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Success in navigating through a crisis situation requires good planning, sound judgement and swift reaction. This note provides a set of detailed guidelines on business crisis management. Areas covered include crisis definition, key principles and a step-by-step assessment of what to do when one occurs.

Eight executives at Hoechst and Rhone-Poulenc must make four crucial decisions on the eve of merging their companies to become Aventis--what would become the world's third largest pharmaceutical firm. In addition to formulating a vision and strategy, the two firms must plot their intensified efforts in the U.S. market, pick a leader, and choose between two approaches to research and development. The merger represents the ongoing efforts of the two predecessor companies to remake themselves into life science companies. They face a range of pressures, from falling prices and intensifying demands on R&D for blockbuster pharmaceuticals to union opposition to the merger, skepticism from research analysts, and regulatory scrutiny. Amid these pressures, they must combine national and corporate cultures, merge into a single entity, and deliver the promised synergies. Concludes with a surprising development, when one of Hoechst's major shareholders objects to the merger.

Supplements the (A) case.

Dave Walker, vice-president of business service opportunities and chairman of the governance team at Procter & Gamble, must decide what to do with P&G's 5,700 employee Global Business Services (GBS) group. GBS brought together internal services such as finance, accounting, employee services, customer logistics, purchasing, and information technology into a single, global organization supporting all P&G business units. Recently, P&G CEO A.G. Lafley questioned whether continued investment in GBS represented the best use of P&G's resources. Walker and the other members of the governance team must decide whether to spin off GBS, outsource GBS services to an outside company, outsource the GBS divisions separately to best-of-breed companies, or keep the group in-house. In making the decision, Walker and the members of the team must consider the impact on the organization of altering the existing relationships between the members of GBS and the other employees at P&G. Teaching Purpose: To consider the issues inherent in any decision to outsource services and the impact of such a change on the company.

Spreadsheet supplement for case 404-124.

Anne Ewers, general director of Utah Opera, is awaiting the decision of the members of the board of the Utah Symphony and Utah Opera about whether to merge Utah's top two arts organizations. If the vote favors the merger, Ewers will be asked to assume the helm of the newly created organization and take responsibility for integrating the two organizations. Challenges students to consider the merits of the merger and to develop an action plan for how Ewers would integrate the two organizations, including how to design the new firm, how to manage various constituents--many of whom are upset by the announcement--and how to create a new corporate culture. Students also need to specify what Ewers would do in the first few days if the vote were to favor merging the two organizations. Teaching Purpose: To explore the human capital issues related to mergers and acquisitions.

Latin American

Rutgers sociologist and disaster studies expert Lee Clarke discusses how organizations unwittingly make pie-in-the-sky plans--what he calls symbolic plans--that are often worse than useless. He advises companies to expose and reassess these unrealistic strategies.

An effective executive does not need to be a leader in the typical sense of the word. Peter Drucker, the author of more than two dozen HBR articles, says some of the best business and nonprofit CEOs he has worked with over his 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious. What made them all effective is that they followed the same eight practices: They asked, "What needs to be done?" and "What is right for the enterprise?" They developed action plans. They took responsibility for decisions and for communicating. They were focused on opportunities rather than problems. They ran productive meetings. And they thought and said "we" rather than "I." The first two practices provided them with the knowledge they needed. The next four helped them convert this knowledge into effective action, for knowledge is useless to executives until it has been translated into deeds. The last two ensured that the whole organization felt responsible and accountable. Effective executives know that they have authority only because they have the trust of the organization. This means they must think of the needs and opportunities of the organization before they think of their own. The author also suggests a ninth practice that's so important, he elevates it to the level of a rule: Listen first, speak last. Effectiveness is a discipline. And, like every discipline, it can be learned and must be earned.

This case describes the everyday decisions made by an alliance team. The case focuses on a budgetary decision where the two parties are $100 million apart, and describes the prior decisions of which each partner is clearly aware. Weighing partnership needs against individual company needs is one of the critical concerns manifested.

Blackwell Consulting Services is the largest minority-owned IT consulting firm in the Midwest. Describes the growth of the firm and focuses on the issues of how the protagonist should handle the issue of succession and a difficult partnership separation with his minority owners.

For decades, CEOs have been looking for the holy grail of corporate transformation, asking, "What is the best way to transform my company? Which model should I use?" Management consultants and academics have been working overtime to supply the answer. They haven't succeeded, however, because the search is a futile one. Every organization is unique. Leaders can adopt ideas that have worked elsewhere, but they need to create their own one-of-a-kind change model through experimentation, learning, blueprint creation and, most of all, a strong focus on results.

A corporate brand, which is based on the characteristics of the firm as well as its products, can play a critical role in a company's brand portfolio. It can help differentiate the firm, support internal brand building, facilitate brand management, build credibility, and provide a vehicle for communicating with and maintaining support among broad external constituencies. However, defining and successfully managing the corporate brand requires the firm to address a number of challenges, including maintaining its relevance to the company's strategy, demonstrating its benefits to consumers, and avoiding negative associations or controversies.

NASA's fabled Faster, Better, Cheaper initiative sped up the agency's spacecraft development. But when missions began to fail, it was faulty organizational learning--not hardware--that was to blame.

If they know the unwritten rules about how people in their companies whine, to whom, and about what, managers can determine where not to put their problem-solving energies.

What wisdom could a horse trainer have to offer a corporate manager? Let's start with the fact that the word "manage" has an equine origin. It comes from Latin, by way of the Italian "maneggiare"--to handle, to train horses. To find out whether the connection goes any further than etymology, senior editor Julia Kirby interviewed the man who is perhaps the most famous thoroughbred trainer of all time: D. Wayne Lukas. Over the course of his 40-year career, Lukas has broken virtually every record in the history of the sport. He's had a horse in every Kentucky Derby for the past 23 years. In 14 different years, he has made more money than any other trainer in the United States; his lifetime earnings mark is now approaching an incredible $250 million. Although his accomplishments are undeniable, Lukas remains a controversial figure in his industry. Early on, he bucked long-standing traditions and came up with a training program unlike anyone else's. His willingness to ship horses across the country to compete in fields where they had better chances of prevailing meant more victories, happier clients, and a reputation for success that brought Lukas even better horses. One of the biggest assets a trainer can have is a good eye for selecting not just talented horses but also talented assistants. Horse training is a trial-and-error, learn-by-experience profession, and a lot of it is handed down. There aren't any books that demonstrate how to train a horse to win the Kentucky Derby. Lukas may be famous for holding almost every record in racing, but his ability to develop a whole new generation of great trainers may be his most important legacy.

Highly intelligent, confident, and successful, alpha males represent about 70% of all senior executives. Natural leaders, they willingly take on levels of responsibility most rational people would find overwhelming. But many of their quintessential strengths can also make alphas difficult to work with. Their self-confidence can appear domineering. Their high expectations can make them excessively critical. Their unemotional style can keep them from inspiring their teams. That's why alphas need coaching to broaden their interpersonal tool kits while preserving their strengths. Drawing from their experience coaching more than 1,000 senior executives, the authors outline an approach tailored specifically for the alpha. Coaches get the alpha's attention by inundating him with data from 360-degree feedback presented in ways he will find compelling. Such an assessment is a wake-up call for most alphas, providing undeniable proof that their behavior doesn't work nearly as well as they think it does. That paves the way for a genuine commitment to change. To change, the alpha must admit vulnerability, accept accountability not just for his own work but for others', connect with his underlying emotions, learn to motivate through a balance of criticism and validation, and become aware of unproductive behavior patterns. The goal of executive coaching is not simply to treat the alpha as an individual problem, but to improve the entire team dynamic.

Eliot Spitzer's investigations into the mutual fund and investment banking industries have made the New York State attorney general the de facto flag bearer of corporate reform. His exposure of conflicts of interest between investment bankers and research analysts in Wall Street firms led to the $1.4 billion global settlement between regulators and banking houses in 2003. In this interview, Spitzer describes the challenge of protecting public markets from conflicts of interest, paying particular attention to how such conflicts get institutionalized in an industry. "The cases that have gotten me and my fellow regulators most upset are the ones where we've seen senior management being tolerant of rank abuses," he says. "Because then you know that the entire structure is rotten." He also points the finger squarely at boards, maintaining that board members are drawn from pools of company and industry insiders. He cites "a void in values in a lot of boardrooms," holding up executive compensation as a powerful example. "Board compensation committees...are self-selected and interwoven--it's a rigged marketplace." He continues, "It would be interesting to see what the world would look like if CEO pay packages had to be submitted to shareholder votes." Spitzer suggests that what's really needed is for all business leaders to reinstill throughout their organizations the critical notion of a fiduciary duty--whether it is to the shareholder or to the customer. Using the mutual fund industry as an example, he also contrasts the value of enforcement with that of regulation and articulates an important--and surprisingly limited--role for government in protecting free markets.

Companies facing new requirements for governance are scrambling to buttress financial reporting systems, overhaul board structures--whatever it takes to comply. But there are limits to how much the outside can impose good governance. Boards know what they ought to be: seats of challenge and inquiry that add value without meddling and make CEOs more effective but not all-powerful. A board can reach that goal only by functioning as a high-performance team, one that is competent, coordinated, collegial, and focused on an unambiguous goal. Such entities don't just evolve; they must be constructed to an exacting blueprint--what the author calls "board building." In this article, Nadler offers an agenda and a set of tools for boards to define and achieve their objectives. It's important for a board to conduct regular self-assessments and to pay attention to the results of those analyses. As a first step, the directors and the CEO should agree on which of the following common board models best fits the company: passive, certifying, engaged, intervening, or operating. The directors and the CEO should then analyze which business tasks are most important and allot sufficient time and resources to them. Next, the board should take inventory of each director's strengths to ensure that the group as a whole possesses the skills necessary to do its work. Directors must exert more influence over meeting agendas and make sure they have the right information at the right time and in the right format to perform their duties. Finally, the board needs to foster an engaged culture characterized by candor and a willingness to challenge.

A carefully chosen story can help the leader of an organization translate an abstract concept into a meaningful mandate for employees. The key is to know which narrative strategies are right for what circumstances. Knowledge management expert Stephen Denning explains that, for optimal effect, form should follow function. Challenging one professional storyteller's view that more is better, Denning points out that it's not always desirable (or practical) to launch into an epic that's jam-packed with complex characters, cleverly placed plot points, an intricate rising action, and a neatly resolved denouement. If the aim is to motivate people to act when they might not be inclined to do so, it's best to take an approach that's light on detail--particulars can bog down listeners and prevent them from focusing on the message. Drawing on his experiences at the World Bank and observations made elsewhere, the author provides several dos and don'ts for organizational storytellers, along with examples of narratives that get results. Denning also presents seven distinct types of stories, the situations in which they should be told, and tips on how to tell them. Leaders with the strength to push past some initial skepticism about the enterprise of storytelling will find that the creative effort pays off.