Perhaps there is no better time than right now to reflect on how to manage a crisis.
The U.S. has been grappling with the economic, health and cultural effects of COVID-19 for more than two years. During that time, business leaders have had to make countless decisions to ensure the safety of their employees and customers and the survival of their companies.
That means there are plenty of opportunities for these managers, including bank CEOs, to take stock of what they have done well and — perhaps more important — to consider what they should have done differently, so that these lessons can be applied to the next crisis.
And make no mistake — there will be a next time, the crisis manager Juliette Kayyem emphasizes in her new book, “The Devil Never Sleeps.” The details of the next disaster could be different — say, a massive cybersecurity hack instead of a global health emergency — but business leaders, government officials and others need to be on guard.
The title of Kayyem’s book was inspired by a quote from a survivor of the deadly tornadoes that swept through Joplin, Missouri, in 2011. “The devil never sleeps. But he only wins if we don’t do better next time,” said Jane Cage, a Joplin resident who had become determined to ensure the town was better prepared for the next natural disaster.
Kayyem fully embraces this sentiment and reiterates it throughout the book — to the point it is almost annoyingly repetitive: It’s not a matter of if, but when, the next crisis will occur.
“Disasters are the standard now. They are not the aberration, but the norm,” Kayyem writes.
“The Devil Never Sleeps” doesn’t directly touch on the banking industry and the preparations that financial services executives are required by regulators to take so they’re ready for an economic downturn or other crisis. But bank CEOs could learn from Kayyem’s experience. She is a senior lecturer in public policy at Harvard’s Kennedy School of Government and has spent more than 20 years helping to marshal government responses to crises. Utilizing this background, Kayyem takes readers through several pieces of practical advice that can be applied to managing pretty much any situation in any industry.
Kayyem’s engaging writing style — for instance, “everybody will have an opinion about how those handling the crisis suck,” she quips — makes the book an easy, enjoyable and quick read. She also does an excellent job of taking real-world examples of well-known crises to illustrate important concepts. At times this makes the reader reconsider opinions about how those in power handled those predicaments.
Perhaps the best example of this is her discussion of the fears surrounding Y2K and how that event illustrates the preparedness paradox. In the years leading up to 2000, many experts worried that when the clock struck midnight on Dec. 31, 1999, computers’ clocks would skip back to the year 1900, causing wide-scale upheaval. She notes that companies spent hundreds of billions of dollars preparing and yet when 2000 arrived, everything was fine.
Because of that, the dogged preparation for Y2K seemed comically overblown and many felt “that the threat had been grossly, negligently exaggerated,” Kayyem writes. (I will admit I was one of these people, and Kayyem’s analysis forced me to reframe my thinking.) Thus the preparedness paradox — preparations prevent a crisis, causing people to believe that said preparations were wholly unnecessary.
“Safeguards prevent disasters all the time, but we seldom think or hear about them at all because ‘everything is fine’ is not compelling news. Experts can wax eloquent about how various regulations were crucial to avoiding a catastrophe, but it is difficult to empathize much over something that didn’t happen,” she writes.
Bankers would be wise to learn an important lesson from that. Stress testing loan portfolios may seem frustratingly tedious or reviewing emergency preparedness plans for a natural disaster may feel like a waste of time, especially when the loans have historically performed well and the bank handled the last hurricane smoothly. But maybe everything is fine precisely because of these preparations.
Another piece of advice that should serve bankers well is carefully considering what Kayyem refers to as the “noise.” Don’t disregard what others — customers, employees, other stakeholders — are saying about a particular incident, she warns.
“ ‘Noise’ is often seen as bad, disruptive, and random. It is deemed unreliable, much like a bias that leads people to act on racial or gender stereotypes. But noise can also be helpful, exposing impacts that aren’t being captured by standard procedures,” she writes.
Kayyem walks readers through the example of the deadly Challenger space shuttle explosion in 1986. The disaster was caused by a destabilized O-ring that held the exterior of the engine that could not withstand freezing temperatures.
However, Allan McDonald, an engineer and employee of an outside contractor for NASA, had warned of the issue before the launch. He was so certain that Challenger shouldn’t take off that fateful day that he refused to sign a required pre-flight form.
But McDonald was ignored and disaster ensued. His story serves as a solid warning to business leaders not to ignore those regarded as being in the “cheap seats,” as Kayyem puts it.
“Institutions should look at the way they collect information and ensure it covers the range of impacted communities: employees, customers, students, citizens, contractors, and those who may not have the power and thus say nothing at all,” Kayyem writes. “They’ll know a lot. Not every crank is correct, but sometimes he or she can see the flashing red lights before anybody else.”
As the effects of COVID-19 seem to fade, banking CEOs and others may believe they can finally breathe a sigh of relief. But Kayyem argues that isn’t the case. This public health crisis may be receding, but another disaster likely looms — a cybersecurity attack, deadly tornado or economic downturn. And leaders need to be ready.
“For you to stop worrying, it assumes there was a time of unicorns and rainbows when days were carefree and weightless,” Kayyem writes. “I’m here to disabuse you of that notion. There is no finish line.”
