Strategy guru Rita McGrath on why crisis management will become an increasingly important aptitude

If you were picking a management thinker to keep handy in a crisis, Rita McGrath would probably head the list. Associate professor of management at Columbia Business School and author of books including the recent The End of Competitive Advantage, there are few academics better versed in navigating business volatility.

McGrath’s studies have taken her into the boardrooms of some of the world’s largest companies, as she discovers how they use “transient advantage” to ride out macroeconomic and more localised vicissitudes. In November, she will bring her wisdom to the UK as keynote speaker at the CIPD Annual Conference and Exhibition in Manchester. People Management asked her for a sneak preview. 

If you’re facing a corporate crisis, how do you ride it out without too much damage?

The first step is to be open to what this change can represent. A lot of leaders just end up in denial about the fact anything’s changing. By the time it’s inevitable and obvious to everybody, you’ve lost so much time. An example of that would be BlackBerry; it took them years to realise that the iPhone was not just going to be a consumer device. They didn’t listen to the warnings.

Good leaders in these situations have a couple of qualities that set them apart. One is that they’re looking for early warnings. They’re looking to get the data first, and when it comes in they’re good at finding the path forward and breaking transitional problems down into manageable chunks. They’re not afraid to reshuffle their organisations and reroute resources around the company. That’s one of the biggest barriers to being able to adapt, because people who run powerful businesses feel entitled to direct resources so that new opportunities get starved while the core business goes into defensive mode.

Will we just have to get used to the concept of volatility in business?

Yes. In more and more economies, volatility is here to stay, and there are both positive and negative implications. With crisis comes opportunity and there’s more scope for people to behave in an entrepreneurial way and discover new things. But people feel more insecure, so previously comfortable jobs are now seen as vulnerable, and there’s a real pressure on people to make sure their skills, contacts and networks are kept up to date. The people who thrive in this economy get disproportionate rewards, whereas the people who just want to do their thing, go home and watch Downton Abbey, are the ones feeling the pressure. 

Can companies who treat people well still thrive in that kind of environment?

It’s entirely possible. There’s some fascinating work by Zeynep Ton at MIT, who just wrote a book called The Good Jobs Strategy. She finds that companies who deliver good jobs and have people who are engaged consistently outperform companies who don’t. Her logic is that we have workforce management tools but essentially we treat people like interchangeable widgets – the culture created by those tools is to minimise the cost of those widgets as much as possible. 

What it overlooks is that people aren’t just widgets: they’re capable of lifting performance, and if you get employees who are engaged and can create better customer relationships, you can increase sales. It also decreases churn because economic modelling shows happy and engaged people tend to stick around more. The cost to companies of losing people and then having to replace them is just phenomenal. 

HR professionals are bombarded with a lot of management thinking. How do they know what to listen to?

It comes down to being a smart consumer of management ideas. Very often somebody develops an idea they think will be popular, then they go and look for examples to support that idea. The trouble is, you can’t attribute causality to those kinds of studies. You know the sort of thing: “we discovered that all the best performing companies have buildings, so clearly buildings must be the key to their success.” There’s so many awful ideas foisted on the public with that kind of work, where an outcome variable is taken and the data is then selected based on what the outcome variable is. 

What you want to look for is a change of some kind that affected one group of firms and didn’t affect another, so you can step back and ask: did that thing really make a difference?   

Rita McGrath will be speaking at this year’s CIPD Annual Conference. For more details: bit.ly/CIPD2014