What Apple’s Standoff With the FBI Says About Leadership

This article originally appeared in Fortune on March 1, 2016.

By Harry Kraemer Jr.

Apple Inc.’s standoff against the U.S. government’s mounting pressure to hack into an iPhone used by one of the San Bernardino shooters highlights the importance of having clear leadership values in place. Otherwise, when a crisis arises, a company will be on the defensive and scrambling to respond, creating uncertainty and eroding trust among customers and business partners.

Despite pressure from the Justice Department, Apple CEO Tim Cook has refused to order his company to make software to unlock the phone used by one of the attackers to give the government access to encrypted personal data. According to Reuters, Cook reportedly told employees in an email, “This case is about much more than a single phone or a single investigation. At stake is the data security of hundreds of millions of law-abiding people, and setting a dangerous precedent that threatens everyone’s civil liberties.”

The purpose here is not to weigh in on what Cook should or should not do in the midst of a crisis that touches two of the most emotionally-charged issues of our day: guarding against terrorism and personal data security. That said, one of the key principles of values-based leadership is to take the time to understand the multiple perspective surrounding any issue — particularly the most critical ones. In the case of Apple, it appears Cook is trying to determine the right actions for his company and its customers, such as urging the government to create a panel on encryption. This process could facilitate dialogue and understanding among the multiple perspective on the issue.

A values-based leadership approach also focuses intently on the issue of trust. The Trust Project at Northwestern University, a new initiative launching in March, is designed to advance the study and management of trust in business in society, and shows that trust is multifaceted. Using a simple example, customers may trust that a company’s products are backed with in-depth technical expertise. But those same customers may have lower levels of trust that the company is really looking out for their best interest, such as in product pricing, technical support, or customer relations.

Trust, like everything else is business, cannot be taken for granted, and it must be managed as part of values-based leadership. Being a values-based leader in an organization that prides itself on what it stands for is relatively easy when things are going well. However, personal and organizational leadership are defined by challenges — especially change, controversy, and crisis. During these times, leadership is tested, often publicly with high visibility, broadcasting the values of the leader and the organization to the world.

The backbone of every crisis-response plan must be the company’s values. Then, as simplistic as it may seem, the company and its leaders need always to do two things: do the right thing and do the best they can.

Throughout my career, including as chairman and CEO of Baxter International, a $12 billion healthcare company, I have defined values-based leadership in the context of four principles: self-reflection, to gain greater self-knowledge and accountability to my commitments; balance, to gather input and feedback from all sources to make the best decisions possible; true self-confidence, knowing what I know and acknowledging what I don’t know; and genuine humility, to treat everyone with respect. These values along with the commitment to do the right thing and the best I could helped me face numerous episodes of change, controversy, and even crisis.

In 2001, a dialysis filter product made in a Swedish plant owned by Baxter was blamed for 53 deaths in several countries. Suddenly, the company’s name was on the front page of newspapers around the world, accused of causing these deaths. With values-based leadership and a commitment to do the right thing, we quickly mobilized our response: putting together a team to uncover the cause of the deaths; taking the appropriate actions, including closing the facility that made filters; meeting with health ministers in various countries; and sharing information with suppliers and even competitors, just in case they were using materials or had manufacturing processes similar to ours.

We didn’t stop there. Even though Baxter’s financial results that year exceeded targets, I recommended to the board that they reduce my bonus by 40%, and my 20 senior executives agreed to cut their bonuses by 20%. We knew the world was watching, and in order to maintain trust with all our constituents, especially the 50,000 team members within Baxter, we needed to make sure we did the right thing.

The eyes of the world are on Apple as it squares off against the Justice Department over an issue that has many sides and valid arguments, from the need to safeguard against terrorism to individuals’ rights to privacy. Regardless of what Apple decides, the company must remain guided by its values and principles, with a commitment to do the right thing and the best it can.

- Harry Kraemer Jr., former chairman and CEO of Baxter International Inc., is a professor of management and strategy at Northwestern University’s Kellogg School of Management.