I had the opportunity last week to participate in the Chicago chapter of the National Association of Corporate Directors (NACD) seminar titled “The Board’s Role in Preparing for and Navigating Through Crisis” for which I served as the keynote speaker and panel moderator.
In my keynote, I shared my experience dealing with a major crisis when I was at Baxter: Starting in the summer of 2001, a number of dialysis patients died unexpectedly in the US and six other countries. Though it wasn’t clear what exactly the cause was, there was a possibility that the deaths were linked to Baxter’s dialysis filters. As is typically the case with such situations, we didn’t have all the information, but it was literally a matter of life and death – we had to act quickly. We immediately issued a recall for the filters linked to the deaths, and as the CEO of Baxter, I took responsibility for the situation and owned up to it. In the midst of all the chaos and turmoil, we remained clearheaded because we focused on two simple mantras:
- We will do the RIGHT THING.
- We will do the best we can do in the time available.
And yes, as in most crises, it wasn’t totally clear at any given point in time what exactly the right thing to do was, but in an uncertain world, Baxter’s associates around the world rallied to do their best. We devoted a ton of resources globally to get to the root cause of the issue, and based on our learnings, we took decisive action in closing down two manufacturing plants. We ended up taking a $189 million hit, and I recommended to the board that they reduce my bonus. We certainly got our fair share of bad press for the incident, and our stock price dropped slightly. In the longer run, however, our patients and their families, our customers, our shareholders, the FDA and other regulators globally, and Baxter associates around the world witnessed Baxter living up to our values, and that won us a tremendous amount of credibility.
If you are interested in reading more about the incident, here’s an article by Keith Hammonds published in Fast Company in October 2002: “Harry Kraemer’s Moment of Truth”
Following my keynote, we jumped into the panel discussions. Greg Hedges, President and Chief Executive Officer of NACD Chicago, and his team put together two fantastic panels. The topic of the first panel was “Crisis Preparedness” with panelists Bobby Mehta (former CEO of TransUnion), Jenny Gore (Partner at FGS Global), and Harpreet Sidhu (Senior Managing Director at Accenture). In my comments regarding preparing for a crisis, I focused on the fact that it is never a question of IF there will be a crisis; only a question of WHEN it will occur. As a result, the key is to surround yourself with a group of strong values-based leaders and ask yourself what you will do WHEN a crisis occurs.
The panelists shared a number of great insights, including the fact that you have to treat crisis preparedness like going to the gym. You can’t just do it once and expect to stay fit the rest of your life. You have to maintain a regular cadence. Harpreet also emphasized the need for businesses to prep for a “minimum viable business.” If all your systems fail due to a cyber-attack, does management and the board know what is required to keep the lights on? Do you have in place the means and know-how to make do with the bare necessities while you sort things out? How will you communicate with your employees if normal communication channels have been hacked? Crucial points to consider when preparing for dealing with potential crises in our digital age.
The topic of the second panel was “Legal and Executive Management Considerations in a Crisis” with panelists Bobby Mehta (former CEO of TransUnion), Suzanne Sinclair (Managing Partner at Marie Norman), and Nilofer Umar (Partner at Sidley Austin LLP). To kick things off, I summarized my three-step process for dealing with a crisis (which includes team members, customers, the media, shareholders, regulators, etc.):
- Explain what you know to be factual and true (don’t make assumptions, guesses or an attempt to say what you think people want to hear)
- Explain what you currently don’t know and what you intend to do to get the facts
- Let people know how frequently you will provide updates on what you didn’t know in point number 2
As I often do, a key point I emphasized is to “minimize surprises.” If you’re the CEO of a company reporting to a board of directors, you DO NOT want a board member learning for the first time about a crisis impacting your company from the news media. You need to ensure that you’ve already informed them and that they have a very clear understanding of what you’re doing about it.
The panelists shared several great insights from their experiences dealing with corporate crisis situations. Nilofer expounded on the evolving fiduciary obligations of company boards and emphasized the necessity of actively engaged directors in the long-term success of companies.
Both panel discussions elicited a lot of interaction with and great questions from more than 100 attendees. NACD Chicago does a wonderful job in bringing together some of the best business minds of our city and the Midwest region together, and I’m grateful for the opportunity to continue to learn from outstanding sessions like these.
