The University of Huddersfield’s new Chancellor, Sir George Buckley, former 3M Chairman and CEO and namesake of the 3M Buckley Innovation Centre (3M BIC), highlights how to be a great leader in a crisis and explains how he led one of the world’s most successful companies through the 2008/2009 global economic recession.
What the recent global pandemic has taught us again is that we should not take anything for granted in life or business. The magnitude of the impact it has had on families and businesses across the globe, from small independent companies to large blue-chip firms, is immense. Some companies that were once at the top of their game are now fighting for survival. Some others have climbed to prominence. It is always the case in crises.
Business leaders are being tested daily. The Covid-19 pandemic has brought far-reaching challenges as leaders strive to secure the future of their companies but also to safeguard the safety, health, jobs, and the livelihoods of their employees. And in current the pandemic case, the safety of their employees’ families too.
How a Fortune 100/Dow 30 company survived a major crisis
During the 2008/2009 global recession, I was faced with one of the most significant challenges of my career as Chairman and CEO of 3M. As credit availability froze and the world economy went into free fall, in late 2008 our sales figures were dropping by about 25% each month. I was under pressure from the Board and my colleagues to dramatically cut costs and correspondingly lose 25% of our workforce. As a company with 110,000 employees at the time, most with families, I made it my mission not to let that happen. I might not be able to prevent all the ills, but I was going to prevent as much as I could.
The challenge I had was to figure out was how long this recession would last and how deep it would go. This would inform me about the scale of the financial hurdles we likely faced. The challenge was made more difficult by the volatile supply chain dynamics that we saw, something that most executives understand in a general sense, but few understand mathematically. We were mostly a “make to stock” company, and it was clear that these supply chain transients were amplifying the already considerable economic effects in our end markets. Was the end market that bad I asked myself? I needed to appreciate just how much. To fully understand the problem, I needed to develop a set of mathematical and econometric models that would enable me to forecast the combined effect of the economy and these volatile supply chain dynamics. There was no clear guidance from the government or their economists about what to expect in these extraordinary circumstances. Some even thought a complete economic collapse was possible. Accurate modelling was essential because it would guide what I told investors in the public market and the decisions I would take vis-à-vis our employees and investments. So now I had some complex mathematical models to develop and some tough decisions to make. If I got them wrong, the results could be catastrophic for the company and all our employees.
Some onlookers inside the company said I was trying to forecast something that could not be forecast. I disagreed. The global econometric models indeed proved to be useless in forecasting such rapid changes. But my point was quite simple; we had to forecast where the market was going and to do it well; otherwise, our decisions would be just guesswork. Nevertheless, it was not an easy task, and it would put the future of our business and its people on the line.
Using my engineering training in dynamics, and by studying each of the economic cycles over the previous 107 years, I was able to develop a combined model that predicted when the recession would end its downward spiral and begin to improve. This covered the period during where we had to figuratively “hold our corporate breath” and work through the immediate challenges. Through these results, I forecast that the economic recession would reach the bottom by July 2009, and then begin to make an upward turn. Luckily for me, the forecasts were spot on. With this model, I was able to predict the timing of the recessionary bottom, how deep the recession would go and how long it would last for 3M. That was the basis for all the decisions which followed.
The model showed the end market was falling by only about 10%, not the 25% people feared and to be fair, we were experiencing in current sales. Some of our end markets fell by as much as 80% at the economic bottom. That 10% news alone reduced the prospective layoffs by 60%. But I was not satisfied yet. We created exciting incentives for early retirement, sent many of our employees off on paid vacation, eliminated pay increases for everyone, insourced significant parts of our supply chain and cut costs everywhere we could, with one exception. We never cut our $1.5 billion annual R&D spend. My view was that, if we do not invest in the future, it will not be there when we need it. If my modelling was accurate, I was confident we were going to need it soon.
The net result of this analysis and decision-making resulted in only 2,000 (<2%) of our workforce being lost in these terrible times. That included contractors and temporary workers, and it compared well to the 25% initially projected. Though each layoff was an individual tragedy, we treated all those leaving the company generously. After all, they would still be ambassadors for our company, and everyone needs to retain grace and dignity in such horrible times. And so, it turned out to be.
Knowing the scale of the unfolding economic catastrophe, I was asked by a local US newspaper how deep the cuts might become at 3M. After all, we were the largest non-government employer in the State. In answer, I said, “as many as necessary, but as few as possible.” That is precisely what we did, as few as possible. Our profit margins remained nearly constant during this crisis, and I think it is fair to say that we won the hearts and minds of our colleagues in the company, and in the community in general, for our decisiveness and our humanity.
As I mentioned, we protected our R&D department and retained the experts who were the brains behind our legendary innovation and product development. As we came out of recession, we had the fuel, the ideas, and the people to accelerate the growth of the business. It resulted in a 15% growth the following year when many of our contemporaries were still struggling.
Successful leadership during a crisis
The uncertain times of this pandemic are essentially no different to those back in 2008 and 2009. Leaders are forced to make decisions that inevitably impact people’s lives, and they must perform the sometimes-precarious balancing act between the current problems and future opportunities. They are forced to think about adapting the business for survival, without causing undue hardship to their workforce. These are horrible things to deal with, but they can determine the survivability of the company. In most cases during times like this, if you can get the people and the cash issues simultaneously right, most everything else will work out positively.
Great leaders are not frozen in fear of failure during a crisis. As leaders, we all make mistakes, but at times like these, we need the grit and “nous” to make courageous and sometimes scary decisions, which are often the difference between success and failure. Attitude is an essential piece of this puzzle. After our top 130 3M leadership meeting in January 2009, I told my colleagues that if we found a way to navigate past this crisis, they would never fear another business challenge for the rest of their life. Additionally, I stated that, after leaving the meeting, they needed to be positive, uplifting, encouraging and inspiring with their staff because people will never follow a leader who is more scared of the problem than they are. I think this is another universal truth in business. There may have been times when my colleagues thought I had lost my mind as I suggested some of these unconventional ideas and analyses, but brilliant execution and the perseverance of the whole company paid off handsomely. I was proud to work with every one of them.
While assessing risks to the business, it’s essential to look for the opportunities and the positives – and there are always opportunities. The pandemic has allowed many business leaders to take a step back and re-evaluate their strategies and ways to improve productivity or even ways to diversify and strengthen a company’s offering. Essentially, it is still mostly the innovators who have taken the spoils in this pandemic. We can see this in electronics, in communications equipment, video streaming, supply chain management, pharmaceuticals, healthcare, food supply and logistics, to name but a few. We have seen many good companies extend the supply of personal protective equipment not just to their employees, but to their employees’ families also. It’s a small example of humanity and great companies at work.
All great leaders are great teachers, and they need to lead visibly and authentically from within during a crisis like the one we face today. It is essential always to be transparent and honest with employees at all levels of the business. Unlike wine, bad news does not usually get better with age. During those testing times at 3M, I updated the whole company weekly on the state of the company and the economy. I wrote all those communications pieces personally, and I spoke from my heart as well as from my brain. Regular and authentic communication is crucial to reassure employees and stakeholders that they are in safe hands and to build a stable level of trust within the business.
Challenging times, whether caused by a financial crisis or by a global pandemic, are thankfully few and far between, but leaders always need to be prepared to take measured risks and look for hidden opportunities. A successful leader will lead their companies through adversity, bringing them out the other side stronger and better than ever before. We always learn more on stormy seas than ever we do sailing in calm waters.
Sir George Buckley Leadership Centre
The University of Huddersfield will launch its new Sir George Buckley Leadership Centre in January 2021. Managers and senior leaders will have access to Level 5 and Level 7 CMI programmes designed to strengthen leadership skills, complemented by leading-edge global insight from the Huddersfield Business School, practical application of learning, enhanced self-awareness, peer group networks and a specific organisation–based leadership project.
For more information about the Sir George Buckley Leadership Centre, click here.