February 26, 2011 Crisis: The Ultimate Refiner’s Fire

Volume 14 | Issue 1

If not handled in appropriate fashion, a crisis can burn down a business faster than Mrs. O’leary’s cow destroyed “Old Chicago.” Davia Temin

Crisis – it’s one of the most overused words. Still, in the corporate world, it represents one of the least prepared-for eventualities.

Indeed, the global financial crisis has impacted just about every country, industry, profession and company throughout the world. As it followed closely on the heels of the “dot.com” meltdown – as well as other calamities – we’re all in what I call “crisis overload.”

If companies have survived, they haven’t survived intact: jobs, business plans, departments, product lines, families, homes and lives have been shattered, along with reputations.

But our exhaustion from all of the “sturm und drang” doesn’t mean that “business as usual” will come back any time soon. We can’t ignore the fact that we may face even more crises down the road. That’s the way it works. Just when we feel we can’t take anymore – when we’re bone-tired and think we can’t handle yet one more issue – another crisis comes hurtling from the sky, like an asteroid that threatens our very existence. Like Job, we face crises that come sequentially, one after another, and then another after that.

ADMIT THE PROBLEM
Certainly, the manufacturing sector of the world economy has been hit with successive crises in recent years. No wonder we feel shell shocked. But, in my 20-plus years’ experience as a crisis advisor, I’ve come to realize that the biggest peril crisis-struck businesses face is denial. Boards, chief executive officers and C-suites alike tend to respond to unexpected crisis by going into a period of disbelief, denial, and stasis.

Denial only worsens the crisis. The longer it takes to admit a problem, the longer it takes to come to a solution that would fix or at least minimize the problem. Without solution, events spiral out of control, which damages reputations. Recent business history is replete with examples: BP and Lehman Brothers are but two.

Yet boards and executive teams do not always learn from the mistakes of others. Sometimes, they do not even learn from their own mistakes. Arguably, this is part of human nature, and I’ve seen it happen over and over again. When faced with a crisis, boards – especially in the manufacturing sector – respond by rationalizing: “This, too, shall pass.”

They reason that the crisis isn’t really all that bad or that no one really took notice when a similar crisis happened before. Or, if anyone does care enough to notice, the crisis won’t impact the stock price for too long. Or, if the stock price is impacted, management will take care of the problem and a rebound is just around the corner. Rationales go on and on, and on and on.

MOVING BEYOND DENIAL
Much of my work is at the board level, and involves quickly moving the board and the chief executive officer out of the denial stage, so that they can develop a wise and strategic response, and implement it rapidly. When crisis strikes, there is no room for delay in our current era of immediacy of communication. News travels around the world at the speed of electrons, so an organization must get out front of the news immediately, if it wishes its point of view to be heard. Boards and leadership must arrive at the absolute right answers and actions immediately. Once they determine a course of action, they must communicate those decisions clearly, correctly and sensitively to many audiences, both internal and external.

If Tony Hayward (former BP chief executive officer) taught us anything it’s that statements that might have seemed benign or obvious to the speaker can have negative repercussions around the world. His famous statement – “I’d like my life back” – will live forever in crisis infamy. While it most likely came from exhaustion, no company in any industry can afford to have a senior management figure make such a seemingly insensitive and self-centered verbal gaffe in the face of a calamity. As Hayward’s example indicates, it has become imperative that organizations learn how to think from the outside during times of crisis, and to approach crisis management and communications in a flawless and strategic manner.

But this requires an enormous effort that must be simultaneously wise and carefully orchestrated. True, that’s a complex task. But if it can be accomplished, a company and its brand will benefit. Conversely, if it’s performed poorly – or even conducted in mediocre fashion – shareholder value, jobs and even lives will be destroyed. Have no doubt about that. Indeed, the stakes – in a 24/7 media environment where anger abounds within a rush-to-judgment populace – are very high.

EFFECTIVE STRATEGIES
So what can be done? This question relates to both pre- and post-crisis circumstances. How can organizations prepare themselves at the governance, leadership, strategic and operational levels? I offer these preparatory actions:

Get your strategic crisis plan together: While a real crisis, especially a “black swan crisis (one that is unexpected), rarely conforms to any preset planning, going through the discipline of crisis planning causes an organization to focus at every level on what might occur, and put in place some procedures to cope.

At a minimum, the board and chief executive officer must construct their ideal crisis leadership team. Invariably, the chief executive officer must be the point person, having the last word in all decision-making. At the same time, the chief executive officer shouldn’t necessarily be the person delivering all of the messages. Moreover, his/her team may not be made up of all of the usual suspects on the organizational chart. Because special traits are needed – e.g., immediacy, flexibility, out-of-the-box thinking, rapid and correct response, empathy, decisiveness, personal leadership and insight, to name just a few – not every leader is cut out for crisis leadership. Those who are too slow, too studied or too deliberate (and only able to respond in one speed) would be better suited to support such a team, instead of being engaged in real time.

In fact, this is often when I am first called in to work with a company – if their board or leadership is farsighted enough to perceive the need.

Here are some “real world” scenarios we all recognize:

• Universities putting into place ways to locate and communicate with all of their students, in case outside gunmen or homicidal or suicidal students threaten the community;
• Wall Street, which just before 9/11 had just opened emergency alternate trading floors in New Jersey, in case lower Manhattan was incapacitated;
• Plans for a worldwide pandemic, such as SARS, have been put in place by companies so that they can isolate but support their sick, yet continue operations with reduced work forces;
• And we are all hoping that those who control the cobbled-together U.S. electrical grid have thought of some alternate plans for when the next inevitable blackout hits.

In fact, the U.S. Government, after 2001, convened some of the best scientific and science fiction minds, in order to brainstorm about previously unthought-of scenarios of what could go wrong. Companies, within reason, should be doing the same thing, and then figuring out scalable and flexible plans to deal with these situations.

Practice the team’s communications skills until they are honed to an extraordinarily high level: Like it or not, when a crisis hits, the face that an organization shows to the world – and the things it says, and the way it says them – are almost as important as the decisions made. We live in a world where perception can be reality, or even more important than reality. Style matters, and sometimes even trumps substance. And, even if you mean to do the right things in the long run, but don’t yet know what they are, communicating with the right style can buy you time.

CLOSING THOUGHTS
Public scrutiny of organizations, especially in crisis, has expanded exponentially. Reputations hang in the balance, as does share value and survival itself. Every organization must begin to take these lessons to heart – in order to begin to prepare for the refiner’s fire of crisis.

In the second part of this series, I look at how crisis games can help and explore in further depth the crisis role plays that help stress-test organizations in anticipation of the unexpected.

Davia Temin is president and chief executive officer of Temin and Company Inc. The New York-based business is a global reputation and crisis management, strategic marketing, media strategy and communications coaching consultancy. For more information, visit www.teminandco.com. She also can be followed on Twitter @Davia Temin.

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