)Speed and effectively (before FEMA)• Sent truckloads of merchandise Sent truckloads of merchandise • Prevented chaos Prevented chaos • Saved livesSaved lives

• In the 3 weeks following the storm’s landfall, Wal-Mart shipped almost 2500 In the 3 weeks following the storm’s landfall, Wal-Mart shipped almost 2500 truckloads of merchandise to the affected areas and had drivers and trucks in place truckloads of merchandise to the affected areas and had drivers and trucks in place to ship relief supplies to community members and organizations wishing to help.to ship relief supplies to community members and organizations wishing to help.

• Home Depot provided more than 800 hundred truckloads and used buses to Home Depot provided more than 800 hundred truckloads and used buses to transport more 1000 employees to the region from other areas.transport more 1000 employees to the region from other areas.

• Wal-Mart Wal-Mart got this assistance almost immediately after the storm had passed got this assistance almost immediately after the storm had passed rather than in the daysrather than in the days or weeks that took government agencies to provide relief to or weeks that took government agencies to provide relief to residents.residents.

Wal-Mart Leadership: Emergency Strategy Wal-Mart Leadership: Emergency Strategy (Horwitz)(Horwitz)CommandCommand Center:Center:

ExpandablExpandable Structuree Structure

Responses: Responses: Agile, Agile,

Flexible Flexible (Protocol)(Protocol)

Hurricane Tracking SoftwareHurricane Tracking Software

InfrastructureInfrastructure On-the-spot On-the-spot infoinfo. .

Contracts w/ private forecasters (updated info.)Contracts w/ private forecasters (updated info.)

Calculate Calculate damagedamage

Warehouses-Warehouses-SendSend

5 days before 5 days before trucks,

satellites cell. supplies

Stores Stores affectedaffected

Relief Relief supplies, supplies,

truckstrucks

Quickly Quickly good sense good sense

of the of the disaster’s disaster’s dimensiondimension

First Part

CharacteristicsCharacteristics Wal-MartWal-Mart FEMAFEMA

Doing job right/wrongDoing job right/wrong YesYes NoNo

Measure: Profit/LossesMeasure: Profit/Losses YesYes NoNo

ProcedureProcedure Practical Reason + Practical Reason + TechniquesTechniques Main Task: Coordinate / PlanningMain Task: Coordinate / Planning

OutcomeOutcome Market signalsMarket signals How much “coordination”= final How much “coordination”= final OutcomeOutcome

Authority in each agentAuthority in each agent YesYes No No

FeedbackFeedback ImmediateImmediate Not ClearNot Clear

Future ResponseFuture Response Learn from mistakesLearn from mistakes No: Always differentNo: Always different

ResponsibilityResponsibility CompanyCompany Blame othersBlame others

Importance of Flexible, Contextual and Tacit knowledge for Leadership in Crisis Management

First Part

Four common dangers in Crisis Management:1.Bureaucracy (misallocation of relief labor and supplies, diverting critical resources to superfluous uses or causing them to sit idle and unused, etc.).2.Wrong Coordination (no response on time).3. Adverse incentives.4. Absence of competent leadership.

First Part

• The incentives individuals face depend strongly on the institutional context in which they operate (Sobel – Leeson, 2006). The incentives faced by individuals in the ground level are different from those faced by individuals in top level decision making.

• Two types of policy mistakes (Buchanan & Tullock):– Type-one errors (errors of commission): are mistakes that result from not

being cautious enough (e.g. if the FDA approves a new drug without sufficient testing and the drug make millions of people seriously ill, the FDA had committed a type-one policy error). High impact and visibility.

– Type-two errors (errors of omission): are mistakes that result from being too cautious (e.g. if the FDA has an overly burdensome testing requirement for new drugs, potentially helpful drugs are prevented from reaching, or at least delayed in reaching, patients who could have greatly benefited from them). Public agencies are overly prone to commit type-two errors because are less visible. Low impact and visibility.

First Part

Contextual KnowledgeContextual KnowledgeDaily operations and actionsDaily operations and actionsLocal Knowledge (Place and Local Knowledge (Place and Time))Know where help is neededKnow where help is neededSupplies/human capital near

Tacit Knowledge Tacit Knowledge Cannot be expressed using words or numbersCannot be expressed using words or numbersKnow how to Improvise (Experience)Know how to Improvise (Experience)Know Know what needs to be done (Skills)Communication is based on choices made in the marketplaceCommunication is based on choices made in the marketplace

e.g. How to keep our balance on a bicycle

Second Part1. Crisis management: “making the best of a bad

situation”.2. Three approaches: Rules, Results and Virtue.3. “Rules” and “results” collapse into one because

“rules” are based on probable “results”.4. “Rules”/“results”: obtain desired outcomes

regardless of means; retrospective justification.5. But: procedural utility/intrinsic value vs. outcome

utility/extrinsic value (see Simon, Sen).

Second Part

6. Virtue does not exclude rules (though general and vague) nor results (though beyond control).

It depends on agent’s character and decision-making (simultaneous justification); attention to means.

7. Virtuous character: Sensitivity to morally relevant features

(perception).Capacity to be moved by morally relevant motives.Prudence: choose proper means to right end.

Second Part

• 8. Virtuous decision-making:“Habit of right action + right reasons + right feelings”.

Conclusion

• Successful crisis management is not guaranteed by scientific planning and prescriptive decision making (Gilpin – Murphy, 2008).

• Overly rigid crisis planning procedures can raise falseexpectations among managers that handle crises.

Conclusion

• Virtue Ethics Crisis Management (VECM) emphasizes a leadership able to cope with the unexpected and uncertain, through practical reason, integrity of character and advance planning.

• VECM takes into account the local and contextual knowledge.

Conclusion

• VECM Leadership allows individuals with local knowledge and the ability to act, make decisions and try their best.

Questions

Thank you!

???

http://www.unav.es/filosofia/ajsison/

http://www.unav.es/filosofia/msilar/

ReferencesRisk Management - Gilpin, Dawn R. – Murphy, Priscilla J., Crisis Management in a Complex World, Oxford, OUP, 2008.- Olsson, Stefan (ed.), Crisis Management in the European Union, London – NY, Springer, 2009.- Devlin, Edward S., Crisis Management Planning and Execution, NY, Auerbach, 2007. Katrina case study- Comfort, Louise K., “Fragility in Disaster Response: Hurrican Katrina” (29 August, 2005), The Forum 3, nº 3.- Horwitz, Steven, “Making Hurrican Response More Effective: Lessons from the Private Sector and the Coast Guard during Katrina” (2008), Policy Comment, nº 17, Mercatus Center, George Mason University.- Sobel, Russell S. – Leeson, Peter T., “Flirting with Disaster. The Inherent Porblems with FEMA”, Policy Analysis, (2006), nº 573.Leadership and Virtue Ethics- Athanassoulis, Nafsika – Allison, Ross (2010), “A virtue ethical account of making decisions about risk”, Journal of Risk Research, 13:2, pp. 217-230.- Sison, Alejo, The Moral Capital of Leaders. Why Virtue Matters, Northampton, Edward Elgar, 2003.