How CEOs Can Lead Selflessly Through a Crisis

How CEOs Can Lead Selflessly Through a Crisis

by Stefanie K. Johnson - May 14, 2020

You might think that crises tend to bring out the worst in people, but that isn’t reflected in how we view our leaders, at least. In fact, crises cause us to view leaders as more charismatic and effective than we normally do. This is probably why U.S. presidents are almost universally re-elected in times of war. And research has shown that leaders who self-sacrifice tend to be seen as the most effective.

Following 9/11, I was so intrigued by crisis leadership that I did a study on the topic. In my research I found that leader self-sacrifice, such as cutting one’s own salary or giving up one’s own benefits, caused employees to feel more positively toward their leaders and more committed to their organizations during crises. This finding has been corroborated by additional research in the lab and field that suggests that when leaders demonstrate self-sacrificial behavior, it makes us see them as having higher moral values and as being a better role model - leading to better organizational outcomes.

More recently, we have seen CEOs step up to support their employees during this pandemic by pledging not to lay off employees - even those who cannot go into work. For example, even though all of Patagonia’s stores are closed, CEO Yvon Chouinard has announced that the company will continue to pay all employees, leading some to conclude that the values-driven organization will survive the pandemic while other organizations will fail. Other CEOs who have committed to no layoffs include Hearst CEO Steven Swartz, LinkedIn CEO Jeff Weiner, Twitter and Square CEO Jack Dorsey, Morgan Stanley CEO James Gorman, Citigroup CEO Mike Corbat, Bank of America CEO Brian Moynihan, Visa CEO Alfred F. Kelly Jr., and FedEx CEO Frederick Smith, Cisco CEO Chuck Robbins.

So, what can leaders do in this time to support their employees and how can they be sure that their giving hits the mark? Effective measures fall into three categories: taking some of the same hits as your staff; giving with a larger purpose in mind; and being aggressively transparent even when it’s hard.

Take a hit.

Self-sacrifice is not just about the company doing what’s right. If you are going to ask your employees to sacrifice, you need to sacrifice as well. If you expect your team to behave safely, you as a leader should behave safely. If you expect your team to get down in the trenches, you should be down there with them. No one likes the leader who throws their team on the front line while they sit in their office.

Marriott International CEO Arne Sorenson, forfeited his salary for the year and is donating hotel rooms to front-line workers to help fight Covid-19. Marriot also asked its executives to sacrifice half of their salaries and has been furloughed many other employees. As a result, Marriot is still viewed – at least in the media - as an employer of choice despite its need to furlough employees.

Other companies whose top leaders have cut their salaries include NBCUniversal, Uber, Delta, and Yelp. In my own field of academia, highly paid deans, coaches, and administrators at top universities like Harvard are taking pay cuts to help make up for the impending deficits that higher education is facing. Even world leaders, like Jacinda Arden, New Zealand’s prime minister, are taking pay cuts.

Not all of us are CEOs who can make the decision to keep people’s paychecks coming or give up our salary for a year. But there are still ways to sacrifice for our employees. Small gestures like ordering lunch to be sent remotely to your employees for a team zoom meeting can go a long way at maintaining the morale of the team. If your organization has a leave donation program, you can donate some of your time off to your team members who need it.

When you’re a leader, sacrificing along with your employees could mean that they will be more committed to staying with the company during and after the crisis. And, considering the cost of employee turnover, this could mean the difference between recovering from the Covid-19 crisis - or not.

Give with purpose.

Many organizations are offering free services like free virtual tours or free learning tools for kids. Likewise, we have seen organizations step up to help provide resources needed to combat the effects of the pandemic.  Tesla, Toyota, Ford and GM have shut down factories to make ventilators while Medtronic openly shared the software and specifications for their portable ventilators, allowing anyone to use them for free to help create ventilators in response to Covid-19.

But, whatever the give, it is important to tie the sacrifice to vision, mission, and the values of your organization so that people can understand why you are doing it. When Salesforce co-CEO Marc Benioff pledged not to do any layoffs for the next three months, he tied it to the cultural value of Ohana (family) and giving, asking that employees also continue to support the people they relied on before the crisis, such as house cleaners or dog walkers. Leaders should be clear about how their actions are consistent with the organization’s values.

If that purpose isn’t clear, there can be backlash. Research shows that we are a skeptical bunch and when leaders self-sacrifice, we try to infer why the leader might be doing it or focus on what they are not doing (like whether or not the leaders are keeping their bonuses). The more cynical among us might infer that Johnson & Johnson’s decision to invest a billion dollars to develop a Covid-19 vaccine was driven by profit. But, when CEO Alex Gorsky tied the act to their responsibility to improve the health of people and they announced that they would provide the vaccine on a not-for-profit basis, the doubt turns to admiration.

Be aggressively transparent.

In addition to explaining why they are making a sacrifice, leaders should be transparent about what that sacrifice amounts to. If a leader publicly donates 10% of her salary to a nonprofit, she should explain what the nonprofit is and what exactly is happening to the money.

For example, Jack Dorsey is donating $1 billion of his Square equity (28% of his wealth) to fund Covid-19 relief. Not only is he giving away the money; he also shared a Google Doc showing how the funds would be spent.

Voluntary transparency becomes key in this situation. Disney’s CEO Bob Chapek is forgoing 50% of his salary and other benefits as a result of Covid-19. But this decision came after pressure from the union for some information from leadership over concerns about the closing of Disney parks.

Even when we are not in a crisis, 84% of employees think organizations are not doing enough to create transparency. But this comes at a cost to the organization. One study showed that organizations that were more transparent had higher productivity, innovation, and retention than those that were more opaque. In contrast, increasing transparency can in fact build trust.

Crises create the opportunity for leaders to provide direction, meaning, and support when followers need it the most. Learning that Columbia Sportswear CEO Tim Boyle reduced his salary to $10,000 while continuing to pay its employees or that Yum Brands CEO, David Gibbs, gave up his salary and gave $1,000 bonuses to the managers of his restaurants does more than lift the spirits of their employees. These various strains of research indicate that this type of sacrifice can improve morale and trust for the rest of us, and ease the pain the rest of us are feeling in this time.

Stefanie K. Johnson is an associate professor of management and entrepreneurship at University of Colorado’s Leeds School of Business and author of Inclusify. Dr. Johnson studies the intersection of leadership and diversity, focusing on how unconscious bias affects the evaluation of leaders, and strategies that leaders can use to mitigate bias. She is a member of the MG 100 Coaches and the 2020 Thinkers50 Radar List.