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BULLETPOINT FOCUS REPORTS FOR THE THINKING MANAGER

Crisis Management

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2 Crisis, What Crisis?

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4 Planning for Crisis

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6 Leadership in Crisis

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8 When Disaster Strikes

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10 Communicating Crisis

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11 Reputation in Crisis

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13 Learning from Crisis

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14 In Crisis ... The
Unofficial Version

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15 Crisis Assessment

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16 References &
Further Reading

The Leadership Skills Portfolio REPORT 4

CRISIS MANAGEMENT
The high-profile terror attacks that make up the public perception of crisis are a
relative rarity: most crises come not as bolts from the blue but as ‘problems’ - and
often it’s mismanagement of their early stages that escalates them to crisis point.

This report is about coping when the worst happens:

G preventing the crisis in the first place: how to spot the tell-tale signs of a
corporate disaster waiting to happen
BULLETPOINT
FOCUS REPORTS G planning: for crises ranging from product recalls to floods

G the element of surprise: how to respond to what you could never have predicted
I N S I G H T
G the who and how: what makes a good crisis leader? and how do they get their
INSPIRATION teams behind them?

SOLUTIONS G defending your corporate brand: how to fight back against attacks on your
company’s reputation
K N O W L E D G E
IN JUST 16 PAGES G avoiding repeats: how to learn from crises

The report ends with a diagnostic guide for your own crisis plan. Is yours fit for
purpose? The guide will help you fill the gaps now - before crisis hits.
Chapter 1

CRISIS, WHAT CRISIS?


Crisis [noun]: Any problem or disruption that triggers negative stakeholder reactions that
NOT THE ‘WAY’
could impact the organisation’s financial strength and ability to do what it does.
Wal-Mart: US retailer faced Institute of Crisis Management, definition
allegations of low pay,
pressurising suppliers, and
‘forcing’ its way into communities; Crisis [noun]: Where the hairs on the back of your neck stand up on end and you have that
a similar tale to Tesco in the UK sinking feeling in the pit of your stomach.
but the US firm did just about Journal of British Administrative Management 2005, definition
everything wrong:
G defended itself: through what
purported to be a grassroots
blog but was in fact funded by
Companies in crisis
Wal-Mart; Edelman, the PR
firm that came up with the idea The clarity of the first definition belies the fact that there are more kinds of crisis in more
and wrote the blog, got sectors in more markets than ever before - from natural disasters to product recalls - and firms
suspended from professional may themselves have contributed to the growth by:
associations when the gaffe
was blown; Wal-Mart got more
criticism than before G dispensing with tacit knowledge
downsized middle managers were often the ones who best understood how things worked
G attacked labour groups: on its
website for criticism of its anti- in practice and had a sense of when things ‘weren’t right’
union stance; but had to pay a
court fine of $78.5m for violating G re-engineering the business
Pennsylvania’s labour laws by may work to make an operation leaner but can be so tightly coupled that it doesn’t prevent
forcing employees to work
through their rest breaks and threats from escalating and leaves insufficient slack for managing them when they do
‘off the clock’
G exploited the dead: settled a
G thinking in the short term
class action suit involving 73 research: ‘corporate memory’ has been downgraded; firms lack a longitudinal view of how
former employees who claimed a crisis has occurred; narratives tend to be partial and fragmented - also makes it difficult
Wal-Mart had taken out life to trace what went wrong and when
insurance on their family
members and collected the
benefits when they died; the
firm paid each family $50K and TOP 5 CRISIS SITUATIONS
committed to stop buying
insurance on its own employees So what’s a crisis? Institute for Crisis Management: the top (most frequent) crises are:
G found fingers in the tills:
former vice-chairman Tom 1 white-collar crime
Coughlin pleaded guilty to
stealing merchandise and 2 (financial) mismanagement
money from his own stores
3 labour disputes
LITTLE GREEN APPLES
4 workplace violence
Industry experts, researchers and
assorted voices of reason weren’t 5 natural catastrophe
enough to overcome the impact of
a TV appearance by actress Meryl
Streep holding her child and
claiming the waxy coating on
apples was a health risk; male Is it really a crisis? How much trouble are we in?
industry reps immediately piped
up, lambasting her for ‘ignorance’; Research: crises share more features than just the triggering of negative reactions. Take for
the critics were right but they
example the 2003 outbreak of the Novo virus on a P&O cruise ship which involved 600
forgot a few essentials - they:
passengers + crew, confining them to cabins:
G had no clout: had the facts but
not the voice
G they involve a range of stakeholders: P&O management and staff, customers, Greek
G tried to co-opt wrong group: and Spanish govt agencies, the media and lawyers who encouraged passengers to sue
women buy apples and look
after kids - they were hardly
likely to mount a pack attack on G there are time pressures that make the need for a response urgent: 17-day cruise
a latter-day maternal heroine was (obviously) cut short - but P&O had to speedily arrange for medics to come aboard
G underestimated the celebrity
factor: they’d never starred in G they’re precipitated by a surprise: P&O was shocked by the outbreak - and equally
The French Lieutenant’s shocked by the response of the Greek and Spanish authorities, which closed their borders
Woman; who cared what they
said?
G they tend to be ambiguous: not only the scale of the outbreak but also political
With the public furore raised by intervention and media interest made the crisis more opaque and difficult to manage
Streep’s appearance, it took a
government report to vouch for
apples’ safety. G they pose a serious threat to strategic goals: passengers communicating with family
onshore and media scrutiny of past outbreaks on P&O ships added to pressure on the firm

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Chapter 1
CRISIS WHAT CRISIS? cont’d

Drivers of disaster DON’T MESS WITH THE


HOMEBOYS
So that’s what crisis is - but how do firms get there? Over-emphasis on measuring against Burberry: a mishandled factory
targets can obscure the real drivers of crisis - the ‘operating dynamic’ ie human and closure left the luxury brand
organisational factors - because managers tend to believe they can’t be identified, quantified looking ropier than a chav’s
ponytail; if becoming the
or changed. The 3-stage slide into catastrophe: downmarket (knock-off) brand of
choice weren’t bad enough, the
1 hidden phase: lassitude - an ‘internal pathology’ usually invisible inside and outside the ‘quintessentially British brand’
company that can’t be spotted by conventional due diligence but can lose the firm a third of had one of its own models (read
stakeholder), actor Ioan Gruffudd,
its value; becomes evident when the firm tries to mobilise internal resources to meet an turn on it after it said it would
unexpected challenge and flounders close its South Wales factory and
transfer operations abroad; the
2 subtle phase: crisis becomes internally and externally visible - but only if viewers know firm underestimated the gift it
where to look; described as ‘corporate shortness of breath’ - an accident waiting to happen gave anti-closure activists who
could then question the firm’s
3 overt phase: shows up as underperformance on the bottom line, negative press reports, ‘British’ credentials (the UK in fact
accounts for only 10% of
aggressive Internet chat, or a call from the Serious Fraud Office production) and the reputational
dent caused by closing a factory
in an area of high unemployment;
CRISIS X 3 with the celebrity Taffia - including
Tom Jones, Rhys Ifans and Bryn
Terfel - signing up to the anti-
Once the crisis is underway, holding tight and riding it out isn’t an option; instead, closure campaign, a Burberry
managers need to fight on three fronts: spokesman stumbled into
admitting that it had no plans to
G management: develop strategies to identify, prevent and respond to risks before they publish employment standards
escalate such as work hours, pay, breaks,
right to time off, set for its
suppliers in markets where it
G operational: minimise the damage through effective team management and planned to transfer the work;
stakeholder involvement eg using the media to reassure stakeholders why? because to do so would
likely invite criticism of Burberry
G legitimisation: re-secure the firm’s legitimacy in the aftermath of the crisis via eg from campaigners and
open-door policies, inviting those affected to inspect operations consumers when its suppliers
failed to live up to them.

A QUESTION OF ETHICS
Crisis indicators Astra USA: just as pressure
reduces inhibitions and shows
Long before it’s written on the bottom line, managers should be alert to not-yet-visible signs that people as they really are, a crisis
things are starting to go wrong - they act as the corporate polygraph, testing stress responses: activates a company’s core
beliefs and reveals its ethical
identity both in terms of financial
G root causes of organisational (and human) behaviour: eg distrust, bureaucracy and and workplace wellbeing - ‘that
low performance expectations; indicate trajectory of the firm is downward and symptomatic sinking feeling’ can trigger,
of corporate indecisiveness, lack of accountability and failure to acknowledge work done; instead of panic, a down-the-line
can block performance approach to fairness: Swedish
pharmaceutical firm Astra
showed its ‘ethical rationality’
G parametrics: eg production numbers, percentage market share, staff satisfaction as over allegations by six employees
measured by regular surveys; show up earlier than financials that a US executive had fired
older, married women and
pressured new, younger
G non parametrics: natural disasters and random acts of violence are relatively rare - most replacements to have sex with
crises show early warning signs in: him; despite the executive’s initial
denials, the pharma:
O data: technical, research and operating systems reports
G fired the accused and other
O individuals: listen to warnings from employees about organisational processes and executives
decisions; even if you subsequently reject their suspicions, welcome whistleblowers
G launched an internal
and devil’s advocates investigation
G set up a hotline for employees
Conversely, firms are better able to ride and survive a crisis if they learn first to build ‘healthy’
to call investigators
organisations in non-crisis situations. Instead of focusing exclusively on monitoring, they can anonymously
develop a trusting workforce eg by
Timely communication and
O supporting whistleblowers unwillingness to compromise on
employees’ wellbeing reinforced
O spreading positive stories about their observations the firm’s awareness of its own -
and its stakeholders’ - values.
Research: under such conditions staff won’t hide problems when they can still be fixed.

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Chapter 2

PLANNING FOR CRISIS


How to define the crisis point
JUST FLYING OVER ...
As a Deutsche Bank report What if it’s too late for early warnings? If the initial signs have been and gone unnoticed, it
hypothesised pandemic may not be too late to see a crisis coming before the sinking feeling sets in:
meltdown, US fast-food firms,
anticipating a bird flu pandemic, G plan for internal crisis rather than looking ‘out there’
took their own preemptive
approaches:
despite common wisdom and (relatively rare) Acts of God, crisis events are more likely to
be caused by internal forces eg fraud and strikes than external ones eg floods
G Bojangles: focused on
employees: ‘the healthier we
keep our employees, the more G smell the smoke
[of them] we’ll have to serve our most crises ‘smoulder’ before catching fire; monitor potential sources of crisis; research -
customers’ - and introduced fish two-thirds of crises should never reach crisis-point; the whole firm - top to bottom - should
G Church’s: reassured franchises be on the lookout
with regularly updated bird flu
info designed to be passed on G rethink crisis as ‘potential loss’
to customers and seek to minimise it; evacuating a building after a hoax bomb threat represents a loss in
G KFC: went straight to customers terms of productivity but failing to evacuate represents far worse ie loss of life and
with a ‘food safety assurance’ potentially reputation; product defects and recalls can be a costly distraction eg Sony’s
on packaging and outlet laptop battery recall slowed the launch of PlayStation 3
windows: ‘Rigorously inspected,
thoroughly cooked, quality
assured’
G El Pollo Loco: took consumers TESTING, TESTING
to the experts - included info
about bird flu on its website and
linked to an external, credible
But does it work? Simulation testing doesn’t guarantee the plan will work - but it’ll tell
info site you if it won’t:

G create multiple scenarios: does it set out each employee's role in the event of each
emergency? are priority actions listed first? are the contact details correct?

G update with new data: eg new premises could present a new set of risks - it’ll
involve giving new maps and contact details to emergency services
ADVANCE PREPARATION
Oklahoma: advance preparation
for crisis speeds recovery - of
employees, morale and trust.
Coming up with a plan
Lessons learned in ‘emergency
emotional care’ from the Following a plan prepared in advance enables leaders to switch to prioritisation vs making
counselling team sent in after the knife-edge decisions in a hurry and with limited data. But what should the plan look like? To
Oklahoma bombing: formulate a crisis plan:
G let them know what’s coming:
pre-brief teams on what they're G define ‘crisis’: or critical incident for your firm eg the death of an employee’s spouse
likely to encounter
won’t bring BP’s operations to a halt but it might adversely affect a small firm dependent
G monitor teams for signs of on that worker for its smooth running
stress: and offer counselling if
needed
G evaluate existing resources: eg employees trained in first aid
G demobilise teams on the way
out: ask them to describe their G set up a first-response team: establish who’s authorised to call for assistance or make
experiences and pass on
problems for leadership referrals over employees’ wellbeing; create a document identifying who will do what - with
involvement contact details
G address individual issues: in
one-to-one counselling G train first-responders: ensure training covers common reactions to stress eg loss of
meetings sleep and depression
It doesn't just work for terror
attacks; study recommends G identify family liaison people: how managers deal with families of affected employees
managers counsel employees can boost or sink a corporate reputation; treat employees’ immediate families as
after redundancies, robberies, extensions of employees
accidents or (especially for
frontline staff) physical assaults.
G develop communication channels: distribute the list of emergency procedures and
resources to all employees; include contact details of post-crisis counsellors

G run role-play sessions: simulate responses to a disaster eg to check awareness of initial


meeting points; ask senior managers to follow up immediately with accurate information
and amend the crisis plan if necessary

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Chapter 2
PLANNING FOR CRISIS cont’d

Meet the gang HOW TO CREATE A CRISIS


Never mind planning for crisis -
The most important element of any crisis plan is who will implement it. Firms often face creating one can overrcome civil
reluctance from the best people for the job because the rewards are few and the crisis might service inertia and hostility to new
never happen, and opt for making it a ‘nice-to-have’ part-time role for the under-stretched. ideas; when Sir Humphrey
Managers can optimise a crisis-management team if they: threatens to set up a committee
to look at (read: dissolve) an
issue, it recommends:
G separate corporate vs crisis leadership
the crisis response team should remain aloof from regular management, protecting facilities G decide the solution - then the
problem: what do you want the
and people while the bosses keep the business running; but it takes a change in the way crisis to do?
managers routinely think - away from return on investment towards managing loss:
G find the data: charts, graphs
will help you create a nightmare
O don’t expect short-term revenues: continuity planning could save the company - but it scenario eg social meltdown
won’t return a profit in the short term unless they follow your plan
G publicise the plan: and the
O re-think rewards: to avoid penalising the company’s defenders; rewards based on eg dire threat of social meltdown; if
meeting revenue targets won’t work for continuity planners and crisis managers with the case is weak, call it a
other, non-revenue-generating priorities ‘pending’ or ‘quiet crisis’
But the research advises against
O be prepared for sacrifice: not just in terms of returns but in opportunity cost - crisis over-using the strategy:
planning drains time, people and financial resources G it diverts energies: to a debate
over whether there’s a crisis vs
O institutionalise crisis planning: by lobbying business and support units across the firm getting them moving
- lobby for the inclusion of continuity in the planning cycle and in the launch of all new G they might not buy it: if senior
ventures; a crisis plan is useless if it stays with eg the security function operators don’t bite, you’ll lose
credibility

O plan for the long haul: managers can’t just brush off an old plan when the crisis hits; it G it seldom works: how quiet
needs constant testing, questioning and monitoring can a crisis be?
Tips for managers with a mission
G layer crisis managers to cause crisis:
into executive authority, the command (decision-making) level, and an incident response G the point is to meet the firm’s
team to deal with the situation on the ground; make command responsibilities clear (‘X will mission, not make changes for
do Y in Z circumstances’) and ensure there’s a second person ready to take over each role their own sake
if the main contact is unavailable G talk to employees - ask them
what’s worked in the past, what
G pool available talent hasn’t and what might work now
research: faced with a crisis, managers are more likely to rely on personal judgement and
go with intuitive (or, less often, negotiated) solutions vs those based on data; need to rely GLOBAL HEALTH CRISIS
on diverse experience and expertise to avoid groupthink and broaden judgement; the SARS: lessons for managing a
answer to ‘which option should we choose?’ needs to be based on the strength of available cross-border crisis from the
options vs the boss’s gut instincts epidemic that killed 800 and cost
business $60bn (£30bn):
G communicate consistently:
WEED OUT POTENTIAL CRISIS-CREATORS between HQ and operations in
other countries; avoid confusion
by ensuring regular updates to
Most crises are rooted in people - but because of familiarity, misplaced trust, employees are consistent
unwillingness to confront people, shyness they’re often the last place from which
G rely on facilities managers for
managers expect a crisis to sprout. So crisis planning must involve a robust people information: ie for the true
assessment. situation on containment efforts;
use info to reassure employees
It might sound like a job for the FBI, but ‘profiling’ potential miscreants is straightforward. G postpone partnership:
Security consultancy Kroll suggests that today even smaller firms are more likely to: companies will likely avoid visits
and meetings during
G dig deeper during background checks: to include eg a reliable address history vs contamination scare
one provided by the applicant and a criminal records search G phone clients: expect them to
cancel meetings but keep them
G screen all employees, not just managers: temps and consultants (eg an IT in the loop
consultant with systems access) could pose as great a threat to the business as full- G don’t expect a warm welcome
time managers home: if you’re returning from
an infected area, HQ is unlikely
G adopt sophisticated methodologies: eg identifying ‘liabilities’ in applicants’ to let you anywhere near the
backgrounds, verifying education and employment histories across countries place - at least for a couple of
weeks

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Chapter 3

LEADERSHIP IN CRISIS

ROLL OVER A test of character


GSK: arguably played into its own
Coping with crisis is a test of character and leadership, as well as planning; learning to adapt
crisis by resolutely defending
pricing for its HIV treatments before a crisis happens will make efforts to manage one more successful, if not easier, when
against the South African it occurs. If the worst does happen, employees, customers and suppliers want to know the
government’s legal challenge; as company’s leaders are ‘large and in charge’. How to be a crisis-competent manager:
pressure groups and headlines
accused him of heading a ‘global
serial killer’, then new CEO Jean- G develop adaptive capacity
Pierre Garnier quickly took charge all crises are different and require a different leadership style - particularly for
of the newly merged firm and: communicating or handling new information to cope in eg a natural disaster or a case of
G came out fighting: Garnier employee sabotage
refused to downplay the
problem - used his inaugural G identify who you need to lead
broadcast to employees to
trust between internal and external audiences will define success; leaders need to
outline the ‘enormous
challenge’ of access to AIDS influence key audiences among eg trade associations, consumers and pressure groups -
medicines each with its own interests
G showed willingness to
compromise: agreed secretly G expect the worst
to speak to South Africa’s worst-case scenarios build confidence in the firm’s ability to cope; at any one training
government, and other session the army trains tank units to fight 90 enemy tanks with only five of their own;
pharmaceutical firms; resulted
despite initial defeat, confidence grows that the five will win eventually - even though the
in an out-of-court settlement
brokered by UN Secretary scenario is unlikely; the principle? train for the worst and you can handle anything
General Kofi Annan
G admitted mistakes: initially
G make (and copy) the best
dismissed pressure groups as of leadership opportunities; identify who you would choose to lead a crisis and emulate the
irrelevant to a court case over characteristics that explain your choice
pricing; later recognised that
GSK had ‘lacked the visionary
clarity to see that it would be a
spark in a powder keg’ BEYOND FEAR
G ... and learned from them: eg
to choose battles carefully; “We Keeping a cool head means getting past ‘the freak-out point’ - the pit-of-the-stomach
had to defend the principle of anxiety first-time parachuters feel when the plane door opens (and managers feel when
patents, but South Africa was faced with a crisis); how to overcome it:
the wrong place to have this
fight”
G know you’ll survive: facing down the fear is as important as success
Garnier’s tips for leaders under
pressure: G focus: concentration can overcome stress
G think ahead: start educating
the media about issues while
G react: but don’t overreact; and remember that inaction equals lost opportunities
they’re still warming up - before
they become hot
G don’t rely on being right to
boost your PR: GSK had The ‘crisis organisation’
already offered to discount HIV
drugs but the HIV-sceptical
government refused; Garnier
Crisis managers need to be able to cope when the firm’s interests are threatened, the effects
eventually saw the of actions are uncertain and a speedy decision is necessary; faced with doubt, even chaos,
government’s response was what happens?
irrelevant - that people saw
GSK’s defence as tantamount
to suing Nelson Mandela G stress takes over
stress associated with decision-making under pressure isn’t conducive to good decisions -
G centralise control: maintain
close contact with local
rather it’s associated with rigidity, low tolerance and increased error
managers and operations;
insufficient contact between G it can bring out the worst
local management HQ led to the crisis ‘response environment’ encourages the development of groupthink,
the courts because ‘they were
overestimation of the decision-making group, closed-mindedness and increased uniformity;
fighting the local cause without
looking at the consequences’ just as pressure reduces inhibitions and shows people as they really are, a crisis activates
a company’s core beliefs and reveals its ethical identity both in terms of financial and
G keep your head down: after
workplace wellbeing
initiating a programme to supply
cheap HIV treatments to
developing countries, GSK G it becomes a habit
declined to participate in (multiple) there’s a danger that ‘crisis organisations’ evolve permanently out of a specific crisis - they
South African pricing disputes learn from feedback and handling the crisis, but also develop a crisis mentality that makes
sticking to a strategy difficult

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Chapter 3
LEADERSHIP IN CRISIS cont’d

Learning to say sorry


COURAGE UNDERGROUND
Taking the rap for what’s gone wrong - and responsibility for putting it right - is the first step to The London bombings on 7 July
managing a crisis and rehabilitating a corporate reputation; crisis managers should: 2005 were the worst attacks on
the capital since the Blitz but swift
G come out quickly response and ‘business as usual’
approach avoided chaos; London
vs Cadbury Schweppes, which apparently knew in January 2006 that there was a danger
Underground:
of salmonella contamination in its chocolate; by August - six months later - it still hadn’t
managed to construct an apology that didn’t come across as insouciant G got back to work: most Tube
lines were operating by the next
morning; CEO Tim O'Toole says
G make it unequivocal - and specific speed=safety - ‘if we didn't
acknowledge precisely what’s gone wrong - mealy-mouthed apologies won’t cut it; Firestone reward people with chaos (the
CEO and chairman overcame initial reluctance to apologise and went for it wholeheartedly; in terrorists’ aim), they would likely
a speech in front of the US Congress, CEO apologised to the government, the American leave us alone’
people and the families that the firm’s faulty tyres had killed; then the magic words: “I accept G rallied frontline employees:
full and personal responsibility on behalf of Firestone for the events” across the entire network;
employees assuming local
control enabled the Tube to
G offer explanations evacuate 250,000 people
saying sorry will only help restore trust if you can also explain what happened at length - caught underground without a
time to dust off the diagrams single injury
The work started long before not
G ... vs excuses just with a crisis plan but with a
a British army colonel acquitted of sanctioning inhumane practices in Iraq when a leadership approach that:
subordinate was convicted of abusing and killing a prisoner; acknowledged that prisoner’s G relied on initiative vs orders:
family had been ill-served but claimed he’d been away from the scene and claimed management philosophy -
responsibility belonged to his men, army lawyers, Brigade HQ, the Attorney-General, his leadership on the frontline beats
orders from the front office;
superior officers and then PM Tony Blair; for good measure, he also suggested that it was
training and development
surprising soldiers behaved as well as they did in trying circumstances programmes stress belief in
employees’ own abilities as well
G back it up with credible promise quickly as knowing multiple roles
to employees eg ‘We’ll sort this out’ and customers eg ‘We’ll deliver what we’ve promised’; G replaced acrimony with
study of relationship between promises and recovering trust found that promises help in the accountability: commits to
early stages because they’re an indication of goodwill, but subsequent actions must convey ensuring employees have the
resources to get their jobs done
the same message
and to enforce accountability if
they don’t vs previous
acrimonious short-term labour
relations; hammered out
POLICY CRISIS DOWN UNDER medium-term labour agreement
outlining workforce and
Queensland premier Peter Beattie sought to avert successive electoral crises caused by management commitments
the threat of jaded voters defecting, with two simultaneous (and regularly used) G used myth to his advantage:
strategies that won him two landslide election victories: O’Toole, an American, claimed
that, despite initial resistance to
G the ‘mea culpa’: anticipates and circumvents media criticism with a preemptive his being in charge of an iconic
admission of wrongdoing, acceptance of personal responsibility and a humble apology British institution, ‘they believe
that Americans can get things
usually given at a press conference; the opposition’s ‘re-Pete’ advertising campaign
done’
ridiculed his penchant for being sorry - but it didn’t work with voters
G instilled can-do spirit: with
G the ‘backflip’: responds to criticism by calling commissions of inquiry and promising to emphasis on competence,
training and cheerfulness;
act on their findings
encourages employees to seek
national vocational certifications
How did he do it? Beattie aka ‘Mr Fixit’: (NVQs)

G brought peripheral strategies into the mainstream: by using human error as a first G trains for crisis: all employees
vs (as is customary) a last defence participate in crisis simulations
eg biological attacks -
contributed to effective
G changed the perception of risk: by recasting the management of political risk to response on 7/7
make mistakes okay, makes possible more innovative public policies
G provided a vision: 'A world-
G made error into a positive: admission that he’d been wrong underscored vs class Tube for a world-class
city’ - and (to avoid laughter at
weakened public perception of strength and effectiveness the state of the track and
signals still operated by pulling
G looked flexible vs indecisive: backflips usually come in response to public criticism giant brass handles) spun it in
and negative feedback - they showed he was listening terms of ‘heritage’

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Chapter 4

WHEN DISASTER STRIKES


Managing the unexpected
IN THE EYE OF THE STORM
There’s more than one way to
So what happens when the crisis really does come out of the blue eg a terrorist attack? It
deal with crisis; tips from three isn’t just a question of compassion for employees (and concern for their safety); study -
major US firms based on their productivity declines by around 80% for the two weeks after a crisis.
experience dealing with the
impact of Hurricane Katrina:
If the worst comes to the worst, this is how experts recommend managers prepare for eg a
workplace pandemic:
1. Marriott International:
CEO JW Marriott, kept the lines
of communication open: G set the baseline
identify the bare minimum the business needs to function - think number of employees in
G emailed to safety: shifted its
email system out of New each department and skills transferable between departments
Orleans to Washington;
helped the firm to find out the G send them home
status of each hotel send employees set up for remote working home; for the others, use consumer tech
G launched publicity drive: they’re likely to have at home eg broadband and webcam
helped find 2,500 of 2,800
people in the region;
suppliers provided water and
G identify key contacts
food for communicating with employees and customers and suppliers; decide in advance who
needs to communicate with whom
G helped employees get back
on their feet: gave them
(discounted) rooms and for G be sensitive
some jobs elsewhere longer term, extreme measures (eg redundancies) if the company loses business still need
2. Starbucks: CEO Howard to be handled with due process
Schultz came prepared from
previous attempts at coping
with crisis; his mantras:
G learn from one crisis at a CONFLICT VS CONSENSUS
time: used a script
developed after the 2001 Research distinguishes between two categories of crisis:
Seattle earthquake, when it
lost the use of its HQ for
more than a year
G conflict-type crisis: eg civil strife, violent attacks in the workplace, the consequences
of corporate malfeasance; the company may be implicated (in eg wrongdoing) or may
G help employees get in at best be in an ambiguous position - either way, crisis is likely to be met by a shortage
touch: silence breeds panic;
prepared in advance by
of what former ICI manager John Garnett described as ‘a reservoir of goodwill’ - ie a
creating an emergency text- resource based on corporate reputation
messaging system, then sent
a voicemail message to G consensus-type crisis: eg natural disasters and terrorist attacks - public sympathy is
2,300 people the night before more likely if only because everyone’s in the same boat
Katrina struck asking them to
text in their needs
G set priorities: (1) figure out
who’s where - account for
staff; (2) assess your First response
resources: what will help you
cope with crisis?
Research from attacks in the US eg from the Oklahoma bombing and 9/11 suggests
3. McDonald’s: CEO Jim Skinner employees who’ve experienced - or even witnessed - attacks can face long-term
took it from the centre - and psychological problems; after ensuring employees are out of danger, managers need to act
followed the plan:
swiftly to avoid longer-term mind-bending effects of crisis:
G set up command HQ: in
Chicago HR service centre - G intervene as soon as possible: within a few days; any longer and the problem may
handled 3,800 calls
become persistent, chronic and much more difficult to treat; immediate response also
G opened for business: and provides reassurance that people aren’t alone
did better business - saw
opportunity as an oasis for
devastated people G bring it down to brass tacks: urgent human needs are simple - reassurance, accurate
information and ‘permission’ to be upset
G decided in advance to
reopen and rebuild: of the
280 outlets closed, most G start with small groups: to assess need and impact before offering one-to-one
reopened shortly afterwards; counselling where necessary - saves costs but makes sure the traumatised don’t fall
committed to rebuilding all of through the net eg because they’re resistant to ‘therapy culture’
them
G recognise that no-one is immune: emergency workers eg firefighters can experience
trauma after crisis events - though the triggers may be different than those for ‘civilians’
and the threshold may be higher

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Chapter 4
WHEN DISASTER STRIKES cont’d

IN THE AFTERMATH OF VIOLENCE IN THE EYE OF THE STORM


(CONT’D)
Speed and empathy are the keys to getting back to normal after surprise events eg
natural disasters and attacks. According to a study of more than 800 postal workers, Home Depot: CEO Bob Nardelli
supporting employees after violent incidents reduces short-term damage and long-term says earlier crises eg Florida
absence. It’s best handled in two phases: hurricanes taught the firm how to
react. Lessons applied to Katrina:
1 first-line support: immediate response - take over if worker can’t carry on, organise G prepare for the next crisis:
repairs, make sure they aren’t going home to an empty house after each crisis, the firm does a
post mortem, notes lessons for
O react promptly: increases employees’ perceptions of support next time eg Florida taught the
firm which products were in
short supply - stocked up on eg
O normalise the situation: don’t drag it out - offer support to ‘get back to normal’ insecticide and water
quickly
G amass resources: organised
generators to keep stores
O empathise: line managers need to show empathy and talk to the individuals affected affected by Katrina open and
- the personal touch matters drafted in 1,000 extra people to
run them
2 follow-up: after the initial crisis management, managers can back up earlier efforts: G shut down: shut stores quickly
in order to get them back open
O understand longer-term impact: research - debriefs won’t get traumatised employee faster
back on track; they may do more harm than good

O reassure: eg that symptoms of trauma are normal - and point them towards sources Alltel: CEO Scott Ford leveraged
of information and support all his contacts to ensure
employees were safe:
G recognise the humanitarian
crisis: “Just getting everybody
The dreaded call taken care of was the first thing.
The rest of the stuff is frankly
just money”
How do you make a disaster into a crisis? Ask Robert E Murray, CEO of Murray Energy - the
owner of the Utah mine that recently buried six miners in an underground chamber, whose G use all resources: used mobile
networks to track down last
miscommunication started out as simply confusing but declined into ranting. missing employee - worked with
the army via an ex-colonel,
He started out well, jumping into his plane as soon as he heard of the accident, taking charge now-employee, to get her out;
“If I’d asked the head of
of the rescue operation and talking to the press ... so far, so good (vs worst-practice - Exxon marketing, he’d still be sitting
CEO took too long to get to Valdez and to take stock of the 1989 oil spill that turned into one here”
of the world’s worst (and worst handled) environmental disasters); but then Murray:

G slagged off the press: and everyone else - including union organisers (who’d suggested Gap: CEO Paul Pressler focused
on providing immediate help -
that retreat mining - widely acknowledged to be dangerous) could have caused the collapse and involving employees in the
effort:
G veered miles off-topic: with the families of six men still desperate for a breakthrough, G take care of immediate
lambasted environmentalists for their crusade against global warming as ‘an affront to the needs: offered housing and
coal industry and to the American economy’ - hardly uppermost in the families’ minds; clothing allowances
panned by critics as ‘callous’ and ‘damaging’ G organise access: extended
pay for 30 days - and
G contradicted the evidence: insisted an earthquake had caused the collapse - even when encouraged workers who lived
paycheque-to-paycheque to set
seismologists said the collapse had caused the tremors that had stalled rescue attempts vs up direct deposit so they could
best-practice: wait until the evidence is in before you start dispensing answers get hold of their pay
G empower the workforce: in
G disappeared: without explanation after three rescuers were killed; families said they felt order to build a sense they
‘abandoned’ were participating in the rescue,
Gap allowed employees to
transfer paid time off to 1,300
Lessons from the fiasco for crisis communicators: employees affected by Katrina

G be calm and honest - but optimistic: avoid spin but make it clear the firm is pulling out
the stops; despite his rantings and ‘near-insanity’, Murray got some praise for ‘candour’

G resist pressure to give immediate answers: when information is incomplete or


changing minute-by-minute; fight the urge to speculate

G focus on the task at hand: in this case the safety of the victims - not extractives
industry critics

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Chapter 5

COMMUNICATING CRISIS
In the eye of the beholder
WORLD BANK BIRD CRISIS You can’t leave it to PR ‘minders’ to rescue the business when the press uncovers the world’s
Faced with bird flu in some of its largest ever case of embezzlement, a hamster’s head in your flagship product, or board
markets, the WB communications members in bed with a bevy of minor celebs.
team focused on one message -
‘our employees’ safety is our
priority’ - then looked for channels:
Salvaging the corporate reputation is the bosses’ job - and if investors, consumers and
employees can’t see that you have demonstrable faith in the firm, they won’t, either.
G online interviews - print and
audio: with those leading the
in-house work on bird flu These days a crisis is more likely to be one of perception than eg all-out wildcat strike because:

G the bird flu website: included


O news travels fast: while companies were deciding whether or not to have an intranet,
internal policies and action
plans, links to external sources anti-corporate pressure groups were Facebooking their way into a global social network
of activist malcontents - as a result, a film made by a local crew, of rats scurrying
G regularly updated Q&As: with
a space for employees to
around a New York KFC-TacoBell franchise made it to YouTube and millions of
submit their own questions viewers within hours of being shot
G senior managers’ memo: sent
to all employees - outlined O consumers are quicker: Dell’s slow response to the 2006 ‘exploding laptop’ crisis
specific steps in the event of an allowed film clips to do the Internet rounds unchallenged
epidemic
G town hall meeting: bank O everyone hates business: ask Joel Barkan (whose The Corporation suggested
invited all staff to question a companies are like psychopaths) - and compare the scepticism about any claim made
panel of six managers over the by business with the relative lack of scepticism for claims made by its critics
plans for managing crisis - and
broadcast the meeting across
the organisation O firms have more weak points than in the past: the increased value of ‘intangibles’ eg
corporate social responsibility may influence competitiveness but leaves reputations
open to being tarnished eg when suppliers turn out to be exploitative employers

COME OUT FIGHTING KEEP TALKING


Rather than roll over and repent,
firms and individuals have better First there was viral marketing; now there’s viral mourning. Crises these days happen in
survived crisis by ignoring the PR real time and the public glare: communication channels need to allow for response and a
advice and trading punches with
their adversaries:
sense of community as well as disseminating information.

G Bill Clinton: instead of During the recent Virginia Tech shooting, the college’s website was the forum for
admitting guilt over disseminating information to the press and public during and after the incident; within 48
‘Monicagate’, countered
allegations one by one ... and,
hours it had added a memorial site to the dead for people to post condolences.
though battered, survived
G Northwest Airlines: US airline
declined to apologise for
‘imprisoning’ passengers during
Releasing pressure
a 1999 snowstorm - but restored
its reputation through targeted Anti-corporate activists will never be a CEO’s best friend; but companies can mitigate some of
local advertising - didn’t want to the most aggressive anti-corporate groups’ tactics:
draw attention of people who
hadn’t heard about it
G identify who wants what
G Merck: pharmaceutical firm managers can gain an idea of where ‘antis’ are likely to strike from their specific aims; eg
overcame critical press by
fighting US lawsuits and
Burma UK campaigns against investment in that country vs self-identified socialist groups
labelling the plaintiffs as with no fixed goals but a general distaste for business - the more wide-ranging the goal,
opportunists vs Audi: German the more difficult it will be to preempt
carmaker implied a guilty
conscience in the 1980s when it
G cooperate (or co-opt) asap
expressed sympathy for crash
victims following press claims questionable labour practices in eg China will draw fire for firms sourcing from factories
that its 5000 model accelerated there; it’s well worth communicating directly with labour rights groups and involving those
of its own accord; resulted in willing to cooperate in decision-making - helps resolve issues and (just as importantly)
US sales collapse avoids press hype with your firm’s name in the headline; TopShop’s decision not to sign
up to voluntary standards on labour didn’t help when some newspapers all but accused it
of complicity in slave labour

G use them as weathervanes


of public opinion; successful activists exacerbate already latent public concern eg over
environmental impacts - could help firms foresee shifts in demand
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Chapter 6

REPUTATION IN CRISIS
Damage control
Reputation and crisis management are closely linked; PepsiCo public affairs boss Rebecca CAN WE FIX IT?
Madeira cited reputation as ‘your biggest asset or your biggest liability’; manage your
Mattel: tips from the US toy-
reputation before a crisis and chances are you’ll survive it. Dos and Don’ts when crisis strikes: maker at the centre of the world’s
largest toy product recall crisis to
G DO aim for damage control vs damage disappearance date:
quantify the problem - and the scale of the damage; wishing it away or downplaying its G give it the full monty: this
significance won’t help approach to damage control
meant explaining what went
wrong, apologising, accepting
G DO go beyond apologies
responsibility and taking action
eg faced with multiple flight cancellations, US airline Jetblue CEO David Neeleman put the
firm’s money where his mouth was; instituted a reimbursement programme and a G get it out there: took out ads in
major newspapers eg the New
‘passenger bill of rights’ York Times and USA Today;
held a press conference
G DO prepare staff
G make the message clear: sent
to deal with awkward questions; the CEO needs to come out in charge - but frontline staff clear messages about what had
need to be able to give the same messages and answer customer questions gone wrong and what they
sympathetically, precisely and consistently planned to do about it
G play to (character) strengths:
G DON’T try to deal with emotional people logically Eckert filmed a separate online
don’t explain the details of your disaster recovery processes - no-one cares; instead, video apology; worked because
it was a competency vs
reassure people eg whose records have been hacked that it’s under control and won’t
character crisis - the CEO still
happen again - talk to them in person and show them what you plan to do; answer the encapsulated trusted, solid
questions people are asking - “Will I be OK?” and “What are you doing about it?” qualities of the brand
G make it personal ... and from
G DON’T grovel the top: CEO Bob Eckert
when H-P was caught tapping its competitors’ communications, CEO Mark Hurd was posted a letter on the group’s
apologetic but not prostrate; said “We’re a very strong company; we’re going to pull website addressed to ‘fellow
parents’, explained: ‘I’m a
through this” - important reassurance for employees as well as customers parent of four kids as well’

THE POLITICS OF CRISIS

The long-held model of ‘engaging’ with adversaries doesn’t work because it assumes
they’re potential friends.
CONTROL THE AIRWAVES
Research: instead managers should adopt a more realistic ‘political’ model that assumes Skype: when 200m users lost the
rivals want to torpedo the business. How to fight attacks on corporate reputation: service, the disruptive innovator
and web-telephony pioneer went
G don’t wait for the facts into control-freak mode; the firm:
the public won’t; instantaneous emotions are likely to define the company’s image G didn’t connect: redirected calls
to its not particularly helpful PR
G forget appeals to reason people vs being open and
a leaked think tank report found that countering even outrageous allegations with facts accessible to its punters
doesn’t alter public beliefs; people don’t trust business - and education doesn't defuse G sang from the corporate
outrage over companies’ perceived misdemeanours hymn sheet: repeated the
mantra on its website rather
G don’t overreact than responding to specific
queries - gave the impression
mobile phones responded to ‘brain tumour’ scare with low-key independent scientific no-one knew what was going
studies vs press conferences and over-communication (which could have backfired on
by increasing press attention)
G declined to inform: ignored
the big question - users wanted
G admit when you’re wrong to know: “When will I get my
if you want to be believed when you’re right; McDonald’s responded to sustained Skype back?’’
criticism (and long-term consumer trends and expectations of business) by
switching from plastic to paper wrapping and ending super-sized menus; was
it responsible for obesity? no, but that didn’t matter as much as the need to
appear ‘responsible’

G be prepared to switch tactics


from conciliatory to aggressive; when you’ve been wronged, mount a vigorous defence

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Chapter 6
REPUTATION IN CRISIS cont’d

Post-crisis brand-building
I HELD THE LINE
Cantor Fitzgerald: boss Howard So you’ve been visible, given straightforward information and survived the crisis with your
Lutnick rebuilt the brokerage in staff intact. Now what? When it’s a matter of reputation, keeping quiet when your corporate
the aftermath of 9/11 after losing
two-thirds of its New York reputation gets dented isn’t just a bad idea, it’s also a wasted opportunity:
employees in the attacks; how?
he: G customers don’t forget: unless they have an alternative, they’ll hold on to blame and
G cried: public tears showed he associate the brand with the disaster well into the future
had a human side despite
previous copious evidence to G ... though they may forgive: in specific circumstances eg where a product has been
the contrary - he’d taken the firm contaminated once it’s on the shelf - but not where internal human error eg an employee
over in 1996 as its founder lay
on life-support forgetting to change a filter is involved; the good news? if they don’t know the cause, they’re
more likely to assume it’s technical vs human error
G got the firm back up quickly:
re-opened within two days of the
attacks and posted a profit the G they see the brand in terms of themselves: brands - and their memories of them - are
following quarter strongly autobiographical ie susceptible to nostalgia
G held the line: despite operating
in a high-attrition industry, A classic study of how not to do it: US fast-food chain Wendy’s faced with an accusation that
Lutnick hasn’t lost a single a customer had found a finger in her chilli, kept quiet even when she was discovered to have
senior manager because ‘I stood brought it with her in a bid for compensation. Lessons from Wendy’s reaction:
with my guys at hell’s door and
held the line’ - and they had
equity G appeal to emotions, not wallets
post-crisis brand recovery takes emotional reach - the relationship with customers needs to
G rectified mistakes: found that
behaving as he had before -
be reestablished vs Wendy’s, which launched a discount (though not on chilli) - mistakenly
aggressively - didn’t play well appealing to reason - and implying to many consumers that the freebie was an effective
publicly when he immediately admission of liability for the finger incident (‘If they’re not at fault, why give away free stuff?’)
cancelled dead employees’ pay
cheques; he claimed otherwise
G call up good memories
the firm would have run out of
cash and subsequently set up a remind customers of the good times via a nostalgic campaign focused on ‘autobiographical
relief fund with a quarter of referencing’ ie weaving the brand into customers’ past lives; eg ‘Remember when ...’ ; the
Cantor’s profits over 5 years technique:
O works beyond what’s actually remembered: reconstructive memory might make them
remember good experiences they never actually had; case study found many participants
remembered (the non-existent) Wendy’s Playland
DELAYED RESPONSE
BAE: faced with allegations that it
O gives comfort: focus groups after 9/11 identified nostalgic advertising as the most
ran a £60m slush fund to pay comforting because it reassured and boosted trust
Saudi officials as part of the al-
Yamanah arms deal, the UK G tap brand (as well as customer) heritage
defence firm (eventually):
marketers can use heritage as a reference point for campaigns; restage brand capitalising
G set up a committee: to assess on emotional connections already in the marketplace eg Wendy’s ‘old-fashioned
compliance with ethical business hamburger’ iconography
practices and anti-corruption
legislation
G weigh the cost
G made it credible: hired Lord the firm might risk lawsuits if it publicly accepts responsibility but this might be the cheaper
Woolf, the former Lord Chief
Justice of England and Wales,
option in terms of long-term reputation if the crisis involves human vs technical error
to head the investigation; the
other four members included
former Coca-Cola CEO Douglas
Daft - avoided the appearance HALO VS VELCRO
of bad faith and window-
dressing
How big a crisis the business faces will depend on how the public perceived it before -
G roped in whistleblowers: set they could end up with public sympathy and understanding, or more blame:
up a website where employees
and others can submit G ‘halo’ effect: despite widespread belief that prior good reputation will mitigate the
information confidentially
public perception of the same firm in crisis, study shows it doesn’t always work; vs
G offered transparency:
promised to make the G ‘velcro’ effect: so-called because a prior poor reputation will attract additional
committee’s findings public reputational damage; study of reaction to hypothetical firm that was rated low on a
G committed to act: the firm said ‘best places to work’ list and refused to support community efforts found that public
it would act on the committee’s didn’t just think they had crisis coming, they were also more likely to think the firm was
conclusions to blame for it

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Chapter 7

LEARNING FROM CRISIS


Why managers don’t learn
Despite the fundamental changes crisis provokes, managers often fail to learn from their own AFTER THE FLOOD
or other businesses’ experience; why? because they: Gloucester County Council:
findings from the council’s post
1 look at but not around the crisis - eg to immediate causes vs factors leading up to it and mortem of its crisis handling after
take too short a timeframe floods swept through the area
(and led to the evacuation of its
HQ):
2 allow the issue to slip off the list of priorities
G keep the plan close by: HR
chief found his copy of the
3 can’t bear to think about it - post-survival sensitivity
emergency plan submerged
under water in his kitchen
4 get bogged down in day-to-day management issues that eclipse what should have
been post-crisis reflection G pick substitutes in advance:
some crisis managers were
personally affected by the crisis
5 try to avoid their own responsibility - or even culpability - left the team short-handed
With the emergency plan
6 pass lesson-learning over to experts
drenched and key people
missing, the ‘bloody-mindedness’
7 don’t recognise the transferability of crisis learnings to ‘peacetime’ operations of managers carried the team
through; they:
8 work for a firm that doesn’t encourage knowledge-sharing
G kept vital services going in
the flood zones: prioritised
How to overcome the tendency not to learn? Instead of settling into oblivious survival mode, continuation of services for
managers can strive to incorporate learnings from crisis periods into risk assessment, vulnerable people - often on
prevention and management strategies; lesson-learning and vigilance may not avert the next employees’ own initiatives
crisis but it could make one less likely if managers: G strived for normal ops: ran
payroll and other IT services
from a suite in a car park; paid
G set up reporting systems for near-misses staff, clients and pensioners
it isn’t just full-blown crises managers can learn from; how a crisis was averted suggests normally as a result
indicators of where the next one might come from
G minimised disruption: outside
of flood zones, most services
G suspect ‘the way we do things’ remained in operation; within
analyse existing processes for their potential to contribute to crisis-generation, especially three days, all services were
during the ‘incubation’ period; investigation into Union Carbide’s 1984 Bhopal gas leak operating at between 70-100%
disaster identified common (in this case, safety) cultural flaws across multiple sites G worked with partners: after
the evacuation of their main
G learn to learn building, eg the emergency
centre moved in alongside the
from the crisis about the firm and its vulnerabilities; ask fire and rescue service

O what have we learned? eg new information on potential risks, and tacit information G operated on worst
about the firm including (invisible) routines that emerged in crisis assumption: ie that HQ would
be off-limits for the duration and
improvised - the HR recovery
O how did we learn? during the crisis but also before (in eg simulations and training) and team moved for three days into
afterwards (in sharing experiences of the crisis) a team member’s front room,
used mobiles with poor signals
O how can we use it? what’s the potential for transfer to the rest of the firm? and a dial-up Internet
connection for email
G re-allocated resources: staff
not delivering front-line services
DON’T GO IT ALONE acted as volunteers in the
community or temporarily
In the aftermath of its mishandling of nationwide forest fires, the Greek government ditched their job descriptions to
proposed ‘a cohesive mechanism’ based on European solidarity that would call out EU- do whatever needed doing -
relieved pressure on key staff
wide reserves in a crisis; the partners would: working 24/7

G offer a ‘phone call’ service: the idea is that help from other European countries will G took it off the page: ‘people
be only a phone call away strategy‘ based on ‘enabling’
and initiative proved its worth;
the policy came from the top
G pool forces: to act as reinforcements for national efforts; can be used proactively or but the momentum for getting
reactively, as required services working again came
from below
G coordinate efforts: eg via common training programmes and exercises, and expert
exchange

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Chapter 8

IN CRISIS ... THE UNOFFICIAL VERSION


What does not kill me
SUPERHERO STUMBLES
Finally ... vs the official version, former GE CEO Jack Welch offers an alternative five stages
Nissan: auto firm CEO Carlos of crisis management, based on the (mis)management of Hurricane Katrina:
Ghosn, despite being dubbed in
France ‘Le Cost Killer’ took a
more sophisticated approach 1 denial: ‘the problem isn’t that bad - it can’t be because bad things don’t happen here’; with
when he took over ailing Katrina, no-one failed to act out of malice but there was still widespread paralysis brought
Japanese carmaker Nissan in on by panic
1999:
G upped the product ante: O fight inertia - a side effect of panic: federal, state and agency reps waiting 12-24 hours
instigated a wider product line before ordering evacuation and getting emergency services into the area
with ‘curb appeal’
O deal with denial quickly: being able to overcome a human tendency to paralysis is a
G raised morale: new products
convinced employees the new test of leadership; ‘face hard stuff with eyes open and fists raised’ à la Rudi Giuliani
boss meant business - secured after 9/11
cooperation in work changes
and efficiency measures 2 containment: leaders try to keep the problem quiet - until it gets out of control; in Katrina’s
G made money: success of new case, meant buck-passing from one arm of government to another - the city and state asked
product strategy reduced debt, for federal help, which demanded the state accept the federal relief plan before giving it
generated a 9% profit margin
G achieved iconic status: Ghosn 3 shame-mongering: when all stakeholders fight to get their story told, with themselves at
became a superhero in a series the centre of it - usually as hero; how to deal with the scrapping:
of comic books
So how did the firm go into crisis? O set the agenda: in this case, the Democrats did; ‘never before has a storm become so
Under headlines eg ‘Superman politicised ... Katrina wasn’t a hurricane - it was a test of George Bush's leadership, it
stumbles’, it emerged that Ghosn: was a reflection of race and poverty in America, it was a metaphor for Iraq’
G got Nissan rich quick: but
allowed US sales to become O get in early: the Republicans delayed issuing their ‘story’ - and even then with little
dependent on SUVs; when gusto vs getting their message out strongly, clearly - and early
petrol prices went up, sales
went down
4 blood on the floor: from the moment it was obvious that Katrina was a crisis-management
G faced hubris: overreached with disaster, heads were bound to roll; people need to feel that someone (usually high-profile)
the attempted merger with has paid for what went wrong, with additional personnel changes across departments
Renault and GM; the talks went
nowhere
5 the fix: the problem gets fixed and life goes on - usually for the better; despite fatalism
G forgot the plan: Ghosn had no
over mis-management, Welch is optimistic because crises:
follow-on plan to sustain the
momentum; and the product
pipeline all but ran dry vs O show what’s wrong: a crisis that reveals where the system is broken makes denial
Toyota, which aims to launch impossible for any length of time, forces solutions
six new products annually
O spur a spirit of optimism: crisis compels leaders to find ways to change things - and
Plan, what plan? What managers
can learn not to do from Ghosn: can generate a spirit of optimism eg after Katrina, entrepreneurs set up businesses
providing jobs for local people, with government subsidies thrown at New Orleans
G don’t believe the numbers:
respectable profits belied the
fact that Nissan had reached
O provide immunity to specific types of crisis: businesses don’t go through the same crisis
crisis point twice; instead, they go to extremes eg throw up fortresses of rules, controls and
procedures to fix what went wrong and build up immunity to the sickness that felled them
G delegate: runs two car firms -
Renault without a chief
operating officer and Nissan
without a chief financial officer;
Ghosn’s preferred shuttle
HOW TO HANDLE VS NOT HANDLE A CRISIS
management is fine - if
someone’s in charge Two landmark cases show how to manage a crisis vs letting it overrun the business:
G feel the burn: with eg cut-price
Tata on his heels, Ghosn
G Johnson & Johnson: when the pharmaceutical firm found that batches of analgesic
lacked a sense of urgency - or Tylenol were found to have been contaminated, it reacted instantly with a total recall of
apparently much of a plan - for the product; the short-term loss resulted in a long-term gain - with a reputation for
fighting the Indian firm off; there putting its customers before profits, especially when labs subsequently introduced
was no evident counter-attack
safety seals - now an industry standard
G stretch it thicker: needs to
heed his own advice - ‘The day G Nestlé: responded aggressively to media claims in 1970s that it exploited mothers in
you're stretched too thin is the the developing world by convincing them that formula milk was better for their babies
final chapter of your book. But
than breast milk; when a Swiss activist group jumped on the bandwagon, Nestlé took
you're usually the last person to
know that’ a short-term approach and sued the group - result: increased negative press coverage

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Chapter 9

CRISIS ASSESSMENT
How would you cope in a crisis?
Below is a guide to the crisis decision-making process. In your next crisis, use the checklist to assess how
you responded and measure performance in each of the staged criteria listed; the more efficiently the stages
are dealt with, the more likely you are to get out of the crisis - but poor performance at any stage could turn a PERFORMANCE

crisis into a disaster.


POOR FAIR GOOD

EARLY WARNING SYSTEMS

G key action: recognise what’s gone wrong


do corporate early-warning systems eg whistleblower policies work? for example: traffic-light system for
flight-risk employees is meant to warn of disengaged employees through overt monitoring (eg of those
passed over for promotion); an exodus of eight employees from a team where only five were on amber
suggests the system isn’t working; why not?

DIAGNOSIS

G key action: assess the problem


surface and define likely imminent issues based on the diagnosis for example: in a fire: is it toxic? does
it pose a threat to neighbouring buildings? in the World Trade Centre attack, clarification on what had
actually happened came from the news ahead of the crisis management team’s diagnosis - counts as a
failure

SEARCH

G key action: try to locate missing people, material, documents


the groundwork should have been done in the planning stage; is the log-in sheet in order - ie does it
cover all employees present? a complete log-in sheet suggests appropriate preparation

EVALUATION

G key action: weigh the risks of action vs inaction


did the crisis team follow a ‘triage’ system (ie sorting action priorities - first, second, third) aimed at
encouraging best outcome, discouraging heroics? even in a non-emergency situation, evaluation calls
for judgement, for example: a recently departed employee is bringing a case of constructive dismissal,
claiming his line manager harassed him; there were no witnesses but the line manager wants to follow
due process - yet the lawyers and PR senior managers want the case settled; the crisis management
team needs to weigh the evidence with an eye to potential reputational risk

‘INTERRUPTS’

G key action: manage external forces


how has the team dealt with interrupts that put pressure on the team to take a specific course of action?
for example: in the event of a fire, the transport authorities want nearby traffic routes reopened asap -
with a factory fire still raging; after bargaining with the firm’s crisis manager, they back down - but it
could divert attention away from other elements of the crisis

DELAYS

G key action: remove obstacles to decision-making


are decision ‘enablers’ in place vs crisis management team waiting on the results of earlier stages only
to find no-one has been allocated to collecting results? in some cases, delay can be positive - eg a
firm’s delayed response to an attempt at extortion, aimed at introducing doubt and uncertainty (though
wouldn’t work for extortion attempts via product contamination)

FEEDBACK

G key action: are channels open to ‘fieldworker’ feedback?


for example: if volunteers go in search of unaccounted-for employees and the crisis management team
has to wait for the data, delay may be inevitable - requires functioning communication systems eg
mobile networks

Crisis Management - The Leadership Skills Portfolio Series


Entire contents Copyright Bulletpoint Communications Limited. All rights reserved. Reproduction in any form is unlawful. 15
REFERENCES & FURTHER READING BULLETPOINT
The Benefits of Post-crisis Counselling C Milano Risk Management May 2005
FOCUS REPORTS
Business (Not) as Usual: Crisis Management, Service Recovery and the Vulnerability of
The Leadership Skills
Organisations D Smith Journal of Services Marketing 19:5 2005
Portfolio
The Case for Business Continuity Management E Krell Business Finance April 2006

Concepts of Care in Organizational Crisis Prevention S Simola Journal of Business Ethics (62) OTHER
2005
REPORTS:
Corporate Reputation and Crisis Management: The Threat and Manageability of
Anti-corporatism L Tucker & TC Melewar Corporate Reputation Review Winter 2005

Crisis Management B Friel Government Executive 1 August 2005 G Communication Skills


Crisis Management and Organizational Development: Towards the Conception of a Learning G Appraising Performance
Model in Crisis Management C Lalonde Organization Development Journal Spring 2007
G Motivating for Success
Decision Processes During Crisis Response: An Exploratory Investigation JE Hale, DP Hale &
RE Dulek Journal of Managerial Issues 18:3 2006 G Building Employee
Do Crisis Plans Matter? A Schoenberg Public Relations Quarterly Spring 2005 Initiative

Ethical Rationality: A Strategic Approach to Organizational Crisis P Snyder, M Hall, J Robertson, G Energising the
T Jasinski & JS Miller Journal of Business Ethics 63 2006 Workforce

The Five Stages of Crisis Management J Welch Wall St Journal 14 September 2005 G Making Change Stick

Is that a Finger in my Chili? Using Affective Advertising for Postcrisis Brand Repair KA Braun-
Latour, MS Latour & EF Loftus Cornell Hotel & Restaurant Administration Quarterly 47:2 2006

Kroll 2006 Background Screening Hit Ratio Report 2006

Maintaining Credibility During a Crisis: Challenges for the Manager J Jarret Public Management
May 2007

Peter Beattie’s Strategies of Crisis Management: Mea Culpa and the Policy ‘Backflip’
PD Williams Australian Journal of Public Administration 64:4 2005

Predicting and Pre-empting the Corporate Heart Attack T Fitzgerald Business Credit June 2006
BULLETPOINT
For busy managers
Unpacking the Halo Effect: Reputation and Crisis Management WT Coombs & SJ Holladay For information on
Journal of Communication Management 10:2 2006
our monthly journal
When the Going Gets Really Tough A Jack Financial Times 21 July 2005
please call
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The Leadership Skills Portfolio REPORT 4

CRISIS MANAGEMENT
Address The high-profile terror attacks that make up the public perception of crisis are a
relative rarity: most crises come not as bolts from the blue but as ‘problems’ - and
often it’s mismanagement of their early stages that escalates them to crisis point.

This report is about coping when the worst happens:

G preventing the crisis in the first place: how to spot the tell-tale signs of a
corporate disaster waiting to happen
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FOCUS REPORTS G planning: for crises ranging from product recalls to floods

G the element of surprise: how to respond to what you could never have predicted
I N S I G H T
G the who and how: what makes a good crisis leader? and how do they get their
INSPIRATION teams behind them?

SOLUTIONS G defending your corporate brand: how to fight back against attacks on your
company’s reputation

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K N O W L E D G E
IN JUST 16 PAGES G avoiding repeats: how to learn from crises

The report ends with a diagnostic guide for your own crisis plan. Is yours fit for
purpose? The guide will help you fill the gaps now - before crisis hits.

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