Leadership in Crisis: Insights from Professor Das Narayandas

In a recent session of Egon Zehnder’s Directors Development Program, Professor Das Narayandas from Harvard Business School led an engaging discussion on leadership in times of crises. The session emphasized the importance of fostering a culture of reflection, establishing credibility, and managing expectations between the CEO and the boardroom. Professor Narayandas also equipped participants with the tools to support their CEOs in implementing transformative strategies while navigating the complexities of today's business environment. 

Professor Narayandas introduced “Ron Johnson: A Career in Retail,” a case study he co-authored at Harvard Business School which he wrote both to highlight how leaders fail and to explore the role of the board in managing their relationship with the CEO. He shared his experience of writing the case using publicly available information and later receiving feedback from Ron Johnson himself. This case is so unique because it not only highlights a success story, but brings a rare opportunity to see that failure is not final and can, in fact, be a stepping stone to success.

In the session, participants simulated a board meeting where the focus was a debate on whether to fire Ron Johnson, then CEO of JC Penney, or give him more time. The participants were divided on the issue, with some advocating for more time and others recommending immediate termination.

Throughout the session, several best practices for board members emerged, particularly in their relationship with CEOs and their role in guiding organizational change:

1. Establishing credibility: Professor Narayandas stressed the importance of credibility for leaders. "Performance gaps are easier to fix and provide quick wins that help build confidence," he explained. By addressing performance gaps first, boards can help leaders establish the credibility necessary to tackle more significant challenges.
2. Encouraging reflection: The discussion highlighted the need for boards to create a culture of reflection. Instinctive leaders, like Ron Johnson, may benefit from being challenged to think critically about their strategies. It is beneficial to encourage leaders to reflect on their decisions and not just rely on their instincts. This practice can help leaders align their strategies with organizational goals.
3. Managing expectations: The board's role in setting and managing expectations was a recurring theme. As one participant pointed out during the discussion, the board should ensure that leaders understand the time required for transformation. "It's essential to communicate that while we expect results, we also recognize that significant changes take time," he emphasized. This understanding can alleviate pressure on leaders and foster a more supportive environment.
4. Balancing risk and innovation: The session also touched on the importance of balancing risk and innovation. Professor Narayandas remarked, "In today's fast-paced world, leaders must navigate the tension between being innovative and managing risks." Boards should encourage leaders to take calculated risks while providing the necessary support and resources to explore new opportunities.
5. Fostering open communication: The importance of open communication between the board and the CEO was highlighted throughout the discussion. Participants agreed that boards should create an environment where leaders feel comfortable sharing their challenges and uncertainties. "The board should not just be a place for oversight but also a space for collaboration and support," one of the participants noted.
6. Understanding the market context: Professor Narayandas emphasized the need for boards to understand the external market context in which their organizations operate. "Leaders must be aware of industry trends and consumer expectations to make informed decisions," he stated. This awareness can help boards provide relevant insights and guidance to their CEOs.

A significant part of the session was dedicated to Professor Narayandas's Framework for Managing Change, which distinguishes between two primary sources of change: performance gaps and opportunity gaps. This framework is critical for boards to understand how to effectively guide their organizations through transformation.

1. Performance gaps: These occur when actual performance falls short of expectations. Addressing performance gaps is crucial for establishing credibility and gaining the trust of stakeholders. Professor Narayandas explained, "Performance gaps are easier to fix. They are quick, visible, and successful, which helps build confidence and credibility for the leader." By prioritizing performance improvements, leaders can demonstrate their capability and secure the support of their teams and boards.
2. Opportunity gaps: These arise when there are new opportunities that the organization is not currently capitalizing on. While pursuing opportunity gaps is essential for growth, it is often more complex and requires a solid foundation of credibility established through addressing performance gaps first. "Once a leader has established credibility, they can more effectively pursue opportunity gaps," Narayandas noted.
3. The balance between gaps: The key takeaway from this framework is that leaders should first focus on closing performance gaps before shifting their focus to opportunity gaps. This approach allows leaders to build the necessary credibility and support to undertake more significant transformational efforts. "As board members, it's our job to help management articulate this process and ensure they have the time and resources to succeed," Narayandas advised.

The session concluded with reflections from participants on the insights gained. Topics that resonated included the simplicity and significance of the performance and opportunity gap framework and the importance of understanding the dynamics between CEOs and boards, managing expectations, and providing the necessary support for leaders to succeed. Participants were encouraged to reflect on their roles as board members and apply the insights gained to their unique contexts.

In summary, the session with Professor Das Narayandas provided valuable insights into the complexities of leadership in crisis, the role of curiosity, and strategies for leading transformation efforts. The discussion on the Ron Johnson case study emphasized the importance of managing both internal and external stakeholders effectively, understanding the dynamics between CEOs and boards, and providing the necessary support for leaders to succeed.