Crisis Management

Graphics courtesy of Corporate Board MemberOpens in new window Crisis refers to specific, unexpected, and non-routine events or series of events that create high levels of uncertainty and threat or perceived threat to an organization’s high priority goals.

A crisis is a live issue—one that is happening now. Whether an earthquake destroys infrastructure, computer hackers shut down a company’s entire cyber-system, a terrorist attack destroys lives and property, or a key manager dies with no replacement — all these events must be addressed immediately.

A crisis could be scandal, or a faulty product, or some other unforeseen calamity that results in media coverage. Crises are typically newsworthy. A critical responsibility of any leader is crisis management.

The study of crisis management originated with the large-scale industrial and environmental disasters in the 1980s. It is considered to be the most important process in public relations.

Three elements are common to a crisis:

1. a threat to the organization
2. the element of surprise, and
3. a short decision time.

Venette argues that “crisis is a process of transformation where the old system can no longer be maintained”. Therefore, the fourth defining quality is the need for change. If change is not needed, the event could more accurately be described as a failure or incident.

It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.

Every organization is likely at some time to face a crisis that forces leaders and its employees to act quickly and without perfect information. A corporate crisis, for example, is a significant organization disruption that stimulates extensive news media or social networking coverage.

The resulting public scrutiny can affect the organization’s normal operations and can have a political, legal, financial, and governmental impact on its business.

A corporate crisis (for example, like a cybersecurity breach), is any event with the potential to negatively affect the health, reputation, or credibility of the organization like those. It has been suggested that crises often begin at the local level, but can affect an organization nationwide or internationally.

Many organizational crises can be classified into one of the following groups:

Types of Crises

In considering the list of possible crises, it has been suggested that there are five types of crises that may impact an organization. These are briefly discussed below.

1.     Financial Crisis

A financial crisis occurs when a business loses value in its assets and cannot afford to pay off expenses. This is caused by either internal or external factors that result in a severe decrease in demand for the organization’s product or services.

2.     Personal Crisis

A personnel crisis occurs when an internal stakeholder of the organization is involved with an illegal or unethical scandal that impacts the organization’s reputation.

3.     Organizational Crisis

Organizational crisies occur when a business exploits its customers to gain more profits or information. These situations often receive lots of media attention that is negative for the organization.

4.    Technological crisis

A technological crisis occurs when an organization’s technology crashes — such as when a server breaks or an error emerges in a software product. When these crises happen, customers and users have no access to the organization’s products and/or services.

5.    Natural crisis

A natural crisis occurs when severe weather interrupts normal business functions. This can be temporary like a snow delay or more permanent like a flooding evacuation.

As noted above, an organization crisis can take many different forms, and by definition, are generally unexpected, such as the crises faced in 2018 with Facebook’s data misuse and Starbuck’s diversity missteps and Boeing’s 2019 737 Max crisis.

As one would expect, given the number of crisis and reputation management experts or organizations that exist, there is no want for suggestions or recommendations on how leaders and their organizations can and should respond after a scandal as part of an effort to rebuild and sustain reputation. It should be clear that rebuilding reputation after a scandal or crisis is key to an organization’s future success.

Rebuilding reputation is done by restoring the trustOpens in new window of both employees and other stakeholders. There are no magic bullets, as trust is built through time. The following guidelines can help leaders in their reputation rebuilding efforts.

• Leadership is critical — Leaders are strongly linked to the corporate reputation regardless of how bad it may be following a scandal and must take full responsibility for repairing it. The first critical step is to apologize in the most sincere manner, but the leader must mean it. Credibility of leaders are key. At all times, leaders must walk the talk.
• Clear, consistent, and honest communication — Leaders must provide clear, consistent, and honest communication. A lack of open, honest communication when a critical issue arises will quickly become known in the public eye and will then continue to take a heavy toll on employee morale.
  
  In situations like this, employees go into “career survival”; they are frightened, they want help and like the public, they want honest answers. Customers too, will stay away and find different vendors with whom to do business.
• High integrity organization culture — Most people accept that any organization can have a few bad apples or make a mistake that results in a scandal and that it doesn’t mean everyone is tainted with the same brush. At the same time, every effort must be made by leaders from day one to develop and ensure a high integrity organization culture.
  
  This means that leaders do what they say they will do and will be highly visible to the public, and employees, and other key stakeholders alike. Leaders must leave no doubt that employees are expected to know and abide by a code of ethics or standards and ethical behavior or expectations.

• Social responsibility — While their organization may have already turned to corporate social responsibility (CSR)Opens in new window as a means of building and sustaining a high profile and a stellar reputation, the new leader must ensure that the organization is indeed exhibiting CSR in all it does.
  
  Corporate responsibility is a highly public commitment to behave in an ethical or responsible manner both internally and externally to an organization. It involves taking steps to improve the quality of life not only of its employees but also their families, the local community, and society in general.
  
  
  As a result, leaders should make sure the organization continues (or begins) corporate sponsorships for environmental causes or company-wide volunteer efforts, for example. But if this focus is nothing more than superficial window dressing, the organization’s reputation can be further thwarted.
• Proactive crisis or reputation routine management planning — Organizational crises can occur at any time and will surely come in all shapes and sizes. No matter whether it involves a minor misstep or a disastrous event like a major scandal which resulted in bringing in, for example, a change in leadership, leaders must understand the irreparable harm that is done to the organization and its reputation.

And, while their new organization may not have a crisis strategy or reputation management routines in place, leaders must seize the opportunity to put one in place. Of course, they don’t have to do this on their own since they can contact a communications and crisis management specialist immediately, rather than falling into the same traps of those organizations that failed to get outside help for their organization.

Of course, leaders must be fully engaged, visible, and designate someone to oversee this effort.

In addition to the above, as noted earlier, it is not unusual for many of today’s organizations to already have in place some type of crisis management or communication plan in place. At a minimum, leaders should take into consideration the following:

1. When leaders or organizations say “No comment” it is the same as saying “We’re guilty.” Unfortunately, when a scandal occurs, many senior leaders want to withhold comment until they have more information. That is an understandable impulse, but also a wrong one.
   
   In the eyes of the public and employees, the refusal to comment is the same as saying, “We don’t care,” “We’re out-of-touch,” or “Damn, we’re screwed.” Saying no comment can be perceived as not talking or being silent in order to not flame the fire and add to the knowledge of the risk or damaged reputation or to keep the scandal out of public debate for as long as possible. If leaders choose silence versus communicating regularly then they can expect more damage to the organization’s reputation not less!

2. Avoid the “Just the facts ma’am approach.” Leaders must recognize that facts are not enough. Even if the facts prove that the organization may have done nothing wrong, they are not enough. In the midst of a scandal or crisis, facts get obscured by perceptions.
   
   A good reputation rebuilding response should be aligned to the concerns of the organization’s stakeholders and should not rely solely on a mere recitation of facts. Yes, leaders should get the facts out—but do so in the context of the organization’s stakeholder’s most pressing concerns.
3. Full disclosure, transparency and nothing less — that is, leaders should tell the whole story, or suffer the consequences. There is nothing the media loves to expose more than a cover-up.
   
   
   Any hint of things being less than kosher related to a scandal will result in heightened scrutiny, and if there is anything being hidden, then someone out there will dig until it comes out. Leaders need to be transparent and get it all out related to the scandal. It is human nature to want to bury the bad parts of a scandal that haven’t yet gotten out. But trying to bury negative parts of the scandal often extends the scandal and makes it worse.
   
   Information usually gets out anyway, and the lack of forthrightness reinforces suspicions about the organization’s integrity. If a leader thinks something is likely to get out anyway—and it probably will—it is better to get it out on their own terms instead of letting a reporter do it for the organization.

Getting it out on the leader’s own terms accomplishes two things.

• First, it gives the leader credibility in the eyes of their stakeholders, always important if the leader wants their words to be taken seriously.
• Second, it helps to eliminate the information gap that is often filled by hurtful rumor and innuendo and instead replaces it with verified facts, meaning the organization’s reputation takes less damage and can be repaired or rebuilt more easily.

4. The organization and leadership response needs to be about those impacted by the scandal (i.e., the victims): Consider, British Petroleum’s former CEO, Tony Hayward, failed miserably on this count when he told reporters “I’d like my life back.”
   
   
   His comment was about himself, not the eleven workers who died on his rig or the thousands of newly unemployed locals. Especially in the early hours of a crisis, leaders should align their communications—and actions—to human safety and victim’s needs.
   
   Mea culpasOpens in new window, while necessary in some situations, do little if there is no real empathy or sincerity shown for those who are and will be negatively impacted by a scandal.

5. Communicate on how you are addressing or fixing the problem. In order for customers or clients to continue business with the organization, they will want assurance that similar problems will not arise in the future.
   
   Leaders should talk with reporters or have their public relations personnel write a press release highlighting the steps the company is taking to restore trust and rebuild reputation (i.e., steps being taken to fix the problem).
   
   
   Leaders should avoid offering discounts or sales because that will appear as a selfish business boost. There has to be a real commitment to focusing on those negatively impacted by the scandal.
6. Leaders and other representatives need to be human: Scandals that last longer tend to involve arrogance and lies. If the organization did something that is resulting in media and/or customer outcry, a defensive or haughty response could be just the thing to prolong the pain.
   
   Customer satisfactionOpens in new window should be the number one priority for an organization. During a scandal, the organizationOpens in new window should want clients to feel comforted by lessening their concerns. Leaders should apologize if it is called for and instill confidence that they have a plan in place to make things better. A heart-felt, sincere apology in the form of a public announcement, in addition to supporting communication efforts, will humanize the organization, re-instilling faith and/or trust in the organization.

7. Employ strong internal communication. Employees are the best reputation ambassadors for an organization. Leaders should maintain strong internal communications as this will most often boost morale and provide employees with a sense of empowerment. Their confidence in the organization and knowledge of its efforts to alleviate a negative situation can be transferred to the customers, providing reassurance.
8. Leaders and other members of the organization should take the high road. When a scandal hits, the rules of polite society often get forgotten. The organization’s customer service representatives may have to deal with screaming, irate customers, your media or public relations team with skeptical reporters and senior leaders and other organizational members with accusations and embarrassmentOpens in new window.
   
   Reacting with angerOpens in new window to any of these situations will only make matters worse. In times of crisis, leaders must set the expectation that every member of the organization needs to maintain composure and stay on message no matter what level of rudeness they encounter. After all, those impacted negatively by the scandal did not ask for the organization to put them in that situation.

The focus of any reputation management routines or plans of course should not lose sight of the fact that the organization must still do its day-to-day business (i.e., be operationally resilient—keep operations running smoothly despite a scandal).

Scandals will unfortunately involve disruptions to service delivery, for example. leaders must quickly work to minimize any negative impacts on the organization’s operations. When reputation management based scandals occur, the steps for restoring employee and marketplace trust are vastly different than those required for physical disruptions and/or power/IT failure and requires leaders to be attentive to the demands of both rebuilding and meeting the organization’s performance objectives.