Managing a meltdown: how the best managers respond

13 June 2017 -

CMI president-elect Bruce Carnegie-Brown on managing a meltdown

My story starts on 14 October 2004 when I was sitting in my office in London. I was responsible for the UK arm of global insurance-broking business Marsh & McLennan.

On that day, Eliot Spitzer, who was the New York attorney general at the time, convened a press conference in New York and alleged Marsh & McLennan had steered clients to major insurers with whom it had lucrative contingency agreements, and solicited rigged bids from insurers for insurance contracts.

Spitzer also had a number of emails taken from a Marsh & McLennan employee to prove his point. So this was a very serious indictment.

The first issue was how to react to the crisis, as in many ways nothing happened immediately after Spitzer’s conference. The sun was still shining, and the air conditioning was still working in the office, so there was a slightly unreal feeling about it all. But, of course, something very profound had happened in terms of an attack on the business model of Marsh & McLennan. And that needed to be addressed.

The process in the US took a long time to resolve and inevitably involved extensive negotiation. One of the things we didn’t know immediately was how big the problem was and, therefore, we didn’t know what the retribution would be around the issue, nor how many clients would be affected.

And, if this had been happening in the US, it might also have been happening in the UK.

While your first instinct is to shut your door and hope it all goes away, the most important reaction you must have is to get out of your office and go and see colleagues. You need to convey a confidence you don’t always feel and then begin to put in place a plan for how you’re going to address these issues.

The leadership in the US was forced to resign and so we needed to shape our response in the UK for our clients, employees and regulators by ourselves because there wasn’t anybody to ask for permission to do things.

Of course, it’s very hard to prove a negative (that the same things alleged by Spitzer weren’t happening in the UK) so we decided to appoint an independent firm of lawyers to conduct a review of our business in the UK and provide a report to tell us whether or not we had a problem.

Now, I was lucky because I was relatively new to the business. I had only come to the industry in 2003 and the crisis happened 15 months later, so I was in a position to lead any changes that we needed to propose to the business model, and did not have to be defensive about previous practices. I could be very open about what we needed to do.

The lawyers’ report revealed that, while there was the potential for conflicts of interest, there was no evidence of fraud or rigging business in the UK. But this was still enough for the inevitable questions from journalists about whether I should consider resigning from the company.

These are always hard questions to answer, as either you sound arrogant by claiming to be the best person to solve the problem or you appear to suggest you are part of the problem. However, the truth of the matter is that you have to just focus on the myriad issues you are faced with one at a time, working to a plan and trying to instil confidence in your colleagues that you’re all working towards a shared objective of addressing the issues, and working to rebuild the trust of your clients in the quality of your advice and in your ability to execute transactions on their behalf.

Bruce Carnegie-Brown has been a Companion of CMI since 2014 following a top-level 30-year career in the financial services industry.