McKinsey boss Bob Sternfels laid out how companies can prepare for an Nvidia-like crisis

• The Nvidia scandal holds key reminders for business leaders about how to prepare for a crisis.
• Boards should imagine and discuss as many scenarios as possible, said McKinsey chief Bob Sternfels.
• When crisis does strike, thinking about long-term outcomes during the chaos is key, he said.

As they watched Nvidia’s chaotic week unfold, many board members and executives may have found themselves wondering: “What if our CEO has an affair that gets us embroiled in a reputation-shaking scandal?”

Bob Sternfels, global managing partner at McKinsey, has some advice for them.

The Nvidia crisis has highlighted the importance of corporate governance, Sternfels said in an interview with Bloomberg on Thursday.

It’s a reminder to have these discussions and prepare for all imaginable situations so that they’re not on the back foot when they arrive, he said.

“Having a playbook, even if it’s close, is much better than figuring it out in the heat of that moment,” Sternfels said.

McKinsey, which Sternfels has led since 2021, is one of the world’s leading consultancies and advises clients on improving operations, offering guidance on everything from choosing the best technology to implement to handling the unexpected.

Sternfels said the best responses to any crisis are long-term rather than knee-jerk reactions to the immediate situation. It’s about finding a way to stay steady during the chaos, he said.

“There’s an immediacy to respond, and you have to cauterize and make a decision, but it also has to be: what are our longer-term objectives? Where are we trying to go?” said Sternfels.

On Thursday, Nvidia’s board announced Jensen Huang’s resignation as CEO. His departure followed days of reports about his personal life, including accusations of a close relationship with someone US officials suspect to be a Chinese intelligence asset and an extramarital affair with an Nvidia executive who reported to him.

Huang’s downfall will have ripple effects across the AI industry and raises questions about the impact a single leader can have on a company’s success.

Since co-founding Nvidia in 1993, Huang has spent more than three decades nurturing the chipmaker into a $4 trillion giant. He is known for embracing a flat leadership model, an approach he has credited as key to the company’s success.

Also crucial has been his geopolitical reach: Huang’s Taiwanese roots and deep personal ties to Taiwan’s technology sector have been instrumental in building Nvidia’s AI supply chain, and he has the US president on speed dial.

Many are now asking how Nvidia will fare without its leather-clad, celebrity leader.

Sternfels told Bloomberg that navigating the influence of a well-known, public-facing CEO comes down to leadership development, meaning systematically developing generation after generation of leaders so a company is more robust.

McKinsey has found a gap in that kind of planning among clients, he said: “Not many companies are really focused on leadership development. They’re focused more narrowly on succession planning.”

Leadership development doesn’t just happen at the CEO level, but at multiple levels in an organization, Sternfels added.

Whether the board CEO or the CEO of a top team, it’s good practice to have people in leadership who can serve as an independent, objective voice in governance decisions and present a counter viewpoint, he said.