A well-handled crisis can actually enhance corporate reputation, but this will only happen if senior management are prepared to take charge, writes Warren Thompson
Are you ready for a crisis?
Does the board and senior management have a thorough understanding of crisis management?
Are crisis plans part of any diversification, expansion, downsizing or investment plans?
Have you identified your major threats?
Does the management structure allow for effective crisis management?
Are crisis simulations conducted regularly?
Do you have a nominated crisis control centre?
Are the communications protocols and technology crisis ready?
Are crisis trigger points in place?
Do you have a crisis contact directory for major stakeholders?
Do you understand the human impacts of a crisis?
Have key spokespeople been identified and do they receive regular and intense media training?
Do you have the capacity to manage a crisis and still run your business?
If you answered yes to all these questions, take some comfort. If you answered no to any of these questions, you could be leaving your organisation unnecessarily exposed.
ONE minute you are a long-established supplier of gas, the next you are being blamed for a declared state disaster. One day you have a successful business selling aviation fuel, the next you are being held responsible for grounding half the nation’s aircraft.
Managing a crisis is a true test of any company’s management skills.
When it comes to a crisis, the chief risk officers are the CEO and the board. They will be judged on the clarity of their management philosophy and systems, and it is becoming increasingly indefensible not to have invested in ensuring a company is able to withstand a crisis with minimum negative impact on its operations, reputation and brand.
Add up the cost of advertising, public relations, sponsorships, networking, corporate entertainment, government relations and community relations – it quickly becomes evident that brand and corporate reputation are anchored in a huge investment over a very long time. This investment is fragile and can easily be damaged, often in preventable circumstances.
An effective crisis management plan is imperative when employees, their anxious next-of-kin, your own management, customers, investors, analysts, regulators, government agencies and a diverse range of stakeholders you never even knew you had are all demanding immediate answers and action.
Prior to the Sydney Olympics, a valve failed on a contracted tanker supplying Shell’s terminal in Sydney Harbour, causing an oil spill. Shell’s proactive approach included pre-dawn letter drops to nearby residents, an immediate expression of regret and the promise of a speedy cleanup.
The response was all the more impressive because Shell itself was not at fault. But Shell realised that Sydneysiders attached enormous value to the harbour and that community outrage would be high, particularly as the spill occurred just ahead of the Sydney Olympic Games. The company had to move fast and, if necessary, ask questions later.
What Shell recognised was that, whatever the legalities, the company had to accept some ownership of the problem.
Shell may not have done its industry peers any favours – its proactive approach has set the bar even higher when it comes to managing a crisis. The community will now perceive a lesser performance as second rate and unacceptable.
Silence is not an option in the face of confusing advice and contradictory evidence.
If the CEO, or their designate, will not front up to the media during a crisis, the media will find someone else who will. It might be police at the scene, a regulator or even a disgruntled former employee.
This complicates matters, takes the media agenda out of your control and reduces the chance of getting your key messages into the public arena. In the communications age, offering ‘no comment’ leaves the perception of guilt.
The public has come to expect that it will be told how a company is managing a crisis. It is critical that a credible and convincing person takes centre stage during the first few hours – the ‘golden time’ – to show control, reduce misinformation, stop innuendo and to proactively manage the media agenda.
Unfortunately, too many CEOs are ill prepared for a serious crisis. It comes as a hard lesson that the roles of principal spokesman and crisis team leader can be relentless, exhausting and sometimes incompatible.
At a time of crisis the conspicuous presence of the CEO is a symbol of strength and control that can reassure a diversity of stakeholders. And the strength and control of the CEO can only be based on a good team approach.
Shell’s experience illustrates that it is preferable to err on the side of disclosure even if it has some impact on the company’s legal position. At the end of the day the court of public opinion does not have an appeal process and credibility, once lost, is very hard to win back.
Companies stand the best chance of containing incidents at the level of ‘issue’ or ’emergency’, rather than having them escalate into a crisis, by combining the right people with current and rehearsed crisis response plans.
A common frame of reference -the crisis plan – is required so the management team knows what to do, and, importantly, how to do it under pressure. A crisis plan ensures there is consistent performance on the whole range of fronts that must be tackled in a crisis, rather than peaks of heroism and troughs of omission.
Companies in crisis must be upfront and respond quickly to their identified stakeholders, such as the public, customers, suppliers, investors, regulators, governments, employees and the media.
For instance, the impact on employees and their families is too often overlooked in the midst of crisis management. This group is vital in terms of recovering from a crisis, but can be alienated if not treated well.
It is also a recipe for disaster to try to establish working relationships with government agencies and regulators for the first time during a crisis.
It is of great comfort to share-holders, the CEO and the board that a company can withstand a media ‘feeding frenzy’, the intense scrutiny of a coronial inquiry or court case, and even hostile shareholders at the AGM. But this can only happen when a robust, well-rehearsed crisis management plan is in place to protect market value and mitigate damage to employees, consumers, third parties, operations, assets and corporate reputation.
The key elements of a crisis plan are thorough planning, a trained team and the protocols to empower the team to act. Regular threat identification and analyses can eliminate some threats and set the agenda for developing response plans for threat containment.
Ensuring that crisis trigger points are identified and severity classifications are understood will avoid confusion and prevarication and encourage proactive crisis management strategies. A triage process to ‘staunch the bleeding’ is essential, but the crisis team can’t forget that the business still has to operate.
A CEO’s mettle is truly tested during times of crisis. The CEO is on centre stage – at no other time is their leadership more apparent or more critical to the market value and long-term future of the company.