I wrote last week about the financial crisis in the UK.
That crisis has continued to play out this week, unraveling still further over the last 24 hours and culminating today in the unceremonious sacking of the Chancellor of the Exchequer1.
What a textbook example of crisis management … and how not to manage a crisis.
In this week’s issue I review the crisis so far and try to draw some provisional lessons from the crisis and the Prime Minister’s handling of the crisis.
But first a piece by Martin Wilson, Chief General Counsel and Head of Fiduciary Services at Phillips (the leading global Contemporary Auction House), and the author of Art Law and the Business of Art.
Martin shares his views on leadership through crisis, and his experience of leadership through crisis.
As always, please comment and contribute to the debate by posting direct on Practical Counsel. Also, please write in with your unique people issues to me (practicalcounsel@substack.com) - I unequivocally undertake never to reveal your identity and will change key details of your situation so as to preserve your confidentiality and anonymity (unless you don’t want this). I also undertake to write to you personally with my own thoughts and comments on your situation and am always happy to follow up with a call on Zoom or similar.
GC Expert ‘Take of the Week’
Martin Wilson is Chief General Counsel and Head of Fiduciary Services of Phillips. A veteran in-house lawyer, he spent 20 years at the well-known international auction house, Christie’s, including stints as Co-head of Legal and Compliance at Christie’s and Global MD and GC, Global President’s Office. He is the author of Art Law and the Business of Art, published in 2019.
Dear Jonathan
I thought I would write in response to your issue on leadership in crisis. I often feel like, as a lawyer, crisis is what we do. As we become more senior and experienced, people look to us lawyers less for our legal skills and more for our ability to navigate through crises. The line you quoted from Rudyard Kipling’s If - “If you can keep you head when all about you are losing theirs …”- is interesting because it really embodies the central role that we, as senior lawyers, are expected to play. In ordinary situations it is usually easy to live up to that. But in a major crisis, that expectation can be a heavy burden.
GCs tend to have a cool head because when things go wrong at a sub-crisis level in an organisation the GC is usually the first port of call. In a way this daily diet of solving problems, correcting mistakes and limiting damage is our training ground where we limber up for the day when the big crisis arrives. Because we deal with set-backs on a daily basis we tend to see each one as a challenge rather than a cause for alarm or anguish. That works for me as I know I am not alone in finding problem solving the most satisfying aspect of my job as a GC. Generally the thornier the problem the greater the satisfaction from solving it.
But a crisis is different. Just occasionally a problem walks through the door which falls somewhere between potentially extremely damaging and an existential threat to the organisation. A crisis of this kind can take many forms - where the organisation becomes the target of a criminal investigation, a dawn raid or prosecution, the subject of a class action, insolvency, a damaging news story or a major data-breach. When that happens the pressures on the GC are of a different order.
Here in the UK our prime minister has just experienced a crisis of significant proportions. For those not following UK politics our newly appointed prime minister Liz Truss and her Chancellor recently announced an unexpected series of tax cuts which were politically and economically very badly received. Almost overnight the value of the pound crashed, and so did the government’s popularity. The Prime Minister was clearly shocked at the reaction and her initial reaction, after a long period of silence, was to double down and make it clear that the tax cuts would go ahead and on no account would she back down. However, she then gave a series of hesitant and defensive radio interviews in which the tone of her responses was at odds with her stated determination to plough on. Her party sensed a retreat and her support quickly ebbed away. A day later she was forced to back down and abandon one of the main tax cuts. She is now trailing in the polls by more than 30 points. I felt that this illustrated that successful crisis leadership is often defined by behaviours and mindsets. Certainly in the initial stages mindset can often be more important than having a clear plan of action. One of the problems with a crisis is not simply the potential exposure but the fact that everyone is usually in unfamiliar territory. So in the early stages of a crisis, when a plan of action has not yet been developed, a critical part of how as a leader one faces up to the crisis is the attitude which the leader projects. And, as Liz Truss demonstrated, it is difficult to get that right. Go quiet and you can appear not to be in control. Respond too quickly and you may seem rash. Come out too confident and you will seem arrogant and out of touch. Come out too optimistic and you may appear not to have understood the gravity of the situation. The balance in each case depends on the situation. But whatever tone you strike – if as a leader you appear hesitant or unsure of yourself you risk failing. That doesn’t mean you need to have all the answers – but you need to project a sense of being in control.
The second, related, aspect is the importance of using negative energy to create a sense of challenge and mission. US President Franklin Delano Roosevelt said, "We have nothing to fear but fear itself". Crises often create a level of fear and uncertainty that even GCs are not immune to. This fear can be destructive and is infectious in a crisis – ultimately leading to bad decision-making. The advantage that we as GCs have is that our job is to face and solve problems. Experience therefore tells us that problems can be mitigated and solved – and because of this we are sometimes better able to step back and approach problems with a greater sense of emotional distance. This ability can however be tested in a crisis. Some years ago I experienced a situation where a legal crisis arose which I was concerned had the potential to be a very major threat to the company I was working for. My initial, very human reaction, was one of great worry – not just for the company but for my colleagues and for the company. Had I allowed that worry to be apparent to my colleagues the effect could have been very negative. But rather than seeking to ignore those feelings I tried to make them a positive force by reminding myself that if there ever was a moment for a GC to play a central role in steadying things then this was it. Looking at it with that sense of mission and professional duty helps to put to one side the fear and the uncertainty.
Finally I absolutely agree with you that good communication is at the heart of managing any crisis. This is more so than in any ordinary situation because one of the interesting aspects of a crisis is that the traditional top-down management approach may well be less effective. Often a more efficient approach in chaotic fast moving situations is to organise a network of teams, each with delegated responsibilities. For such an approach to be effective, however, clear communication channels and timely sharing of information within the organisation are crucial. And of course there is also a related but different challenge around external communication. Because oral and written communication are such a central part of our training GCs will often find themselves playing a key role, often together with the communications team, in determining when it is necessary or appropriate to release information, to whom it should be released and how and when to do it. Here I have found that there are no hard and fast rules – other than ensuring that all communications, both external and internal, are scrupulously honest. That does not mean that there are not decisions to be made about the extent of the communication – but it does mean that what is communicated is open and truthful.
Looking forward to the rest of this series.
Best wishes
Martin
Jonathan’s Response: As the King said to the Prime Minister, “Dear, oh Dear. Anyway ….”
Delphic words from King Charles III, captured on a microphone as he welcomed Liz Truss for her weekly audience with His Majesty. But you probably don’t need the wisdom of the Oracle to guess what he was referring to.
A week on from their last audience and the financial crisis continued to rumble on. And just 72 hours later the Chancellor of the Exchequer, Kwasi Kwarteng, was toast, dumped by his close friend and colleague the Prime Minister.
Too early to draw a full range of lessons from the crisis but here are a few lessons I’ve taken, illustrating several of the points raised by myself and my GC experts over the past couple of issues of Practical Counsel:
1. In a crisis build a good team around you: Contrary to this sage advice, Liz Truss and her Chancellor have fallen out with just about everyone. They failed to take independent advice from the Office of Budget Responsibility and thumbed their noses at everyone who disagreed with them. Just over a month into her administration Truss has had to make two colossal U turns and her own survival must be in doubt. She has also – finally – brought a couple of her gainsayers into the tent and appointed a new Chancellor who is not one of her supporters.
2. Communication is Key: Communication from Truss and her key allies has been disastrous – a mixture of naïve, tin-eared and preposterous. One of her key supporters blamed the crisis on the Bank of England rather than the Government’s own missteps – thereby combining arrogant (mis)communication with an insult to one of the key financial institutions with which the Government has to work closely.
3. React appropriately to the crisis: As Martin Wilson points out in his piece, it is hugely important to react appropriately to the crisis. It can be important to project optimism, but misjudge tone and you lose credibility. Winston Churchill was famously brilliant, in his wartime speeches, in painting a realistic picture of the size of the task confronting the Allies – while at the same time urging defiance and galvanising the nation. President Zelensky has achieved a similar feat through his rhetoric and brilliant use of social media. Truss’s response to the UK crisis has been flat-footed and inept – she has projected denial rather than optimism and her performance when interviewed has been, at times, abysmal.
4. Manage risk; take the best advice: In his piece last week David Moskowitz talked about the importance of developing good relationships with a wide range of external parties and the importance of managing risk effectively. His focus was on senior in-house lawyers but his words were apposite in the context of the current UK financial crisis, too. Truss and her Chancellor ignored the advice of the vast majority of financial experts and failed to weigh the risk of putting all of their chips on one option (in this case tax cuts which would have to be funded by government borrowing). This approach both failed to weigh risk vs. potential reward and flew in the face of expert advice.
No wonder the new King greeted his Prime Minister somewhat tentatively for their weekly audience.
Dear, oh Dear, indeed.
Key Takeaways
1. This is the third in a series of issues about leadership through crisis.
2. In the first issue, Jonathan introduced the series and shared some initial thoughts about the best ways for senior in-house lawyers to show leadership during a crisis.
3. In the second issue, David Moskowitz, an ex-DGC of Wells Fargo shared his views, emphasising the critical importance of managing key internal relationships and relationships with the Board, incorporating risk perspectives beyond pure legal risk and developing influence with both non-legal corporate partners and key external parties.
4. In this issue Martin Wilson, Chief GC of Phillips talks about the importance of responding appropriately to a crisis – maintaining a cool head but also deploying behaviours and mindsets commensurate with the crisis.
5. Jonathan draws lessons from the current UK financial crisis and explains why, in his view, the Government has failed to respond appropriately to the crisis.
And now …….
Contribute to the debate and write in with your comments and observations. Also write to Jonathan with any other people issues you face as an in-house lawyer.
Jonathan can be reached by email at practicalcounsel@substack.com
A note for you picky lawyers; and a plea for tolerance
I am a British lawyer by background and went to both school and University in the UK. So my English is British English. I have taken a conscious decision to write this newsletter in British English, but to try to avoid phrases that aren’t common outside the UK. Sometimes, though, I’ll use a phrase that isn’t commonly used outside the UK, without realising that it is a Britishism. I also endeavour to use the vernacular spellings of my contributors (e.g. to use US spellings for a US contributor), but won’t always get this right.
My plea is for you to tolerate the British spellings and grammar and the occasional Britishism. And to focus on the substance of the newsletter rather than the occasional (to you) annoying turn of phrase, bit of grammar or unorthodox spelling, or the occasional inconsistency in spelling as between, for example, UK and US ‘standard’ spellings.
Thank you and best wishes,
Jonathan Middleburgh
Key Strategic Partners
I explained in the last issue that the UK Finance Minister is, for historic reasons, known as the Chancellor of the Exchequer.