Daniel Diermeier
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Big Brains podcast: A Crisis Management Expert’s Advice on Handling Coronavirus (Ep. 47)

A world-renowned scholar gives advice to business and political leaders on handling the COVID-19 pandemic.

Daniel Diermeier
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Show Notes

Our society has always relied on leaders to effectively manage crises. But with the COVID-19 pandemic ravaging society, it’s more important than ever to understand what effective leadership should look like right now.

Daniel Diermeier is the former provost of the University of Chicago and the recently appointed chancellor of Vanderbilt University. But he’s also a world-renowned crisis management scholar. On this episode, he shares his expertise on how business and political leadership should be managing this crisis.

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Transcript:

Paul Rand: It’s always been crucial for our leaders to effectively manage crises. But with the coronavirus pandemic ravaging society, it’s more important than ever to think about what effective leadership should look like right now.

Daniel Diermeier: COVID-19 is probably the biggest challenge that we have faced at a global scale since the second world war. This is a new situation for most leaders and the challenges that they’re facing now is not anything even remotely than what they have seen previously.

Paul Rand: Daniel Diermeier is the former provost of the University of Chicago and the recently appointed chancellor of Vanderbilt University. But he’s also a world-renowned management scholar. At this moment, his expertise is essential.

Daniel Diermeier: The ability for a leader to on the one hand, be realistic about what the challenges are, to have your feet on the ground on that. But then at the same time to inspire confidence that we can get through this and we can get through this and come out stronger. It’s absolutely essential.

Paul Rand: From the University of Chicago, this is Big Brains. A podcast about pioneering research and pivotal breakthroughs that are reshaping our world. This is our special series focused on how the coronavirus is affecting our society and what the top minds and researchers are focusing on during this pandemic. I’m your host, Paul Rand.

Paul Rand: Before anything else, Diermeier says the most important factor business and political leaders should be thinking about when it comes to managing crises is trust.

Daniel Diermeier: Yeah. So let me preface this just with thought. One of the things that make COVID-19 so difficult is the sense of profound and persistent uncertainty. And a changing understanding of the pandemic. So what this does, it challenges us. When we usually make decisions, you want to get the data. We want to have it fact-based, we want to think about it. And then we want to make the decision. And you can’t do this right now. It’s not possible. You have to operate in an environment of tremendous uncertainty and lack of information. Therefore, maintaining trust is essential. And what we know from the literature on trust is that there are various factors that increase trust.

Paul Rand: And you’ve actually developed something that you call the trust radar. And it breaks these factors into four categories. Can you start by just giving some background on one of these categories?

Daniel Diermeier: So the first one of them is transparency. Transparency is not the same thing as full disclosure. Transparency is really reached by understanding what’s in the mind of your audience. What are the questions that they have? What are the concerns that they have? And then try to address them as much as you can. Specifically, what you want to do is you want to tell them what you know. You want to tell them what you don’t know. You also want to tell them if there are things that you cannot share with them, but give a reason for them that they understand. For example, privacy concerns usually fall into the third bucket. So the important thing is to start with what’s in their head. What are the questions and try to address them to their satisfaction as much as possible. That’s transparency.

Paul Rand: Okay. Now you also referenced transparency is the ability to be fully understood. And I wonder for our leaders political or otherwise, business, is that often a problem for leaders to be fully understood?

Daniel Diermeier: Yes. Here’s typical mistake that happens. We have a certain comfort zone that we have because we deal with certain operational issues that can be quite complex and complicated on a day to day basis. And we just assume naturally that everybody can follow that. But if you’re not understood, you can’t be trusted. So what’s natural to you is to say, "Well, isn’t that obvious?" It isn’t obvious to anybody else. And as a consequence of that, you’re not being understood. If you’re not being understood, people think you’re hiding behind expertise and mumbo jumbo and then trust goes down.

Paul Rand: So that applies of course, in the business sector, I’m assuming equally as well.

Daniel Diermeier: Everywhere. It’s true everywhere. I think businesses are particularly in danger there and leaders because they operate in most specialized environments. And talking to the general public is not something they have to do every day compared to political leaders.

Paul Rand: Gotcha. All right. Well, the next part of your trust radar is expertise. And that seems like it ought to be a pretty basic term. But I think in a crisis or a pandemic, expertise has a whole new level of meaning, doesn’t it?

Daniel Diermeier: Yes. So the first thing to recognize with expertise is that in the United States, companies are believed to have high level of expertise. People believe that companies are competent. That sounds like a good thing, but there’s a flip side to that. If things go wrong now, people sometimes attribute this to bad motives rather than to a lack of capabilities. It’s like the company didn’t invest enough.

Daniel Diermeier: Now, in the case of COVID-19, the expectations are lower. So people do not expect that let’s say, a bank or any other service provider, a restaurant has a detailed response strategy off the shelf that can just be deployed. That’s not the case. That would be the case in contrast, for example, with cyber security threats. Where the expectations are very high. So people have lowered the expectations of companies on that. However, what they do expect is a basic crisis management capability. So the ability to make decisions quickly, to communicate them clearly. And companies will not get a pass if they don’t have that.

Daniel Diermeier: I should say one more thing on nonprofits, too. Nonprofits usually do not face the same levels of high expectations on expertise, except in the areas that are their core competencies. If Target has a data breach, people get mad. Because they say, "Why didn’t you invest more?" If the same were to happen at the Red Cross, people are more forgiving. But if the Red Cross had a problem with contaminated blood supply, they would not be forgiving.

Paul Rand: Because that’s the core area of expertise.

Daniel Diermeier: That’s the core area of expertise that the Red Cross stands on.

Paul Rand: Okay. There’s another award in this mix, which is empathy. And we’ve talked quite a bit on this show, Big Brains about empathy. But I wonder in the context of a pandemic, what does that mean?

Daniel Diermeier: Empathy means that when you communicate, you have to communicate with the pain and suffering that people are facing in this context. That includes the uncertainty, the economic impact that they may be facing. Or if they have somebody in their family is ill or God forbid, if they’ve lost a loved one. So for leaders, it’s very important to understand that when they communicate with their own people or with a broader environment, that they express a sense of empathy. That what they’re asking people to do will be tough, will be painful and that they sympathize with that.

Paul Rand: Got it. Now it seems really obvious, but you often comment and say that actually that’s one of the most important factors, but also the easiest for many leaders to miss. Why is that?

Daniel Diermeier: The reason for that is, is that our tendency is to go to a area of expertise because that’s our comfort zone. And so we focus on, when we communicating and things, on a lot of operational and technical detail. And we forget that we need to connect with people as people. And the empathy side is a very important part of that.

Paul Rand: Okay. Whether in this current situation, pandemic or in other cases, business cases, can you give an example or two of a case where you saw empathy coming through in all the right ways?

Daniel Diermeier: So a great example of that was there was a train crash in Britain that affected Virgin, the train part of their business. Roads and railroad. And Sir Richard Branson immediately flew to the crash site, expressed his empathy with the victims. And praised the train driver who had avoided that even bigger catastrophe. So he was there on the spot and he connected with people as a person. There’s a fourth factor of this, which is commitment. Which is basically people demonstrating that they will find a solution or make people whole. Showing up in person is an important part.

Paul Rand: And so that is your fourth pillar, is commitment. Let’s dig into that a little bit deeper. And I want to ask you just to just again, give me a definition in this context of what does commitment actually mean?

Daniel Diermeier: What commitment is about is the following. In a crisis context, you often don’t know what the problem is or what the solution is. But people want to be reassured that once you know, that you will find a solution and you will take care of them. So the way to signal that is through commitment. And commitment usually has comes in two forms. The first one is by defining a process and

communicating that to the relevant audience. A taskforce, an ad hoc committee. And then to give updates on that.

Daniel Diermeier: The second one is to make it personal. When you face a crisis, people want to hear from the leader in charge, not the spokesperson. And that’s the CEO or the equivalent in a nonprofit context. The person that is in charge. The more personal you can make it, the better. Videos are better than emails. Town halls are better than videos. In person is better than everything off that. But of course, we can’t do that now.

Paul Rand: And now I know you’ve talked about the fact that some leaders may actually consider this a waste of time. And they’ve got some really hard challenges and issues to tackle. But you push for making time to be as important as any of the other things they’ve got going.

Daniel Diermeier: It is time consuming. It is difficult and it requires extra effort. But you have to remember that if you lose the trust of your stakeholders in this environment, everything will be harder.

Paul Rand: So are business and political leaders following these crucial factors today? And what other factors besides trust does Diermeier believe our leaders need to focus on? That’s after the break.

Paul Rand: The COVID-19 pandemic is a global crisis on an unprecedented scale, listen to the new podcast, Pandemic Economics from Stitcher and the Becker Friedman Institute for Economics to help you navigate this moment. Hosted by Tess Vigeland, former host of Marketplace. And New York Times reporter Eduardo Porter. Featuring insights from top economist from the University of Chicago. With data-driven research on topics ranging from the impact of global financial markets to how this will change the nature of work. New episodes every Thursday. Subscribe now to Pandemic Economics.

Paul Rand: Big Brains is supported by the Harris School of Public Policy at the University of Chicago. Looking to accelerate your social impact? Learn how to use evidence-based decision making to lead measurable change in any sector. Work alongside top UChicago faculty to put policy into action using your data science and analytical toolkit. Full time and part time programs available. June 1st deadline for a fall 2020 start. Visit harris.uchicago.edu/admissions.

Paul Rand: Well, one of the things that certainly has undermined this entire pandemic and [inaudible 00:12:11] when you see the number of people getting sick and the number of people dying is fear. And I wonder if you could talk a little bit about how does fear during a pandemic like this or any crisis drive people to the level of response that’s needed?

Daniel Diermeier: Yes. So fear is an very important component of many crisis, especially those that involve safety, personal safety. The thing to recognize is that the subjective assessment of risk and the objective risk are not the same. They are there significantly different. This has been studied extensively in the area of risk perception and risk communication. And we now have a very good understanding for what are the factors that drive up risk perception or drive them down. Things that drive up risk perception are, if something is novel. If something has dreadful consequences such as severe injuries or death. If there are identifiable victims, not numbers of victims but identifiable victims. If there is a high degree of media coverage that makes the issue salient. And for example, if people have a sense of powerlessness or lack of control.

Daniel Diermeier: Now COVID-19 has all five of them.

Paul Rand: It sure does.

Daniel Diermeier: So as a consequence of that, people are very fearful. And arguably more fearful than is warranted by the objective risk to themselves and to their safety. So what you can do in this particular case is you can think about how you communicate and how you act as a leader to help them deal with that risk and with that fear. Now there’s not much you can do about the dreadful consequences or the media coverage. Novelty will wear off over time. Once people become familiar to that, to the situation, they kind of get used to it and then fear goes down.

Daniel Diermeier: But where you can do something as in the aspect of powerlessness. So what I would recommend in this case to empower people, to participate and make a difference. Whether that’s through volunteering or by giving a whole organization a sense that if we pulled together, we can get through this. So that people feel they can make a positive contribution to dealing with a crisis. Once they feel they can make a positive contribution, the level of fear goes down.

Paul Rand: Okay, this kind of all leads up to this. And this area that I’m going to ask you about is particularly relevant right now and baffling to me in many ways. Because you talk about how important it is for leaders to infuse people with a sense of duty and a sense of community. But when we look out and we see people in many cases, ignoring the recommendations. Not social distancing, not taking the warning seriously, is that a failure that a sense of community and duty has been not imbued as it needs to be?

Daniel Diermeier: I think is a problem. Now, of course, when you think about compliance with like a stay at home orders, for example. There is a debate on whether these things are the right approach or not. So for example, Sweden has taken a very different approach. And so there are policy debates on that, on how you handle this. And then of course, there’s an overlay of that. The political polarization in our country has entered the question of what to do and when to release this lockdowns on top of it. And then the third thing of course is there are people here that are losing their livelihoods. So all of that makes this a much more complicated and complex decision environment. Than to say, we know there’s one right answer. And now we just have to do it. And then if you don’t do this, you’re somehow not doing your duty. I think there’s complexities here that make this more challenging.

Daniel Diermeier: On the community side, this is an important insight. So it’s particularly important insight for businesses because that’s not where they typically operate. The distinction that people [inaudible 00:15:54] between an exchange orientation and a community orientation. An exchange orientation is a typical business interaction. For example, we go to restaurant with our friends, we have a great dinner. We have a great time. We ask for the check, we leave a tip. That’s a business transaction. Now, the same type of people have a dinner at a friend’s house, same conversation, same food, same wine. At the end of that, one of the guests asks for the check and wants to leave some money on the table as a tip. As an appreciation of how great the evening was. People would be aghast, would be a total disaster.

Daniel Diermeier: Now why is that? Because having a dinner in a restaurant is not the same have dinner in a friend’s house. In a friend’ house, it’s a ritual of enforcing a community. So people don’t pay to bring a bottle of wine or some flowers, or they invite people back. So the rules of engagement, what’s

acceptable, what’s not acceptable is very different in an exchange orientation than it is in a community orientation.

Daniel Diermeier: Why is this relevant? Because natural disasters or pandemics trigger a community orientation. We come together as a group, we rally around the flag. It’s all about responding to needs. And things like pricing or selling things are very problematic. So to put it differently, if Starbucks wants to sell a bottle of water for $3 during a regular business environment, that’s unproblematic. But after 9/11, when first responders run in there and try to get waters for themselves and for the victims, you cannot charge them. Not even a discount is enough. You have to give it for free. That’s a different environment that businesses have to deal with, and it’s not easy.

Paul Rand: And so where does this idea of being a community member versus being a business. Where does it start and where does it stop? And how do organizations know when they’re crossing the line?

Daniel Diermeier: I think you have to realize that once you are in a pandemic or a natural disaster [inaudible 00:17:55] that you are in a community orientation. That’s that. There are tensions [inaudible 00:17:59] that you need to navigate. You can’t get out of business. You have to be able to do what you do by being able to operate in a way that maintains the sustainability of your business.

Daniel Diermeier: To give you two examples of companies that have just done this. The first one is the car companies shifting production from building cars to building ventilators. That’s the community orientation.

Paul Rand: Okay. You’ve mentioned car companies producing ventilators. Are there other examples of companies where you’re seeing them just doing such a smart job and you say, "That is really well done."

Daniel Diermeier: There’s a famous example that goes back to hurricane Katrina. And this was Walmart. Had very controversial business practices at the time. But in the context of the hurricane, they really stepped up and really helped them to kind of deal with some of these challenges. So what they did in this case is they utilized their logistics capability to bring products, water, food, shelter, to the affected communities in New Orleans and the surrounding areas. And they would set up mobile staging areas. Basically prepacked trucks that then could be readjusted depending on the path of the hurricane and be deployed in the affected areas. And they were able to outperform FEMA, the Federal agencies in charge of disaster management by days.

Daniel Diermeier: It was done very intentionally. Was driven by the CEO, Lee Scott, who also told his people, "This is extraordinary times and we’re expecting extraordinary things from you. And we have the confidence that you can make those decisions right." So they empowered their line managers, for example, store managers, to just do whatever they thought was right. There were famous examples of store managers breaking into the pharmacy to provide diabetes patients with much needed medication. They’re examples of truck drivers bringing in supplies. And one truck driver said, "This was like as if I had scored a touchdown at a football game."

Daniel Diermeier: Now imagine what this does to these people. I mean, if you’re a truck driver, and this is your experience where what you do. And you’re literally saving the lives of people in the community, you will never forget that. So empowering people along those lines was not only important for the community impactful, but for people inside the organization as well.

Paul Rand: Okay. One of the other terms I’ve seen you write about is something you call the good Samaritan principle, which is combining caring and competence. And I wonder if you can expand about that a little bit more.

Daniel Diermeier: So in a community orientation, we have certain paradigms of what a good community member consists in. This can be summarized in this concept of like the good Samaritan. Reference to the famous story in the New Testament. And the person there is competent and he’s caring. And that’s the key. So business need to be competent and they need to be caring. You want to utilize your capabilities to have the maximum impact on the community. That is not always possible.

Daniel Diermeier: If you are a skin moisturizer company, you don’t want to handle skin moisturizer right now. What you want to do instead, you want to volunteer or provide help and assistance in a different way. However, if you have capabilities that are useful. Manufacturing capabilities or even you have testing or pharmaceutical companies, by all means companies should do this in this context. The caring part is very important here because making it personal, having the CEO and people involved personally, again, helps to reinforce the sense that this is something where the company steps up as a community member.

Paul Rand: Okay. So I want to go back and think through. And we’re by no means out of the woods on this yet and maybe even just getting into the woods. But I wonder how this perceptions that we’ve all been dealing with is going to change people’s perceptions of dealing with companies. Or what they’re looking for out of their elected officials or organizations. What’s changed or changing for us?

Daniel Diermeier: So I agree with you. We’re not out of the woods. I think there’s a tremendous sense of uncertainty and lack of information. And that will go on for weeks and months. I mean, even fundamental statistics about the death rates and expected death rates are changing literally on a day to day by day basis. Models are being adjusted. All sorts of things are not clear. That’s number one. I think what you have in these crisis is they are moments when people really pay attention. And how you conduct yourself in a crisis like that can be career defining. It can actually be legacy building.

Daniel Diermeier: We saw this very clearly, for example, in the second world war. Churchill’s famous speeches. When Britain stood alone, he built a legacy there. So there are many examples where political leaders, governors, mayors will build their careers based on that. It can be a go in both directions. It can be a total disaster, or it can be career defining. The level of attention is very high. And when people pay attention, we will remember. And we will remember what was good and what was bad. And that can go on for decades. I think for, if you’re an elected official now, this is your moment.

Paul Rand: Let’s talk about this. As we mentioned, we’ve got a ways to go on all of this. And if some organizations and leaders are listening to this podcast and think, "Gosh, I haven’t done X, Y or Z." Is it too late for them?

Daniel Diermeier: No, it’s not. And this is a characteristic of this crisis. Is look, if you have an airline crash, you have to ... Or even a tornado. That’s done within a few days. And so if you’re unable to handle that during these times, you can’t recover because ... Or it’s difficult to recover because attention has moved on. During a crisis, people pay attention. Once the crisis is over, they’re watching football again. Well, not now, but in general. And so it’s very hard then to recover from that because fundamentally people are not paying attention.

Daniel Diermeier: Now, people paying attention all the time. So you can have missteps, but then when you step up, you can recover from that. As you’re thinking, or as people think about their own responsibilities, we’re not through this, not by any stretch. And so even if people stumbled at the beginning, if they embrace their responsibilities as leaders, they realize what the specific challenges are. And then they’re successfully step up to the plate, you can recover from that.

Paul Rand: Okay. The challenge it seems with being as something as longstanding as this seems to be. Is when do you go from dealing with all COVID-19 all the time to getting back to the basics of your business and communicating and talking about that? And how do you know it’s the right time to do so?

Daniel Diermeier: Well, I think you have to keep two things in mind at the same time. I was on a panel with the CEO of AIG, Ed Liddy, who expressed this as follows. When he was managing AIG through the financial crisis. He had one card in his left pocket, which was the 10 things I need to do so that the business is still around tomorrow. And in the right pocket, he had a card where there were things. What do we do in order to come out of this stronger?

Daniel Diermeier: And I think you have to have both sides going on at the same time. It’s not that you’re done with one, and then you can shift over. But while you’re dealing with the day to day, you want to think about what are we learning? What’s new? What’s changing? How do we conceptualize this? And what does this mean for the decisions we have to do right now?

Paul Rand: Okay. As you have examples from the last big crisis. Whether it was a recession or Katrina or otherwise, there’s no doubt we’re going to end up having a number of examples coming out of this. So we’ll keep an eye on this and see the winners and the losers that come out of this from a crisis management perception point of view. But you’ve shared some amazing things here. Is there anything Daniel, that we haven’t tapped on that you think would really help the story get across it any better?

Daniel Diermeier: One of the best examples I think of how to think about this as a leader is in the movie Apollo 13. And there’s a pivotal scene in the movie where the head of NASA walks into ground control. And he’s clearly in a sense of distress. And says, "This is the worst crisis in the history of the agency." And the hero of the movie, which is played by the actor, Ed Harris. He is the head of ground control. And he in movie, he wears this white vest, which he kind of pulls on whenever it’s a critical moment. He turns over and then says, "With all due respect, Sir. This would be our proudest moment."

Daniel Diermeier: So I think the ability for a leader to on the one hand be realistic about what the challenges are, to have your feet on the ground on that. But then at the same time, to inspire confidence that we can get through this and we can get through this and come out stronger, is absolutely essential. And leaders that can combine the two are the ones that will be successful in an environment. You don’t want to make predictions to turn out to be wrong. You don’t want to sugar coat things. But you also need to give people a sense of hope and a sense of a direction. So that when we’re done with this, not only will we be all right, but we will come out stronger. And this will be our proudest moment.

Matt Hodapp: Big Brains is a production of the UChicago Podcast Network. If you like what you heard please give us a review and a rating. The show is hosted by Paul M. Rand and produced by me, Matt Hodapp, with assistance from Alyssa Eads. Thanks for listening.

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