Quite unusual for a ‘profit-minded’ western conglomerate, don’t you think?

Of course, the investigation did not go deep to address the social issue. Also, corrective measures were temporary and limited to that one plant. Yet, the initiative from Apple was necessary, laudable even. Here’s why: for the sake of their conscience. No matter how many iPhones Apple might have sold in the future, glaring lacunae in ethical standards would not only tarnish the brand, but also render the company’s integrity as questionable. And that was a risk Steve Jobs was not willing to take.

I am a staunch believer in good character and clear conscience – whether in professional or personal life. There are innumerable examples where a flaw in either part has severely affected the other. A burdened conscience weighs down on every move and every decision. As for a collective guilt, in Lord Byron’s words, “no ear can hear, no tongue can tell, the tortures of the inward hell”. The business world is no exception. Corporate governance that does not value a clear collective conscience is futile, because it not only leads to silencing the ethical voices at the bottom, but creates undue complacency at the top.

Yet, many in the business world tend to undermine the power of collective conscience and values, while designing corporate governance policies. While the mechanisms for control review to identify and resolve problems in the products is well-set, it is the reporting of these problems at the right time to the right person that needs strong ethics and conscience.

Take the example of Toyota, the biggest car-maker in the world. A year ago, it was inconceivable that Toyota, known for its reliable and technologically sound products, would face a severe credibility crisis today and be forced to withdraw 8.5 million vehicles globally. Remember, these vehicles were not made in a single day. For the flaws to exist and persist on such a large scale, thousands of Toyota workers are guilty of oversight, but their managers are even more guilty of ignoring their conscience for the fear of losing their jobs. As a result, the company has lost revenue, tarnished the brand name and severely compromised its future in the automobile industry.

One of the biggest lessons the subprime crisis and ensuing recession has taught us: listen to your inner voice, no matter how inconvenient or weak it sounds. If only Richard Fuld, the CEO of Lehman Brothers would have heeded his conscience lying beneath arrogant market assumptions and stopped the reckless traders from selling subprime securities. If only Chuck Prince of Citibank had listened to his inner voice instead of falling for profit potential and reduced Citi’s exposure to collateral debt obligations and mortgage-backed securities. If only Americans would have let their sense of right prevail and avoided overwhelming loan amounts for a year of enticing interest-and-refinance bait.

There are many more ‘if only’ thoughts, that don’t matter now but would have made a world of difference, if acted upon at the right time. Most importantly, they would have let all the people involved have a good night’s sleep. You know what they say – sleep is worth more than a million bucks and a clear conscience is the softest pillow there is.

This being the case, crisis management is probably the biggest learning one has to undergo. How you handle a crisis is often the key to your survival and growth.

One of my favourite quotes on crisis and leadership is by John F Kennedy, where he said,”The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger-but recognize the opportunity.”

I have a few experiences of my own to share about handling a crisis. There are a few things I have constantly implemented in any crisis situation – different situations, same result – all the more reason why I feel compelled to share the same with you.

One of my closest and severest brushes with crisis was in the year 2000, immediately after the dotcom bust. I used to head institutional sales at a leading Asset Management company. We had just taken over another mutual fund company and had suddenly become the custodian of over 2,00,000 folios – almost double of what we managed before the take over!

It might seem amazing to you now, but this load of 2 lakh investors brought the entire machinery of our registrar and our customer service team to its knees. Why? Because almost all unit holders of the acquired company traded in unit certificates, unlike the account statements we use today. So, what did we have? A collective family of around 4,00,000 unit holders with incorrect data on their account statements, equity markets which had tanked and customer service teams which were completely alien to these pressures! The result was massive redemptions.

If this was not enough, there was serious bad press as well as competition, which started nipping at the heels taking complete advantage of the crisis. I remember a townhall meeting in the canteen at that time which was called after a spate of mass resignations – the mood was tense, morale was low and there was a sense of foreboding.It was almost as if we had all written the company off – I still get goose bumps when I think of that day…

There was however, a bunch of intrepid people, who decided that the best way out of this crisis was to fight it. Fortunately, I happened to belong to that group, which went on to form a crack team to fight this crisis.

Our first step was to “ASSESS” the situation objectively. We realized that the problem was serious at the retail level and if we kept pushing sales of equity funds, we would aggravate the situation further. We decided to focus more on institutional sales and sell fixed income – higher output in terms of results; more manageability in terms of customer service. Clear thinking gives clear solutions.

We moved into the second stage, which was to “FOCUS” – in this case on maintaining the AUM. We made groups of people in major cities whose main role was to cut themselves off from the day to day functioning and focus on the focus.

The third stage was to “COMMUNICATE”. This was the most difficult, yet the most important task. We communicated our expectation from each person clearly. And we communicated honestly with the external audience. We formed combined teams of sales and customer service and an honest response to customer queries as a key way to communicate the real situation was decided upon. Upholding the brand image was a huge responsibility – the sanctity of the brand could not be jeopardized through over commitment, particularly in a crisis like this. These teams were sent to the frontline desks and for the next few weeks, every sales and customer service person was fighting this battle, side by side.

Circa 2001 – 2003. The fund house went through possibly its worst phase, but started bouncing back strongly. A battle scarred management team came up with innovations and initiatives and with some very dynamic people leading the company, started clawing back market share. People who stayed back then have been the most sought after managers across the industry since.

As a leader, you have to have the ability to think objectively through a crisis when every other person is into hyper drive. In fact a crisis is a best opportunity to demonstrate your leadership skills, because the leader in such a situation can not only be a manager, but anyone who clarifies the steps to overcome the crisis. To do so, one must gather information, build a strategy and communicate clearly with others. Apart from the above, the following points could be distilled and reflected upon:

First, one must identify the problem. This is more important than it sounds; the means by which you define the problem will also determine the kinds of solutions that will be need to be worked upon.

Second, one must take steps to minimize and contain the damage. This usually requires a concentrated focus on internal customers and an effective use of Public Relations to reassure stakeholders, as well as other corrective strategies. Honest communication and transparency are critical for restoring the confidence of your internal and external stakeholders in you.

Third, one must set out a clear path to overcome the crisis and delegate responsibilities accordingly. One must ensure that all critical resources are being utilized to address the key issues.

The leader of the team or the company must show deep commitment, as well as give guidelines for overcoming the crisis. He should have strong, clear and crisp communication. A high level of transparency is required so that he is accessible even to the man at the lowest level in the company. This gives the entire company faith in its leader and avoids problems that can arise due to low morale, internal politics or similar issues.

One key thing I have learnt is being up to speed in terms of information, almost bordering on paranoia. The senior management should always be prepared with all the current information in order to weather a crisis successfully. To give a personal example, I have a daily conference call with my sales and customer service team members; I am always up-to-date on everything, from what is happening in the market to interesting competition moves.

I have been part of a few crises situations after that – whether it is part of turning around a company or as part of a start up – I have realized that what can bring you to the tipping point either way is how your managers and leaders handle the crisis while it is unfolding. These tumultuous times give us situations when leadership is the call of the day, and form the crucible where real leaders are born.

As a corollary, real leaders are born only when they face the reality checks of handling a crisis.

Disclaimer: All views expressed in this blog are my personal and in no way express or implied, of that of the company I work with, or have worked with in the past.