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Brent Morgan speaks to ¿press.¿
  Brent Morgan speaks to faux media.
 

Crisis Challenge Tests Judgment, Leadership

1/17/2008 --

Ross students jump out of the frying pan, into the fire.

ANN ARBOR, Mich.--Dense rain from a late night tempest pelts the windows of an office overlooking Hyderabad, India. A bleary-eyed team of executives, employed by U.S. pharmaceuticals outfit Pharmeck Inc., ignores the downpour outside and focuses instead on the perfect storm raging within. A public relations debacle threatens the very future of Pharmeck, and the crew assembled here has less than 12 hours to avert a corporate meltdown.

Earlier that day, Indian news reports cited high levels of mercury in the water supply near Hyderabad, home to Gentab, one of Pharmeck’s key Indian subcontractors. Mercury contamination was being blamed for three deaths and countless ailments in the region – and, despite any hard evidence, Gentab was being blamed for the mercury.

The short-term eco-crisis notwithstanding, Pharmeck stood to face an even greater calamity down the line. Bowing to local pressure, the Indian government had shuttered Gentab pending an investigation. Production had ceased on Maladone, an anti-malaria wonder drug manufactured exclusively for sale by Pharmeck. Millions of malaria victims in the third world would go untreated if Gentab did not resume production of Maladone immediately.

It’s now 10 p.m. at Pharmeck’s Hyderabad offices, and camped around a table strewn with the detritus of a meal half eaten are Pharmeck’s general counsel, the firm’s regional VP of operations, regional VP of sales, and environmental health and safety officer. At 8 a.m., this team will field questions from a hostile press in search of a scapegoat, a consortium of NGOs demanding more Maladone than can be supplied, and a host of twitchy shareholders prepared to offload free-falling Pharmeck stock. All this, despite any definitive proof linking the company or its Indian subcontractor to the disaster.

Just another day in big-time pharma? Not exactly. Pharmeck, Inc., doesn’t really exist. Gentab is a firm that lives only on paper. And the crisis at hand is actually a role-playing exercise to hone the leadership skills of management students in the Ross School of Business.

“The exercise grew from a need to explore the role of the firm in society,” says Sue Ashford, the school’s associate dean for leadership programming and the Michael and Susan Jandernoa Professor of Management and Organizations. She directs the Ross Leadership Initiative (RLI), a two-year series of supplemental activities to complement the MBA class curriculum. January’s RLI Crisis Challenge is the first of its kind for Ross, and is just one touchstone for leadership that Ashford’s team has built into the MBA program. “Judgment and leadership are qualities best learned by experience,” Ashford notes. “But experience can be costly and quite painful. The Crisis Challenge is a chance for our MBAs to exercise both judgment and leadership in a ‘safe’ environment.”

Easy for her to say. Though no lives, eco-systems or corporate futures were really at stake, students did have to sacrifice some short-term comfort for their long-term development. With just a few hours to prepare, 12 teams of four students each sought to frame a strategic response to the crisis, align around it, mobilize, and stick with it – taking into account such functions as operations, finance, legal, marketing, and more. They relied on guidance from Ross Professor Noel Tichy, co-author of “Judgment: How Winning Leaders Make Great Calls,” and Professor Jim Walsh, who warned against “simplistic cognitive structures that won’t serve you well.”

With a midnight deadline looming, the students waded through a plethora of details designed to both inform and distract. Priorities emerged as teams struggled with which issues to engage, which ones to deflect. Meanwhile, RLI staff delivered time-released curveballs in the form of faux memos, news updates, and financial alerts.

Next morning, teams faced what could only be described as a verbal firing squad of multiple stakeholders. Ross professors, professional journalists, and various executives simulated the roles of reporter, NGO, and stockholder. Dressed in formal business attire and wearing nametags that connoted their “jobs” at Pharmeck, the students stepped in front of cameras and experienced a visceral and sometimes excruciating lesson in the delicate art of crisis communications.

“Where is your CEO today?” “Do you take responsibility for the mercury spill?” “What are you doing to help the citizens who’ve been poisoned?” “If you’re not responsible, why are you spending company funds to help the victims?” “How much are you prepared to spend and for how long?” “Why were you outsourcing Maladone production in the first place?” “So are you saying that you’re exploiting cheap labor and taking advantage of lax standards in India?” “How often did you review Gentab’s operations?” “When can we get more Maladone?” “How much inventory do you have left?” “Why won’t you tell us?” “What will the millions of people suffering from malaria do in the meantime?” “Are you prepared to sell your patent on the drug?” “When will Gentab re-open?” “Why don’t you know?” “When will you know?” “What will you do if it never re-opens?” “How long before you can get production up and running elsewhere?” “How can you reassure stockholders that Pharmeck’s bottom line will not be impacted by this crisis?”

At the close of each session, shell-shocked teams sat down with a communications expert who evaluated their behavior, speech patterns, and body language. Most were praised for dressing in similar black suits that “presented a serious and united front” in a crisis. Some were told to keep gestures to a minimum and lose the “uhms and uhs.” Sheepish grins and nods were the most common response to such advice as: Don’t raise your voice at the end of your response or it sounds like a question. Maintain eye contact, and be attentive to each speaker on your team. Don’t hold your hands behind your back or it looks like you’re tied up. The “a-ha moments” came when students realized tough questions can be restated to buy time to formulate an answer. Extremely tough questions can be reframed altogether so you are answering the questions you want to answer. And most important: never lie.

“The communications feedback was extremely valuable,” says first-year Steve Perakis, who was booked to interview with Lehman Brothers the following day. “I’ll continue to use that in the future.”

Three of the 12 teams advanced to the last round of competition toward a $2,000 team prize. Finalists assimilated the morning feedback, refined their presentations and went before a fresh panel of afternoon experts, including Ralph Bahna, BBA ‘64, chairman and founder of Club Quarters, and chairman of priceline.com. He relished the role of inquisitor, pounding the students with relentless queries, right down to, “Why are you even holding this press conference?” And, “Because it’s part of the competition,” didn’t count as an answer.

“The greatest shortage in business today is thinkers,” Bahna says. “And you need thinkers in a crisis.”

David Cieminis, Anurag Gupta, Shally Madan, and Brent Morgan took the final prize for a presentation that hit the highest marks. Gupta, a dual degree student pursuing an MBA/M.D., says the experience challenged him to think both as an executive and a humanitarian.

“I learned how important it is for a corporation to take a stance,” he says. Working every advantage at one’s disposal doesn’t hurt either: his team repeatedly referred to him as Dr. Gupta on stage.

Adds Bahna: “In most crisis situations it is critical that you take the offensive. You cannot move from fear. In this case, Pharmeck needed to get Gentab up and running. Pharmeck is the world’s supplier of this malaria drug. The purpose of this press conference was to tell the story that Pharmeck supplies this wonder drug globally and at cost. Even though people in the immediate area are sick, careful analysis would show the symptoms don’t necessarily match mercury poisoning. The point for Pharmeck should be, ‘Let’s rally. Let’s get the plant back open as soon as possible.’ The message should be, ‘We are the cure for malaria globally’ not ‘we are the killer of people locally.’”

Of course. It seems so very clear in retrospect.

Written by Deborah Holdship



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich