February 18, 2015
Leaders know that there are moves that would be right for their companies but are difficult to make due to the difficulty of overcoming resistance to change. Inertia, political blockages, and entrenched interests in the status quo: these make change an expensive process – in time and energy as well as money. The pain of disruption may make a good idea not worth the cost of change.
A crisis alters this calculation. It lowers the cost of change while also making clearer the price of not changing. With the right leadership, people are brought together to face an external threat like the rise of the Swiss franc, and political differences are temporarily set aside. Inertia is lessened when people understand that the status quo will not stand. A good idea stands a better chance. That's what economist Paul Romer meant when he said that a crisis is a terrible thing to waste. A crisis is a deep short-term discount in the cost of change. It would be a pity not to take advantage of it.
But beware. If you misuse the crisis, if you abuse it, it will cost you dearly in the medium-term by damaging your reputation and your culture. Making the most of the crisis means taking medium-term decisions by reducing costs or increasing value-added while strengthening your company, no matter what the eventual currency level. Here is a test of whether you wasted the crisis: Will you roll back the changes if the franc weakens again? The answer should be no.
Implement those decisions in a way that is fair and that reflects the values of your company. Customers and employees will remember how you responded to the crisis. It is a leadership moment, a moment that proves whether the values of your company really matter or are just words, whether your brand and culture will be strengthened or weakened.
John Weeks is Professor of Organizational Behavior at IMD.