Crisis Leadership


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Crisis Leadership

  1. 1. How To Plan For Potential Corporate Crises Consultant Urges Firms to Consider Priorities, Disaster Scenarios, Do Role-Playing By Alexa Bell, Investor's Daily If Exxon Corp. had tested its crises management plan properly, the oil giant wouldn't be in the mess it's in now. That is the way it seems to Steven B. Fink, president of Lexicon Communications Corp. in Los Angeles. Fink worked for then-Pennsylvania Gov. Dick Thornburgh during the 1979 Three Mile Island nuclear power plant accident. Brought in to design a publicity
  2. 2. campaign for the state, he suddenly found himself at the center of Pennsylvania's nerve- racking but ultimately successful efforts to manage the crisis. Today, Fink is a public relations and crisis consultant who helps others prepare for the worst. At best, he said, planning for possible disasters helps companies head off crises altogether. At worst, it provides a framework for controlling the damage. Organizations caught off guard by crises often pay the price in long-term damage. "One crisis leads to others," Fink warned. "(Companies) weaken their attention and the vultures come in." Union Carbide Corp.'s experiences provide a perfect example of the domino effect a crisis can have, Fink added. After the 1984 disaster in Bhopal, India, the company's stock became severely undervalued, leading to a hostile takeover effort and, ultimately, elimination of thousands of jobs and the sale of company assets. Fink teaches companies to avoid such calamities by recognizing danger signs and taking action early on. Companies should be on the alert, he said, for situations that will: • Escalate in intensity. • Gain unwarranted attention from outsiders, such as the media or government. • Interfere with normal business operations. • Jeopardize the positive public image of the company or its officers. • Damage a company's bottom line in any way. Using these conditions as a guide, Fink helps clients develop a prioritized list of the worst things that could happen to them. Each potential problem is assigned a "crisis impact value," based on its potential to cause damage. The probability of problems is also rated. This assessment is based on history and a company's systemic weaknesses. Potential crises that rate high in either impact value or probability are vulnerabilities that need to be reduced, Fink said. Companies can develop strategies such as better quality control, that will reduce the probability a specific crisis will flare up. They also can develop contingencies to limit the impact of a crisis once it occurs. Analysis-Paralysis Syndrome Companies also must consider the cost of each intervention -- and weigh them against the cost of doing nothing, Fink said. "Then management has a dollars-and-cents way to make a decision," he said.
  3. 3. Indeed, making decisions is one of the biggest problems in managing a crisis according to Fink. "Many executives get the analysis-paralysis syndrome in a crisis," he noted. "It's because there's a lot at risk in a crisis, sometimes life and death." One of the first decisions executives must make in a deteriorating situation is whether a crisis is actually occurring. "Let's say a complaint comes in about a tainted product during the night. . . .Then what? Do you ignore it, wait or investigate immediately? Who makes the decision?" Fink asked. He suggests that companies establish a crisis management team whose responsibilities include identifying crises. If two or three team members decide a crisis is in the offing, the crisis management plan should be implemented. Team members usually consist of a core of decision-makers led by the chief executive or some other authority. Secondary team members with technical skills or other types of expertise should be lined up to handle crises calling for specialized knowledge, Fink said. Companies also may want to set aside meeting places where team members will gather automatically in a crisis. This is a strategy that has been used successfully by United Airlines in handling potential crises, Fink said. United's "situation room" contains a conference table with phones at each seat and a speakerphone in the center. A chemical firm, one of Fink's clients, has a similar facility stocked with food, cots, computers and cash. "The cash is to get money out in the middle of the night, to rent cars or a crane, " Fink explained. A good crisis plan also designates company spokespeople. These should not always be top-level executives, Fink cautioned. Sometimes technical experts are needed or people close to the disaster scene. All of those selected, he added, should receive media training. While the interventions identified in a plan should be general, they should be backed up with pertinent details. Information belonging in a crisis management plan includes the names and phone number of crisis team members and other key players; where equipment or supplies can be procured; and instructions for operating machinery. Once a plan is completed, it must be tested and updated. This is where Exxon failed in its crisis planning, Fink believes.
  4. 4. "If Exxon had been able to contain and control the (Alaska) oil spill in five hours as its plan called for, it would not be dealing with the loss of oil, revenue and image it's going through now," he claimed. A Simulated Disaster Techniques for testing plans can be as simple as role-playing or as elaborate as simulating a disaster. One of Fink's clients hopes to stage a chemical spill, complete with a derailed train and local police reaction. If the plan doesn't work perfectly, don't despair, Fink said. It's probably a sign things are going well. "The goal is not to find out if it works, but to find out how it doesn't," he said. "It's too neat if you don't find any problems." About Lexicon | Lexicon Principals | Lexicon in Print | Client Experience | Crisis Management Crisis Management Services | Crisis Management, "The Book" | Additional Services | Speakers Bureau
  5. 5. Preparing your company for inevitable crises Public Relations By Rod Irvin There’s good news and bad news about crises. The good news is that business news coverage actually declined by 20 percent in 1998, the last year for which statistics are available. The bad news is that crises will continue to occur, and most organizations don’t have written plans for crisis response. That “it won’t happen to me” attitude isn’t limited to small companies. Ninety percent of CEOs responding to a survey indicated that they consider crisis situations inevitable. Nearly all — 97 percent — of those same CEOs were confident that they personally would respond well in a crisis situation. But only half of them said their companies had a written crisis plan in place. If you ask the next logical question — “When did you last test your crisis or emergency plan?” — still fewer companies would report that they are prepared. Many business managers act as though crises are reserved only for major manufacturers, airlines, railroads and oil companies. In fact, the most common business crises aren’t the transportation emergencies, fires and explosions that often first come to mind. Labor disputes, white-collar crime, management-caused business disruptions, product recalls and whistle-blowing are among the most common crisis situations in today’s business environment. The Institute for Crisis Management (ICM) reports that the same crises occur year after year. Many if not most of those crises can be anticipated and planned for. And, because technological advances have dramatically increased the speed and reach of information delivery, organizations should not be surprised to see news coverage about their crises reported around the world in a matter of minutes. The news media and the public expect prompt responses from companies when crises occur. Bob Franken of CNN told participants in a crisis seminar that if he were assigned to cover a breaking crisis, he would expect the company to be prepared to respond by the time his crew arrived on the scene. Does the requirement for speed mean companies have to shoot from the hip? Not at all. In fact, that’s one of the worst ways to respond in a crisis setting. Too many organizations find themselves reeling more from the way they responded to the crisis than from the event itself. Norman R. Augustine, writing in Harvard Business Review, says the best way to manage a crisis is to avoid it. Preventing crises means organizations don’t have to respond to a crisis. Well-managed companies know that one key to avoiding operational emergencies is to invest in capital improvement and implement sound quality, health, safety and environmental processes. Too many companies fail to take the next step and anticipate the crises that are most likely to occur and consider how they would respond to those crises. If, as most CEOs predict, crises are inevitable, then companies need to prepare
  6. 6. for crisis response. That means they have to recognize when a situation is moving toward a crisis situation. Once they know they have a crisis, management teams need to be skilled in resolving the crisis. Finally, best-in-class organizations will conduct a thorough review of both the crisis and their response to it and learn from that experience to be better prepared for future crises. While companies consider all stakeholders in managing crisis communications, they recognize that news media form the conduit through which a large share of communications messages travel — especially during the early stages of crisis. If you talk with reporters about the problems they have in covering their beats, you’ll likely hear several concerns: • Organizations don’t provide adequate information. • We are viewed as withholding information because we fear negative reaction. • They want to talk with experts, and we provide people who don’t know the facts. • Too many organizations don’t have a concern about deadlines. The gap between information the media wants and what companies provide is a good topic to consider as you’re planning for crisis response. Your stakeholders will be asking the same questions reporters are asking, and perhaps the best way to reach them with your messages is to know how to respond quickly. Responding quickly will be easier and of more value to both the public and to your organization if you’ve: • Identified the types of crises that could most likely occur; • If you’ve done scenario planning and stepped through potential crises; and • If the person who serves as your company spokesperson and your legal counsel have agreed in advance about what you can say in the early stages of crises response. Most stakeholders know you can’t provide every detail in your initial statement, for example. But they do expect you to acknowledge the event or action that has promoted the emergency or crisis. It is also a positive if you can let your stakeholders know when you’ll have more to say. If the situation involves the likelihood of serious injury or death, your statement should reflect the sincere concern and empathy of both the spokesperson and the organization he or she represents. As you work through the crisis situation, the timeliness of your updates, how well you answer the most important questions and the visibility of senior management involved in managing crisis will be among the key factors in determining how well the public believes you managed crisis communications.
  7. 7. The difference in successfully managing crisis response and failing to do so is often advance preparation. It is easy for companies to say they don’t have time to develop crisis plans they hope they’ll never use. But, well-managed companies seem to find time to plan for crisis response. They know the impact a poorly handled crisis can have on their corporate reputation and ultimately, the value of their company. David Morehous is an attorney in the Knoxville office of Baker, Donelson, Bearman and Caldwell. Mr. Morehous concentrates his practice in the areas of securities law, mergers and acquisitions and corporate law. He is a member of the firm’s e-business group, and can be reached at (865) 549-7120.
  8. 8. WISCONSIN : JS ONLINE : NEWS : RACINE : E-MAIL | PRINT THIS STORY Practice plane crash gives teams tools to battle crises By JENNIE TUNKIEICZ of the Journal Sentinel staff Last Updated: June 9, 2001 Racine - When ABC Air Flight 666 crashed into Lake Michigan last week, the simulated disaster was eerily real for one participant. "It felt very real," U.S. Coast Guard Boatswain Mate 1st Class Brian Kastner said Tuesday. Kastner, now stationed in Kenosha, was part of the rescue team at the scene of the Alaska Airlines Flight 261 crash into the Pacific Ocean on Jan. 31, 2000. "It was almost scary how similar it was," Kastner said. The U.S. Coast Guard was among more than 20 agencies that participated in the four- hour simulated crash of a 60-passenger plane one mile off the Racine shoreline that was designed to test the skills, response times and cooperation in case of a real emergency. Efforts were made to keep the fake disaster as real as possible, said David Maack, Racine County emergency management coordinator. Real people and fake body parts were plucked from Lake Michigan, along with items made to look like airplane parts. When divers were removed from the water by rescuers and brought to shore, they were replaced on the boats by people made up to have real injuries, such as broken legs or gashed heads. Rescue personnel had to take them from the boats to rescue squads and off to area hospitals. People playing the part of victims' family members paced the floors of the Family Assistance Center and demanded information. Media "actors" tried to ply information from tight-lipped public information officers. Kastner said the involvement of civilian boats helping look for and find victims added to the reality of the scene because that was what happened in the Alaska Airlines crash. Kastner said he could see real intensity building for the rescuers and hear stress in their voices while they continued to calmly do what they were trained to do.
  9. 9. Sheets of rain to constant drizzle, cold and a building fog off of the lake delayed the exercise for about an hour and increased the need to wrap it up by 1 p.m., Maack said. But, it all helped make the action real. "In real life, the action would have been 100 times more than what we were able to do," Maack said. Among those participating in the action Tuesday was Midwest Express Airlines. "We used it as an opportunity to test our Family Service System, Crisis Communication System and almost every service related to the initial response to an accident," said Lisa Bailey, communication director for the airline. Bailey said it was one of many drills the airline had conducted over the years, and she said she was pleased with the response time in the exercise. Maack said it was invaluable for local law enforcement and rescue agencies to work with agencies such as the FBI, National Traffic Safety Board, U.S. Coast Guard and the state Department of Natural Resources all at the same time. While the agencies all identified areas of improvement, Maack said, the exercise was overall a success. "It's always easier to respond to something you've had exposure to," Maack said. "Would it be a flawless response? Probably not. But it would be much better because we've developed these relationships with other agencies, even if it was just for an exercise." Appeared in the Milwaukee Journal Sentinel on June 10, 2001.