Be the Leader Your Team Needs in a Crisis

It is hard to believe it has been 10 years since the Lehman Brothers Bankruptcy and the Global Financial Crisis. I led through multiple tail risk events ... 9/11, Fukushima, BP Oil Spill ... but this was the most challenging and the most sustained. It altered the global economy forever.

GE was in the middle of the storm. GE Capital was the company’s engine of growth in the 1980s and 90s. For many years, it had a strong business model. Our team of leaders there was very strong, some of the best inside GE. We had low financing costs, supported by GE’s industrial cash. That changed in the financial crisis. We were a “AAA” rated company with low funding costs. We used unsecured debt to allow us to grow. However, when the capital markets froze, we were just too big. I spent many sleepless nights confronting the challenge of preserving, saving and later disbanding a $500 billion financial services company. 

These were dark and terrifying days. And yet, looking back, I feel some of our best teamwork happened then, in the middle of the crisis. Why do I say this? Because every decision had huge consequences. And because we had to act decisively, even without a clear picture.

Here is what I learned about leading through the darkest days:

Hold the team together ... In the middle of a crisis, it really doesn’t matter whose fault it is. That will sort itself out over time. People want to follow their leader. If the leader is pointing fingers, then nobody is accountable. People stop their work to cover their ass. You need people to focus, to act. We had great leaders like Keith Sherin, Mike Neal and Jeff Bornstein ... and many others ... who trusted each other.

The GE team hung together. The industrial businesses knew financial services would be a headwind for years (as it had been a tailwind in the 90s). But they wanted to help, to take care of each other, to be part of the “whole.” No one wanted to escape. During the GFC, for instance, Oil & Gas was strong and helped protect our franchise.

Make timely decisions ... Solving problems is more about progress than perfection. And constipation is bad leadership. But action opens you up to criticism. Sometimes your best leadership takes place when you are getting criticized.

We needed to solve our own problems. I was deep in the details and owned the results. GE provided financial support for GE Capital. In 12 months, we raised nearly $40B of capital by cutting the dividend, raising equity and selling 50% of NBCU. The GE Capital team executed with purpose. During this period, the entire financial system benefited from the government’s steady hand.

The most memorable event was a $15B equity raise completed on September 30, 2008, in the middle of the storm. This was planned and executed in four days. It was launched during a week of multiple bank bankruptcies, the failure of TARP and maximum market volatility and manipulation. We had only one moment in time to pull it off. People don’t realize this: the bankruptcy of Washington Mutual was tougher then Lehman Brothers, because bondholders were wiped out. Launching an equity raise was a huge risk, but it was the only way to be safe. You can’t lead without instincts. You also need a few friends. Berkshire Hathaway’s investment at that moment was crucial.

Compartmentalize ... Unlike others that were in the middle of the financial crisis, we had a huge industrial company to run. So, while we were protecting GE Capital, we were also making huge investments in technology and globalization. For instance, all of the aircraft engines – that now dominate the industry – were funded and developed during the financial crisis. We were beating our competitors despite the fact that they didn’t carry the burden of saving a FinCo.

More importantly, in a crisis, is to paint a picture of the future. During the financial crisis, we would talk about our industrial pivot. And, we never “blinked” on technology or supporting our customers. We continued to build Healthcare, Renewables, Oil & Gas for the future. We avoided making a chain reaction of mistakes and kept our team with us.

Survive criticism ... Critics are plentiful. We live in an era without nuance. So, I segmented my critics ... who do I really need to solve the problem and play for the long term. I always had my team and our customers on my side. I took the heat at my level, freeing the team to do its work. In the end, strong teams – like Commercial Real Estate – helped us exit the crisis at a profit. Know what you believe in and stay strong in its pursuit.

Commit to your narrative ... It is important to maintain an external profile. Your communications leader is critical. During a crisis, facts are scarce. You must counter bad news with good news. Speak with one voice. In my 35 years at GE, we never had to deal with internal leaks from the management or Board. Remember that truth = facts + context. Do your best in the situation you have been handed. Your team wants to see you fight, so get out there. Respect your critics, but don’t let them define you. Tell your story.

Learn ... It is important to learn from these tail-risk events. Preparing for the true “enterprise risk” is sometimes difficult. Our risk trigger at GE Capital had been: “can we keep a AAA bond rating?” It became “can you run the company if capital markets close for two years?” Later, as a Fed-regulated entity, GE Capital added more than 2,000 people to strengthen risk and management systems. And, we made the business much smaller.

Business, like life, is filled with tough moments that aren’t on anybody’s calendar. It helps to remember that even as we are beset by events that are beyond our control, we can still control two things: our own attitudes and the way we treat others. We can persevere. We can motivate the people we need to solve the problem.

You learn the most about yourself and the team during a crisis: who stands up, who runs, who gives, who takes, who leaks, who absorbs, who hesitates, who acts, who dwells on the past, who seeks the future. It is important to be a responsible leader; be the leader your team needs you to be in the moment.