Prof. Alexander Wagner and Lukas Rühli
What are the prerequisites for coping well with a crisis? Can we and do we want to avoid all crises if possible, or do crises even harbor opportunities for change? Alumnus Lukas Rühli and Prof. Alexander Wagner discuss distorted perception and the importance of crisis competence. Text: Maura Wyler, Photos: Caroline Krajcir
Currently, various crises dominate the headlines. Is the perception that crises are becoming more frequent true, or is this impression deceptive?
LUKAS RÜHLI (LR): Basically, we have a media bias in favor of crisis reporting. The media report more on negative events than on positive ones, which distorts the public's perception accordingly. With COVID, the Ukraine war and the banking crisis, we are currently experiencing a random accumulation of crises. In reality, various statistics show that the vast majority of conditions in the world have improved significantly in recent decades. Nevertheless, the confidence of the population that the next generation will be better off than the current one has declined in the Western economies.
ALEXANDER WAGNER (AW): You first have to ask what you mean by crises in the first place. That's why there are no studies that clearly prove whether there are more or fewer crises. What is true, however, is that the interconnectedness of the world - trade, globalization, digitalization, the interconnectedness of society - is much greater and means that crises have a more resounding effect in many areas.
So you can't measure crises because they can only be defined as such subjectively?
AW: What one considers a crisis is to a large extent in the eye of the beholder. In fact, calling it a crisis changes something about the situation. Used strategically, the word crisis triggers a Sense of Urgency, which can be used in entrepreneurship to deliberately pursue a specific goal. Of course, this carries the risk that people will react negatively to it and become afraid.
Do we perceive crises differently today than in the past?
LR: What we used to have, we would constantly perceive as a crisis today. From today's perspective, the time before industrialization was a permanent crisis situation. Today, we have become much more resilient to crises due to prosperity. Mostly, we experience crises that make our lives a bit uncomfortable. Very few are existentially threatening. On the other hand, today's technologically advanced society has a new, fundamental potential for crisis that has fortunately not yet manifested itself. Think, for example, of the atomic bomb, biotechnology or AI. They could all theoretically lead to widespread extinction of humanity. Even though the probability is very low, it does exist. This is new.
Climate crisis, government crisis, midlife crisis - the spectrum of crises is very broad. What is the common denominator?
AW: The word crisis comes from the Greek and also means decision. It does not necessarily have a negative connotation. So a crisis is a situation that requires decisions. It develops rapidly and, if no action is taken, quickly becomes negative. In most cases, there is some element of surprise. These characteristics are the common denominator of the interdisciplinary definition from the UZH Center for Crisis Competence, where researchers from seven faculties are involved.
LR: For me, a crisis is a situation where a certainty that was believed to be secure is shaken, and it often happens when there is no reaction to a change in the framework conditions. Of course, there are also exogenous catastrophes, which simply happen. But personal, political or governmental crises in particular are always a failure to make adjustments that would be necessary. Although they are partly predictable, it is then impossible to prevent them in the political or social system. Change only becomes possible once the crisis has been triggered.
AW: I can confirm that. Especially when I think of cases from the corporate world where a framework changes for a company. But it can also be that the change is deliberately triggered by someone with some intention. Especially in economic competition, there are strategic interactions. What is one person's opportunity can be another person's crisis.
Crises always have a negative connotation, but they can also serve as an impetus for progress and innovation. How can we learn from crises and make the most of them?
LR: You have to be aware that in well-developed systems, fundamental change is almost impossible because the need is not seen as long as everything runs smoothly. That's where behavioral economics comes in. People are risk-averse and loss-averse. Losses usually reduce their well-being more negatively than gains of the same amount increase it. And that's why they have a status quo preference. Only a crisis leads to a state where the status quo becomes so unpleasant that people are prepared to make fundamental changes. That's why it takes such crises in highly developed social systems to bring about major changes.
You both take the view that many crises in companies in particular are "homemade". How can these be avoided?
AW: There are various starting points, two of which seem particularly important to me from research and from my practical experience: good corporate governance and the consideration of behavioral science findings. You can rarely win a prize with good governance, but you can destroy a lot with bad governance. But crises cannot be avoided by banning bonuses for executives, as was recently decided in a motion. That backfires, because there are always incentives of some kind, including non-monetary ones. What matters is how people react to these incentives. Just as we cannot ban driving in order to avoid accidents, we cannot ban bad governance.
LR: We have to accept that crises are part of the game. Especially to a free economic system. If you want to prevent every crisis ex ante, you create a lot of rigidity in a system, which can lead to even more negative results in the long run.
AW: And even if you could. It is simply prohibitively expensive to avoid all crises. The statement is very important and at the same time very controversial. You have to be sensitive to those who are affected by crises. It is difficult to communicate politically that it is not optimal for a state or a company to do everything to avoid everything.
What role do human behavior and communication play in a crisis?
LR: To prevent crises of all kinds, communication, cooperation and honest dealings with one another are central. Followers, herd mentality, rigid hierarchical thinking and silo thinking are things that tend to promote crises. In a company, the boss has a great influence on the corporate culture. An atmosphere of lacking trust is harmful. An open and fair feedback culture is important.
AW: If it is allowed in the company to ask uncomfortable questions, then that is an element of crisis competence. The knowledge that something is not going well in a company has to surface somehow. And in order to learn something from crises, you have to make the learning explicit. That's why we talk about crisis competence. It's important to capture learning during a crisis so that it remains in organizational memory. It's not for nothing that people say you should never let a good crisis go to waste.
Mr. Wagner, you are co-director of the UZH Center for Crisis Competence. Why this focus on crisis competence and not, for example, on crisis management?
AW: Because after the crisis is before the crisis. It's not about avoiding every crisis, it's about having the conviction that I as a manager, as an individual, or we as a society have the ways and means to deal with crisis. Another element of competence is to reduce the uncertainties somewhat and to understand what are the key, potential crises we need to focus on. We have limited resources and time and need a radar for those crises for which contingency plans are really needed. Pure crisis management is not enough.
Mr. Rühli, you, on the other hand, tend to take the view that most crises cannot be foreseen and can therefore not be prepared for, or only to a limited extent.
LR: People generally overestimate themselves. Most of us assume that the future is an extrapolation of the development of the last ten years. However, the future is not predictable and cannot be planned. One can hardly prepare specifically for certain crises. The focus must be on communication, cooperation, flexibility, information exchange and on a certain redundancy in social and corporate structures, which generally promotes crisis resilience.
AW: There are also really good research findings on redundancy. The hardest redundancy for a company is to have cash available. That has a strong opportunity cost, especially in low interest rate periods. But it has been shown that the companies that have more cash available do better through crises.
LR: On a corporate level, redundancy is somewhat at odds with efficiency. As a result, management is under constant pressure to justify its actions. The crux of the matter is that the better you protect yourself, the less likely it is that something will happen and the more likely it is that the precautionary measures will be perceived as excessive from the outside. As a result, there is a tendency at the corporate level to create too little redundancy. This effect is reinforced by a phenomenon known in game theory as the hostage dilemma: In individual cases, it is better to negotiate with hijackers to prevent them from harming the hostages. But if this is known, the more planes will be hijacked. Analogously, more crises occur when companies know that in case of doubt, the state will provide assistance. Because that further lowers the incentive to create that redundancy themselves.
Author: Maura Wyler, Photos: Caroline Krajcir
Source: Oec. magazine issue #19