Servant-Leadership is Great in a Crisis

Is SERVANT-Leadership good in a crisis? One of the common misconceptions about servant-leadership is that it’s too slow to use in an emergency. This is also a reason some businesses choose not to apply it in their organizations. However, recent events give us great examples to prove the benefits of servant-leadership in business – especially in times of crisis. The findings of this study show servant-led organizations are a better investment than contrasting organizations without these leadership principles.

Two servant-led companies, Starbucks (SBUX) and Southwest Airlines (LUV), recently experienced major crises. The culture of these organizations and how they responded, protected their market value. If we compare these organizations to two other companies, not known to practice servant-leadership (Facebook, FB, and Equifax, EFX), that also had recent crises, we see measurable benefits of practicing servant-leadership before and through a crisis.

Crises Studied

At the time of study, some of the crises are still unfolding. However, each crisis has at least 3 weeks (21 days) of data to look at. The crises analyzed include:

Starbucks – Arrests 2 Black Men for Doing Nothing Wrong

On April 12th, 2018, two black men are arrested in a Philadelphia Starbucks for loitering and failure to order. This triggers outrage and cries of racism. CEO Kevin Johnson emails all employees, calls the incident, “reprehensible”, flies to Philadelphia, meets with the men and personally apologizes. The company commits to closing all US stores for training on racial bias.  I’m on record of saying the response was too slow, but most of these actions occurred within one week.

Southwest Airlines – Engine Failure Kills a Passenger

Southwest flight 1380 from New York to Dallas experienced an engine explosion, ultimately killing a passenger. This was the first in-flight fatality for the servant-led company. Leadership responded offering full support to the victim’s family and other passengers aboard the flight. CEO Gary Kelly also vowed to perform extra metallurgic scans of 698 planes.

Equifax – 2017 Data Breach

In May through July of 2017, criminal hackers stole private and personal data from Equifax. It is estimated that 44% of the US population is impacted. Equifax does not inform customers and the public until September.

Facebook User Profile Harvesting by Cambridge Analytica

On March 17th, 2018, an expose article reveals that political consultancy, Cambridge Analytica harvested 87 million Facebook user profiles to create psychographic profiles on users. The expose claims these profiles are used to deliver pro-Trump content online in an attempt to influence the 2016 US elections. Similar tactics are claimed to have been used to influence the Brexit campaign. Facebook CEO, Mark Zuckerberg, does not address the growing crisis for 4 days.

Findings

  1. All 4 Companies Lost Market Value: No company, regardless how great their leadership, is impervious to fiscal impact in a crisis. This is also true of our servant-led examples, Starbucks and Southwest Airlines. Where great leadership comes into play, is in reducing the negative impact during crises. An analysis of the 3 weeks following each incident in this study proves this point. Here are the total losses, as measured in market share value, over the 3 week period, following each company’s crisis:
    Figure 1: Market Share Loss by Company, 21 days after crisis. Starbucks -3.3%; Southwest Airlines -3.5%; Facebook -9.84%; Equifax -20.84%

    Figure 1: Market Share Loss by Company, 21 days after crisis.

     

  2. Non Servant-led Companies Experienced Wild Swings: Facebook and Equifax saw wild swings in their market share value throughout the 3 weeks following each incident. In fact, share values in these organizations varied from a positive 12% to a negative 38%. When totaled out though, both companies wound up with substantial losses over the course of the three week period in the study.
    Market Share Value Loss by Week Following Crisis - Starbucks, Southwest Airlines, Facebook, and Equifax

    Figure 2: Market Share Value Loss by Week Following Crisis.

    Servant-led companies lose less value than other companies, following a crisis.

    Figure 3: Servant-led companies lose less value than other companies, following a crisis.

     

  3. Companies Employing Servant-leadership Retained Greater Value & Stability: Overall, the two servant-leadership examples in this study proved more reliable and a greater investment than the alternatives. If you invested $1 in each of the non servant-led organizations, immediately before their crises, you would have lost about $0.31. That same $2 invested across the two servant-led companies, immediately before the crisis, 21 days later, would have lost only $0.07.

Again, no company is impervious to fiscal loss during a crisis. In fact, investors in Equifax, today, may be out of luck, as the company is in bankruptcy. Facebook is unlikely to declare bankruptcy anytime soon. However, Southwest Airlines and Starbucks have also proven excellent multi-year investments. The key here is, during the worst of times, servant-led organizations are better off than their counterparts.

An organization should practice servant-leadership because it is the right thing to do. Any person or company who practices servant-leadership only because they want to maximize profit, will ultimately fail in that practice. This is because their focus is on a single stakeholder group (investors) and not the entire organization (employees, customers…). That, in itself, is a failure of servant-leadership. However, if you seek to practice servant-leadership and fear it may not be good for business, or successful in a crisis, rest assured, it works well in both cases.

2018-06-04T23:10:13+00:00Servant Leadership|0 Comments

About the Author:

My passion is raising servant leadership awareness and adoption, as well as building better servant-led organizations. I do this primarily through blogging, speaking, consulting, and books. I'm the author of Paradigm Flip: Leading People, Teams, and Organizations Beyond the Social Media Revolution. I'm also often asked to speak on my unique perspective of social media as a tool for greater leadership. To know more about why I love servant leadership, check out, "Why I Started ModernServantLeader.com".

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