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The Value of Courage-Joe
Tye (telephone: 319-644-3889) In military history, some of the most stunning victories were achieved when the commander of an army, seemingly with its back to the wall, chose to attack rather than retreat: Miltiades at Marathon, Napoleon at Marengo, the Miracle of the Marne. Likewise, courageous business leaders have created incredible value for investors: Conrad Hilton refusing to put his struggling hotel company into bankruptcy during the Great Depression; Bill McGowan toughing it out in the early days of MCI even as the company’s copy machines were being repossessed; Roberto Goizueta responding to the New Coke fiasco with a renewed assault on the market. The defining moments in a business are often less a matter of brilliant marketing and strategy than they are of courageous decisions being made at the critical moment. In his classic study The Anatomy of Courage, Lord Moran wrote that courage “is a cold choice between two alternatives, the fixed resolve to not quit.” Unfortunately, the need to make that choice will often come unexpectedly and under chaotic conditions. Anyone anticipating a cold choice between two alternatives (and what else, after all, is business ultimately all about?) can and should prepare for it. How does one make sure that courageous decisions are made at the decisive moment? There are two essential steps: managing anxiety and channeling fear. Let’s take a look at each, using the reaction of U.S. airlines to events of September 11 as a real world example. Managing
Anxiety Our era has been called “the age of anxiety,” which has profound implications for the quality of business decision-making. Norman Dixon, in his study On the Psychology of Military Incompetence, found that a common denominator among inept military commanders was the inability to manage anxiety. In a crisis, high anxiety commanders are prone to either lash out in panic (the angry futility of Pickett’s Charge on the final day of Gettysburg) or succumb to paralysis (the failure of General Meade to pursue Lee’s army after the Union victory in that battle). In both cases, the psychological matrix of the commanding general determined the battlefield outcome before the first shot was fired. In the days after September 11, U.S. air carriers announced emergency layoffs totaling more than 100,000 employees. Though they might have seen little alternative, this action comes with a high price tag. Since the layoffs for the most part affected low-salary workers, they will have a marginal effect on overall cost while potentially causing serious morale problems. The rush to downsize could backfire if traffic rebounds faster than expected and airlines are inadequately staffed for the volume. Worse still, the economic and psychological impact has rippled throughout the economy, increasing the potential that airline executives’ worst case projections will become self-fulfilling prophecies. Only one carrier, Southwest Airlines, stated that it foresaw no need for layoffs. Did airline executives panic? Certainly there are times when the most appropriate, and courageous, action a CEO can take is to cut jobs to save the organization. But in this situation, three things are clear. First, even before September 11 there was high anxiety in many airline boardrooms due to deteriorating business performance. Second, the type of careful planning that should go into a major restructuring decision was obviously not conducted in the chaos following the attack. Third, if these companies truly do consider people to be their most valuable asset, in this instance they didn’t evidence much will to find creative alternatives to losing a chunk of that valuable asset. To an outsider, the rush to downsize had the feel of a panic attack simultaneously hitting every airline boardroom except the one at Southwest Airlines. It’s my hunch that Southwest’s executives had the courage to stand behind their employees during this crisis because their history of successful performance under pressure fosters an environment in which panic or paralysis will never replace careful consideration of any decision that could profoundly impact both their business and the lives of individual employees. This commitment has created a virtuous cycle in which effective anxiety management fosters good decisions, which in turn minimizes cause for anxiety. The cycle is reinforced as it ripples throughout the organization: Southwest employees routinely volunteer to help their company weather a crisis; in the present instance, employees on their own initiative inaugurated “A Pledge to LUV,” in which they can donate up to 32 hours of pay back to Southwest. Employee loyalty, in turn, is a key factor in attracting and retaining customers, which is one reason Southwest has not experienced load reductions in the magnitude of most other airlines. In his book The Loyalty Effect, Frederick Reichheld states that employee loyalty is key to productivity, customer retention, and profitability. Southwest Airlines earns that loyalty by not allowing executive anxiety over external conditions to create employee anxiety over working conditions. Channeling
Fear As philosopher Paul Tillich pointed out in his book The Courage to Be, anxiety is general while fear is specific. Because anxiety is so uncomfortable, the subconscious mind seeks to transform it into fear, since fear has an object (the something you are afraid of), and thus at least conceptually there is something you can do about it. In our airline example, the anxiety that existed before September 11 crystallized instantly into fear of economic catastrophe, which in turn prompted massive layoffs that in retrospect could well prove to have been a sub-optimal solution. One of Dr. Deming’s fourteen points for total quality management was “drive fear out of the workplace.” It’s a noble goal, but quite impossible. There will always be fear in the workplace. Effective leaders acknowledge this, and use it to their advantage by making sure it is pointed in the right direction. When employees fear losing their jobs, the effect is malignant and productivity-sapping; when employees fear losing a customer, the effect is healthy and creativity-generating. The
CEO must acknowledge legitimate fear, then channel it productively.
When United attacked Southwest with its own low-cost shuttle, Southwest’s
then-CEO Herb Kelleher sent a letter to every employee entitled
“Commencement of Hostilities” that concluded: “I
am betting on your minds, your hearts, your souls, and your spirits
to continue our success. Let’s win this one and make aviation
history – again!” (quoted in Nuts! By Kevin and Jackie
Freiberg). In subsequent days, Southwest employees could be seen
wearing battle fatigues to work as they went to war to save their
company. Kelleher knew it would be futile to “drive fear out
of the workplace” when Southwest jobs were being threatened
by the industry’s 800-pound gorilla, but he also knew that
fear could be transformed into the energy needed to win the fight.
Today, seven years after Kelleher’s “commencement of hostilities”
letter, Southwest is poised to grow into the vacuum created by cancellation
of United’s shuttle flights. United’s
CEO recently sent a letter to employees warning that their company,
which came through both the Great Depression and World War II with
flying colors, could “perish” next year. Can you imagine
generals Sherman or Patton having delivered such a message to the
troops? “Well, men, the government hasn’t given us all
the ammunition we asked for, and the enemy is tougher and more numerous
than we expected. We’re probably going to get whipped in this
battle, and most of you boys are going to get killed. But let’s
give it the old college try, shall we? Who knows, maybe the enemy
is more demoralized than we are. Maybe we’ll pull something
out of the hat the way Iacocca did.” No? Neither can I. Think about the leaders you most admire. Chances are you remember them less for their triumphs than for their courage and determination in the face of adversity: George Washington freezing with his men at Valley Forge; Florence Nightingale battling the elements and the aristocracy as she invented modern healthcare during the Crimean War; Winston Churchill standing alone against the storm of nazi terror during the darkest days of the blitz; Nelson Mandela sitting alone in a South African prison dreaming of a future that seemed hopelessly utopian to almost everyone but him. There are thousands more, people who refused to even contemplate the possibility of defeat, and whose courage was the catalyzing ingredient for victory. With an airline CEO predicting bankruptcy, is it any wonder Americans are reluctant to fly? What happened to the “failure is not an option” spirit that made this country great, and that was exemplified by the early pioneers of the aviation industry? Today we need Achilles in the corporate office promising victory, not Cassandra prophesying defeat. Isn’t that what they get paid the big bucks for? To do the difficult immediately and the impossible shortly thereafter? Today, more than government bail-out money, American businesses, including airlines, need courage in the executive suite. That’s what will create value for tomorrow. Caring is the Root of Courage The
market capitalization of Southwest Airlines exceeds that of virtually
all other domestic carriers put together. What does the stock market
see? It’s not just a profitable business model: others have
tried, with at best partial success, to imitate that. More than
anything, I believe, it represents the market’s tacit valuation
of Southwest’s culture of courage. The
terrorist attacks of September 11 raise important questions: Do
executives care enough to have the courage to stake their careers
on business strategies that resort to job cuts only as a very last
resort? Do workers care enough to have the courage to work more
enthusiastically, creatively, and productively, and perhaps to accept
less current pay to help save the jobs of their co-workers? Do investors
have the courage to stand behind their companies if they must sacrifice
short term profits to retain good people? And do we as Americans
care enough to have the courage not to allow fear to immobilize
us? How we answer those questions will substantially determine whether
we respond with caring and courage, or with panic and paralysis,
in the war against terror. If it’s the former, we win. If it’s
the latter, we lose. All of us.
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