How CEOs can lead in a crisis

Executives who self-sacrifice during uncertain times can improve morale and trust, and lead to better organisational outcome.

When leaders demonstrate self-sacrificial behaviour, it makes us see them as having higher moral values and as being a better role model — leading to better organisational outcomes

You may think that crises tend to bring out the worst in people, but that isn’t reflected in how we view our leaders, at least. In fact, crises cause us to view leaders as more charismatic and effective than we normally do. This is probably why US presidents are almost universally re-elected in times of war. And research has shown that leaders who self-sacrifice tend to be seen as the most effective.

Following 9/11, I was so intrigued by crisis leadership that I did a study on the topic. In my research I found that leader self-sacrifice, such as cutting one’s own salary or giving up one’s own benefits, caused employees to feel more positively toward their leaders and more committed to their organisations during crises. This finding has been corroborated by additional research that suggests that when leaders demonstrate self-sacrificial behaviour, it makes us see them as having higher moral values and as being a better role model — leading to better organisational outcomes.

More recently, we have seen chief executives step up to support their employees during this pandemic by pledging not to lay off employees — even those who cannot go into work. For example, even though all of Patagonia’s stores are closed, chief executive Rose Marcario announced that the company would continue to pay all employees, leading some to conclude that the values-driven organisation will survive the pandemic while other organisations will fail. Other chief executives who have committed to no lay-offs include those of Hearst, LinkedIn, Twitter and Square, Morgan Stanley, Citigroup Inc, Bank of America Corp, Visa, FedEx and Cisco Systems Inc.

So, what can leaders do in this time to support their employees and how can they be sure that their giving hits the mark? Effective measures fall into three categories: taking some of the same hits as your staff; giving with a larger purpose in mind; and being aggressively transparent even when it’s hard.

Take a hit

Self-sacrifice is not just about the company doing what’s right. If you ask your employees to sacrifice, you need to as well. If you expect your team to behave safely, you should behave safely. If you expect your team to get down in the trenches, you should be down there with them. No one likes the leader who throws his team on the frontline while he sits in his office.

Marriott International chief executive Arne Sorenson forfeited his salary for the year and is donating hotel rooms to frontline workers to help fight COVID-19. Marriott also asked its executives to sacrifice half their salaries and has furloughed many other employees. As a result, Marriott is still viewed — at least in the media — as an employer of choice despite its need to furlough employees.

Other companies whose top leaders have cut their salaries include NBCUniversal, Uber, Delta and Yelp. In my own field of academe, highly paid deans, coaches and administrators at top universities such as Harvard are taking pay cuts to help make up for the impending deficits that higher education is facing. Even world leaders, such as New Zealand Prime Minister Jacinda Ardern, are taking pay cuts. When you’re a leader, sacrificing along with your employees could mean that they will be more committed to staying with the company during and after the crisis.

Give with purpose

Many organisations are offering services such as free virtual tours or free learning tools for kids. Likewise, we have seen organisations step up to help provide res­ources needed to combat the effects of the pandemic. Tesla Inc, Toyota Motor Corp, Ford Motor Co and General Motors Co have shut down factories to make ventilators while Medtronic openly shared the software and specifications for its portable ventilators, allowing anyone to use them for free.

But whatever you give, it’s important to tie the sacrifice to vision, mission and the values of your organisation. When Salesforce co-chief executive Marc Benioff pledged not to lay off any employees for 90 days, he tied it to the company’s cultural value of family and giving, asking that employees continue to support people they relied on before the crisis, such as house cleaners. Leaders should be clear about how their actions are consistent with the organisation’s values. The more cynical among us might infer that Johnson & Johnson’s decision to invest $US1bn to develop a COVID-19 vaccine was driven by profit. But when chief executive Alex Gorsky tied the act to its responsibility to improve people’s health, and the company announced that it would provide the vaccine on a “not-for-profit basis”, the doubt likely turns to admiration.

Be aggressively transparent

Leaders should be transparent about what that sacrifice amounts to. If a leader publicly donates 10 per cent of their salary to a non-profit, they should explain what the non-profit is and how the money will be used. For example, Square and Twitter chief executive Jack Dorsey is donating $US1bn of his Square equity (28 per cent of his wealth) to fund COVID-19 relief. Not only is he giving away the money but he also shared a Google Doc showing how the funds would be spent.

Crises create the opportunity for leaders to provide direction, meaning and support when followers need it the most. Learning that Columbia Sportswear Co chief executive Tim Boyle reduced his salary to $US10,000 while continuing to pay the company’s employees or that Yum Brands Inc chief executive David Gibbs gave up his salary and gave $US1000 bonuses to the managers of his restaurants does more than lift the spirits of their employees. Research indicates that this type of sacrifice can improve morale and trust for the rest of us and ease the pain we are feeling in this time.

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Stefanie K. Johnson is an associate professor of management and entrepreneurship at University of Colorado’s Leeds School of Business. Copyright 2020 Harvard Business Review/Distributed by NY Times Syndicate