THE BLOG
01/15/2014 01:59 pm ET | Updated Mar 17, 2014

Target's Leaders Follow the Playbook For Handling Crisis Well

ASSOCIATED PRESS

Target CEO Gregg Steinhafel and his leadership team are experiencing every company's worst nightmare. As a retailer, the loss of private customer data hurts consumer trust. The timing of the crisis--the biggest shopping month of the year--was doubly unfortunate.

Yet, in response, Steinhafel and his team seem to be doing everything right, at least so far. Steinhafel is wise enough to know that the most important thing is Target's ability to maintain the confidence of its customers. Every decision he has made since the crisis began is based on that clear objective. Steinhafel and his colleagues have been fully transparent with their "guests," as they refer to customers. They have been definitive that guests will have no liability for losses incurred as a result of this breach and they have offered to reissue cards upon request.

The good news here, if there is any, is that the actual losses incurred by Target customers pale in comparison to the enormous number of accounts breached.

Some pundits have criticized Target for additional revelations that expanded the number of customers who may have been impacted. Even if you understand just a little about cybersecurity, you know that you often don't have all the information initially. Firms like British Petroleum have tried to buy time by withholding information until they knew the full story. This only made the situation worse and caused them to lose control over the public messages.

Target has gone in the opposite direction, providing all the information it had at its disposal as quickly as possible. The problem with that approach is that you don't know what you don't know. As its team of experts dug deeper into its computer files, Target learned additional information that it immediately shared with its customers and the media. Since the crisis broke, transparency has been the company's motto.

In 2009 shortly after the peak of the global financial crisis, I wrote the book 7 Lessons for Leading in Crisis, which provides a framework for handling this type of urgent, important, highly visible situation. Measured against this framework, Steinhafel is doing all the right things for Target and its guests - expressing a sincere apology for this incident; demonstrating that he truly values Target's guests and understands their trust is earned; providing information to protect consumers from possible scams; seeking expert advice and support from its Board, employees and external advisors; conducting a thorough forensic and criminal investigation; and remaining focused on taking actions that are in the best interests of the company over time.

I have known Steinhafel for nearly twenty years. Between 1995 and 2005, I served on the Target board when he was Executive Vice President, Merchandising and later President. He has also been a participant in the courses we run at Harvard Business School for new CEOs. He is a person of absolute integrity. I have never seen him prevaricate or dissemble, even under extreme pressure. For him, everything revolves around satisfying his guests. He is a brilliant merchant, arguably the finest in the retail field. He can anticipate customer needs and fulfill them.

This isn't the first crisis Steinhafel has faced as CEO. Shortly after taking over the reins from former CEO Bob Ulrich, he faced a serious challenge from activist hedge fund manager Bill Ackman, who wanted to break up the company by spinning off Target's credit cards and real estate holdings. Ackman's plan would have destroyed the company's integrated strategy of retail merchandising, credit cards that offered customers the opportunity to contribute 1% of their Target expenditures to their favorite K-12 school, and real estate tailored to its merchandising strategy. Target management and its board rejected Ackman's demands and won the proxy fight with overwhelming support from its shareholders.

As an executive, you would never wish for a major crisis, but as I have learned in crises at Medtronic, Goldman Sachs and Exxon, they can make your company more effective and your organization more unified and committed to its True North in the long-run. Ultimately, I predict the same thing will happen at Target.

Bill George is professor of management practice at Harvard Business School and author of True North and Authentic Leadership. He is the former chair and CEO of Medtronic. Read more at www.BillGeorge.org, or follow him on Twitter @Bill_George.