On January 19, 2010, Japan Airlines filed for bankruptcy protection. By the count on Kazuo Inamori’s official site, its debt came to about 2.3 trillion yen. That day its shares fell as low as 3 yen, and the restructuring plan called for about 15,600 job cuts, a third of the workforce. “Everyone believed secondary bankruptcy was inevitable,” Inamori, who became chairman the next month, said later.
A bankrupt airline should be the easiest place in the world to feel urgent. His official archive says otherwise. At the time of the bankruptcy, it says, JAL’s employees “lacked a sense of crisis and ownership.”
So the founder of Kyocera began with attitudes, and he began at the top. By his own account, he “preached earnestly to JAL’s executives, appealing to them to change their thinking,” in intensive study sessions that went “as far as to propose an ideal way to live as a human being.” The company was under bankruptcy protection, and its senior people were in study sessions about how to live.
The step most companies fumble
John Kotter of Harvard Business School had seen this gap before. In a 1995 Harvard Business Review article, later expanded into his book Leading Change, he wrote that over the previous decade he had watched more than 100 companies try to remake themselves. He listed eight errors. The first was “not establishing a great enough sense of urgency.”
This step can sound easy, he wrote. “It is not. Well over 50% of the companies I have watched fail in this first phase.” His reasons point at the people in charge. Executives underestimate “how hard it can be to drive people out of their comfort zones,” or “grossly overestimate how successful they have already been in increasing urgency.”
Bad news isn’t urgency until people believe business as usual can’t go on. Kotter even put a rough number on it: “From what I have seen,” urgency is high enough when “about 75% of a company’s management is honestly convinced that business-as-usual is totally unacceptable.”
JAL had the bad news. By the account in Inamori’s archive, what it lacked was the conviction.
Lighting the fire on purpose
If the facts aren’t enough, why not make them louder? In 1995 Kotter reported that in “a few of the most successful cases,” a group had manufactured a crisis. One CEO deliberately engineered the largest accounting loss in the company’s history. One division president commissioned first-ever customer satisfaction surveys, knowing the results would be terrible, and made them public.
By 2008, in his book A Sense of Urgency, Kotter sounded warier. In an excerpt published by Harvard Business School, he called the crisis tactic “a potential diamond sitting on a rock surrounded by quicksand and very nasty beasts.” At one European retailer, the CEO had two weeks’ warning of an explosive Wall Street Journal article and chose to let it land. Instead of mobilizing people, the crisis “led many managers into making fewer decisions because they didn’t want to be accused of mistakes with the press and public watching.”
Researchers had described a pattern like this decades earlier. In 1981 Barry Staw, Lance Sandelands and Jane Dutton gathered evidence on individuals, groups and organizations and made the case for a “threat-rigidity effect.” The evidence they summarized showed “a restriction in information processing and constriction of control under threat conditions.” They noted the consequences could be functional as well as dysfunctional. Fear works like a flashlight: brighter on one spot, darker everywhere else.
Kotter had a name for what fear can produce instead of urgency. In a 2008 interview with strategy+business, he described “false urgency”: people “scared to death or mad as can be, so they’re running from meeting to meeting, doing all kinds of useless stuff. It’s all activity, not productivity.” In many ways, he said, it can be “more dangerous even than complacency.” He didn’t write crises off. Handled properly, he argued, a crisis can be an opportunity to raise urgency.
JAL needed no manufactured crisis. It had a real one. What Inamori says he worked on first was what people made of it.
What the 50% rests on
Kotter’s figures are his estimates from companies he watched, not results of a controlled study, and the article doesn’t say how the companies were chosen or how failure was judged. A 2012 review in the Journal of Management Development by Steven Appelbaum and colleagues found support in the literature for most of his eight steps but “no formal studies” of the whole model, which “appears to derive its popularity more from its direct and usable format than from any scientific consensus.” The other steps are on the 8-step page.
JAL’s turn is also hard to credit to one cause. According to the aviation expert Hajime Tozaki, salaries fell to around 20 percent below rival All Nippon Airways, current staff lost half their pensions, and banks forgave 521.5 billion yen of debt.
The red deck
Imagine a sales manager who learns that her largest customer may not renew. She builds a deck full of red charts and presents it to her team. Everyone nods. A month later the work looks the same, except that two people now copy her on every email and the team calendar is full of new status meetings.
The charts were true. Nobody in the room believed they changed what to do on Tuesday. In the more successful cases Kotter saw, executives often relied on outsiders, customers among them, to deliver unwelcome news. Twenty minutes with the customer’s buyer explaining why she is shopping around might land where the deck didn’t.
Kotter’s balance point was what he called “urgent patience”: accepting that big change can take years, while still doing something for it today. Even redirecting “one meeting for 10 minutes” toward the problem counted.