Alternative solutions (approx. 600 words). This section should describe two possible approaches of both Ethical Frameworks and CSR justications to be considered by the CEO, and discuss the advantages and disadvantages of each. n't afford to panic.pdf Download i Info X Clos Page of 6 - ZOOM + EXPERIENCE HBR.ORG Case Study Eric J. McNulty writes on leadership, social rprise, and sustainability. He can be reached icmcnulty.com. In an unthinkable crisis, a bank's chief executive has to make a fast decision. by Eric J. McNulty The CEO The Experts Can't Afford to Panic ames J. Dunne III (jdunne@sandleroneill. com) is the senior man Partners. On September 11, 2001, the firm lost 68 of it 171 partners and employees in the World Trade Center attacks. G erald Smarten, CEO of Kaspa "Oh my God!" exclaimed Ben Lee, the Financial Services, was presid firm's general counsel. "There's a fire." ing over the regular Tuesday "Or worse," Smarten said quietly. Just a morning executive committee meeting month earlier he had attended a citywide in the glass-walled conference room that meeting convened by the mayor to discuss looked east over Massachusetts Bay. The emergency response plans. It had seemed management team was wrestling with so abstract then: Experts had talked about the complexities of acquiring Huadong, everything from hurricanes to pandemic Leonard J. Marcus is the a Shanghai-based investment firm. He flu to, yes, a subway bombing. No one ounding codirector of the glanced at his watch: 8:10 already, and seemed to really believe that Boston was Leadership Initiative they still had three more agenda items to a major terrorist target-snow emergency work through. routes and swine flu containment tactics is also a lecturer in health practice at Harvard's School "I just don't trust their valuation of all had been the order of the day-although of Public Health. He can be of their assets," said Sarah Hicks, Kaspa's the mayor had expressed concern about reached at limarcus@hsph. harvard.edu. CFO. "The securities are straightforward, a strike at the liquid natural gas storage but-" She stopped mid-sentence as the facilities on the waterfront. A Timothy building shook and a low rumble rose Mcveigh type in a speedboat could up from below. She and her colleagues incinerate downtown, he had warned looked at one another and then, almost Now, images Smarten had seen of bomb as one, rushed to the window. Smoke ings in Madrid and London flooded his ILLUSTRATION: JULIETTE BORD was billowing out of the subway entrance mind. He tried to push them out. "A fire or across from Boston's historic South an accident. I'm sure you're right, Ben." HBR's fictional cases present dilemmas that real Station. Traffic had stopped, and people Behind him, Sal Persano, the senior eaders face and offer solutions from experts. were pouring into the street. VP of marketing, was fumbling with the March 2010 Harvard Business Review 121n't afford to panic.pdf Download @ Info X Clos Page of 6 0 - ZOOM + EXPERIENCE remote control to the boardroom tele- Smarten had managed "I just got off the phone with my vision. He pushed buttons seemingly at contact at the police department. It's a random, managing only to initiate a video through market crashes. bomb. No indication of chemicals or conference with the firm's London office. He knew that panic was radioactive material at this point. Exten- Hicks, meanwhile, had stepped the ultimate enemy. sive casualties and fatalities. There's been back from the window and was tapping an explosion at North Station, too," he furiously on her laptop. "CNN is just said. "It's a coordinated attack. That's all reporting 'an incident' so far," she said. "chemical," "fatalities." But nothing was he can tell me." "No details yet." She continued to focus confirmed yet. "Do we evacuate?" Kaczmarek asked. on the screen, surfing from site to site Smarten noticed Dana Rossi, the chief She glanced at Hicks's computer screen, in search of concrete information. A investment officer, in the far corner of the which showed a reporter interviewing a cacophony of ringtones in the conference room with her BlackBerry held to one ear woman with tears streaming down her room competed with the sirens of and her finger in the other. He knew that dust-covered face. Simultaneous attacks emergency vehicles outside. Rossi would be on the phone to the trading on the city's two major rail hubs at rush The head of HR, Joan Kaczmarek, desk two floors below them. Markets were hour could mean hundreds of victims. moved close to Smarten at the window. faster than the media in spreading news- "They want us to sit tight," Schlesinger "It's rush hour," she said. "Our people especially bad news. If this was a simple eplied. "There's chaos enough out there." are probably down there. I'll initiate a subway accident, there wouldn't be a blip. Smarten remembered the mayor's final headcount in all departments. What else If futures headed sharply down, it would words at the emergency preparedness do you want to do?" indicate that this was part of something summit: "The city can't do everything," he Smarten turned without answering larger. Rossi returned Smarten's gaze and had said. "You all have an important role her, as Persano had managed to get a news shrugged her shoulders. to play." At the time it had sounded trite; station on the large plasma screen at the He looked back at Kaczmarek now, with people dying outside, the words far end of the room. The cameras showed "Where's Schlesinger? Get him up here held fresh meaning. them the details they'd missed from 20 now," he ordered. "Paul, tell your contact that we want to floors up: Many of the people coming As if on cue, Paul Schlesinger burst into know how we can help. In the meantime out of the subway were choking and the room, slightly out of breath. Everyone we'll get organized here. HR is working on bloodied. Certain words from the reporter stopped talking to hear what their security a census. Keep us informed." Smarten felt cut through the confusion: "attack," chief had to say. a sense of control returning. "He said they may want to use our lobby WHAT WOULD YOU DO? nd cafeteria," Schlesinger added. Some advice from our readers: "Whatever food we have is theirs for the taking," Smarten said. "We'll support the Failure to take immediate voluntary action will lead employees to think, first responders and the victims." "If it was me out there, my company would leave me to die on the street." "Actually, they're thinking about our Neil Reay, CMO, Impact Consulting space for a triage center and temporary morgue." Schlesinger stammered a bit. To miss a single trade in an environment as volatile as foreign currency "He'll be calling back in a few minutes." could have a significant impact on a client's portfolio and a great many Smarten took note of the ashen faces stockholders. Kaspa's responsibility to clients is not easily trumped by of the executives around him. He was a new responsibility to the community. sure he looked no better himself. He had Bo Carrington, senior consultant/practice leader, managed through market crashes. He The Hayes Group Internationa knew that disciplined traders carried the day; panic was the ultimate enemy. if Smarten regards all interest holders in his company (not only the He sought to demonstrate that now and shareholders) as equally important, he must consider the community motioned for the team to retake their seats to be of sufficient importance to offer the lobby and cafeteria. around the table. He looked across at Rossi Irina Bena, assistant professor, The Bucharest Academy expectantly. of Economic Studies "Wall Street pre-opening numbers are HBR's case studies appear at hbr.org prior to publication here. down sharply," she said with a sigh. "I think we need to move as much activity 122 Harvard Business Review March 2010n't afford to panic.pdf & Download @ Info X Clos Page of 6 0 - ZOOM + HBR.ORG to the New York and Chicago offices as Smarten turned to his general counsel. or to get a second opinion. We're going to we can-fast." Ben, issues?" have to say 'yes' or 'no' pretty quickly." Smarten nodded. That decision "I don't want to sound coldhearted," "If they ask and we say 'no," Ben?" was the easy one. They'd rehearsed it the attorney said with a glance to marten asked. numerous times during disaster drills. Kaczmarek. "But I am responsible for "We should be clear," the counsel An attack on Wall Street might close the protecting this firm. If they ask and we replied. "From a legal point of view." markets, but one in Boston wouldn't volunteer our space, we may be open "Ethically, it may be another story," Kaspa would have to stay open for to a lot of liability issues. We should be marten deliberated out loud. "How do business in order to fulfill its obligations covered by the Good Samaritan laws, you-how do we-feel if someone dies to clients. The Boston office traded but who knows what can happen with because we didn't want their blood on our mostly foreign currency, and although g people in and out of fancy Italian furniture?" other offices didn't have the same level of here? Even if someone chokes on food "How do you feel if our name and logo expertise, they'd have to get by. we provide, we could be on the hook. Our appear in every news report, YouTube But they had never rehearsed having facilities will suffer damage no matter video, and Wikipedia entry about this the first floor of the Kaspa Tower trans- what. If they commandeer our resources, bombing forever?" Persano countered. formed into a shelter for bleeding victims however, I believe the liability rests with "Investors may give us credit for being or the bodies of the dead. the city. I want to get an opinion from good guys who stepped up during a crisis, "What are you going to tell the police someone with more expertise." or they may pull back from placing their when they call?" asked Kaczmarek. "We Schlesinger piped up. "I understand money with a firm whose name is tightly have to help, don't we?" He heard a slight the city will ask, but it won't take. And we tied to a terrorist attack." He glanced note of panic in her voice. won't have time to ask for a liability waiver | around the room to gauge reaction, then FIND PROFIT AND GROWTH AFTER THE DOWNTURN In this updated and expand edition of Profit from the Core, authors www.hbr.org/books Chris Zook and James A focus on your company's core is more critical than ever ek to regain their competitive HARVARD advantage coming out of the downturn. BUSINESS Press Get your copy today. PROFIT ALSO BY CHRIS ZOOK FROM THE NEW CORE CORE IN TURBULENT TIMES CHRIS ZOOK CHRIS ZOOK WITH JAMES ALLEN US $29.95 BAIN & COMPANY, INC. AVAILABLE WHEREVER BOOKS ARE SOLDEXPERIENCE HBR.ORG The Experts Respond DISTINCTIVE DOCTORATES FOR PRACTICING PROFESSIONALS Acting ethically during a crisis does affect the bottom Doctor of Management PhD in Management continued. "No one will know if we line. In our case, it may have gesture in times of crisis outweigh the to move trading activity to the other offices. decline. And even if they find out, there saved the enterprise. short-term negatives. It galvanized my But he struggles when facing a novel threat are sound business reasons for saying James J. Dunne III, senior managing organization and generated goodwill that that requires him to think about Kaspa's Complete your doctorate degree in Management 'no!' Joan, you must be thinking about the principal at Sandler O'Neill + Partners helped us through some terribly dark connectivity with the city. In three years from an AACSB accredited business effect on the people who work here and days. Acting ethically during a crisis does That isn't unusual; many of the private- school while continuing to work full-time who might want to work here in the future. As the head of a firm affect the bottom line. In our case, it may sector participants in emergency prepared- No one is going to want to walk through a that sustained tragi have saved the whole enterprise. ness summits my colleagues and I lead Discover more about managing in a world of morgue every day." and personal loss on As a fixed-income trader early in my tend to focus on narrow, high-probability complexity, design thinking, and sustainability Kaczmarek looked up from her PDA. September 11, 2001, I can career, I was, and am, a "numbers guy." risks. A terrorist attack in this country is a 'Nor will they feel very good about a attest to the complexity of making Yet business is not solely about money. If low-probability risk-until it happens. Reach beyond a Master's degree to integrate research company that ignored its employees and decisions under extreme duress. The Kaspa's ability to trade was compromised Smarten needs to focus on the resil- and practice to make an intellectual contribution to the community in a crisis. We have 23 competing emotional and pragmatic by the decision to open its doors to the ience of his staff and, by extension, his organizations and society people missing this morning. If the police views shared by the various players in city, another firm might step in to help. firm and the city as a whole. Resilience has and EMS need our space, I say we give it to the case are valid; there's a lot on the line. Competitive dynamics change when three components: individual (personal them and do anything else we can to help," It's not possible to truly separate something tragic like this occurs. Shortly coping strategies); social (support from To learn more, visit us at: weatherhead.case.edu/dm he said forcefully. business concerns from community or after 9/11, some of our competitors family, friends, neighbors, and coworkers); "London's down 22%, with no bottom ethical ones. You just have to gather as shared revenue with us on transactions and institutional (support from the police in sight," Hicks interjected. "I hate to be in which we had zero involvement. Bank WEATHERHEAD many facts as possible, seek advice from and fire and emergency medical ser- SCHOOL OF MANAGEMENT callous, but Sal has a point. We've got to people whose judgment you trust, and of America donated office space that we vices). The essential core is the individual CASE WESTERN RESERVE think about our shareholders. We want make the best decision you can. In this used in the early months of piecing the component. to be humane, yes, but we also have to case, I would let the city use the lobby. company back together. In the face of a threat, especially a consider the long-term interests of the To be sure, there are drawbacks to After a crisis, executives need to novel one, we all go to the "emotional irm and our investors. There are plenty of that call. Being physically displaced from continue employing analytical and tac- basement": Our primitive "fight, flight, buildings around here they can use. This your headquarters comes at a cost- tical thinking. Being a results-oriented or freeze" survival response takes over. could tie up the lobby for days, and Go psychological and, most likely, financial. businessperson is more important at a Smarten gets quiet; Persano fumbles with Harvard the remote; Hicks burrows into her com- SUCCEED IN THE Review knows no one will ever use the cafeteria Mishandling a trade is no small matter, time like this than ever. But you need to OnPoint again. And if we miss just one trade for a and neither is damaged employee morale. be sure you're weighing all the factors in puter. These are all evidence of panic. major client..." At the same time, making a humane your deliberations, not just the numbers. Fortunately, Smarten begins to climb out NEW CLIMATE "Three of the 23 work for you, Sarah," decision can give morale a tremendous of the basement when he directs his team Make was Kaczmarek's terse retort. boost. At my firm, we united around Smarten needs to focus into action. He uses routine and planned Green Smarten stood at the window. The the cause of honoring those lost and on the resilience of his activities to start moving the group back smoke made it look like an eerily foggy supporting surviving families. toward more normal, and then more strate- Profitable morning. His heart told him to open the At least one partner attended each staff and, by extension, gic, thinking. TO ORDER, VISIT doors, but in his head, he knew that this funeral, and we made countless phone his firm and the city. To answer the city's request, Smarten HBR.ORG wasn't his house; it was the office of the calls and prayers and visits to families Leonard J. Marcus, codirector of the needs to answer this question first: Which firm that employed him and expected of our lost. We paid base salaries for National Preparedness Leadership Initiative course of action will help Kaspa's em How do you go green while creating a sound stewardship of its assets. the remainder of 2001 to surviving ployees and the citizens of Boston regain viable, strategic business model? Schlesinger's phone rang. He nodded families, and we paid total compensation I've been on the scene during equilibrium fastest? Which choice will help The Spring 2010 issue of Harvard Business Review his head at Smarten as he spoke and exceeding each individual's best year. We a number of incidents like the most people bounce back? OnPoint addresses that question head-on. It equips SPRING ISSUE looked at him expectantly. It was 8:19- offered medical benefits to families for a the one here, observing and If Smarten and Kaspa Financial Services you with insights about green-related metrics, ON NEWSSTANDS it had taken just nine minutes for the minimum of five years-unintentionally analyzing the behavior of embrace the city's request as a human and organizational change, and ways to innovate in a request to come. setting the standard among World Trade leaders, and I can fully identify with Gerald civic responsibility, I believe that they will business world that values sustainability. NOW Center tenants. We are Smarten's dilemma. There are valid reasons be rewarded. They'll earn greater loyalty Articles include: How should ortunate enough to for saying "yes" or "no" to the city's request and engagement from employees-after all, "Competitive Advantage on a Warming Planet," still offer the families and his senior staff is clearly divided. He 23 of them could be among those helped by by Jonathan Lash and Fred Wellington Gerald Smarten coverage today. We has only a few minutes to reflect before he the triage center. And investors will appre- "Why Sustainability Is Now the Key Driver of Harvard Business Review OnPoint tried to do the right must take action. ciate that resilient individuals will be able to Innovation," by Ram Nidumolu, C.K. Prahalad, available quarterly on newsstands and balance the needs at hbr.org) focuses on a single theme thing on principle. Smarten is familiar with appropriate cri- better carry out their fiduciary duties. and M.R. Rangaswami each issue. It includes expert-authored of Kaspa and the The powerful, often sis response in situations that are limited to HBR Reprint R1003L Plus, from HBR.org, "Five Ways to Use (Green) Data articles from HBR's rich archives, helpful to Make Money," by Andrew S. Winston. article summaries, company examples, community? lasting positive effects his firm or industry. He quickly agrees, for Reprint Case Only R1003X and suggestions for further reading. of making a humane example, to Dana Rossi's recommendation Reprint Commentary Only R1003Z and more... 124 Harvard Business Review March 2010