Corporate Crisis Management: Five keys for dealing with disasters

Corporate Crisis Management: Five keys for dealing with disasters

Roger Mason, PhD

Introduction

As part of our business we help clients prepare for critical incident management. The first step in helping a client is understanding their approach to crisis management. This usually begins by asking, “How do you make emergency decisions and manage critical incidents?” They typically say, “I make decisions all day long. Our executives are smart people and they were selected in part for their ability to make decisions. You handle a crisis like anything else. You get the facts, determine what should be done, and assign someone to fix it.”

But is it that simple? I believe the types, frequency, and nature of crisis management is much different than typical problem solving. The world and your interactions within in it may be very different when your office ceiling tiles are falling on your head. I believe there are five key concepts that corporate executives should consider when preparing for crisis management. 

Defining Policy and Processes

Effective crisis management by any organization requires defining policies and procedures that inform every member of the organization what they are expected to do.

These definitions and procedures can form the basis for unified action and synchronized efforts which are invaluable throughout any disaster or emergency.  Defining policies and processes means that pre-incident everyone understands the corporate policy regarding emergencies and our processes to deal with them.

The first definition must be what constitutes a crisis for the organization. It is different with every business, government, or military group. It should be based on the unique aspect of the organization whether a brick and mortar commercial chain or an international relief provider. This definition should include what is the essential mission/functions of the organization. It should include any preferences essential to the organization’s survival.                                                 

Other important definitions include contingency lines of authority meaning emergency authority that is available during a crisis. Who is responsible for what is important especially if the tasks and responsibilities during a disaster are different than normal operations.  Issues like benchmarks and expectations for the response, mitigation and recovery efforts must be included. These allow managers to set priorities and determine their effectiveness. This is a much better approach than hoping everyone does their best and hopefully covers all the contingencies.

Planning

Corporate planners employ a variety of methodologies in their plan preparation. Emergency planning is no exception. Emergency plans are often titled contingency plans or disaster recovery plans. These plans are intended to provide the planning and procedural support to supplement any shortfalls of spontaneous decision making during emergencies.

Emergency planning in the civilian world is typically designed to mirror the three stages of a disaster or emergency: initial response, continuity operations, and recovery.

The initial response should be the emergency plan. When an emergency or crisis occurs how should the various levels of decision makers and groups throughout our organization respond?   The next stage of an emergency is the continuity of operations phase. Now that the initial emergency has passed how do we maintain operations and deal with the contingencies brought on by the emergency? The third phase occurs once the emergency is finally under control. How do we recover from the impact of the crisis and return to pre-incident levels of operations?

Merely developing a disaster recovery plan means an organization is assuming the first two phases of the emergency will occur automatically and successfully. The most effective way to break the chaotic cycle of a critical incident is by injecting effective decision making coupled with timely action. By focusing on recovery an organization can miss early opportunities to impact the incident’s outcome. Some organizations take the approach they just have to absorb the damage, both direct and collateral, and once the crisis begins to wane begin working on recovery.

The problem with this approach is relying on assumptions for the outcomes. When the Takata Automotive Company became embroiled in their airbag recall the executives did not anticipate in two years they would go from billion dollar international sales and 48,000 employees to bankruptcy and collapse. Their strategy of riding out the storm did not anticipate how serious the storm would become. Having an emergency plan that incorporates the three stages of an emergency provides the company managers and employees a framework for planning and problem solving.  

Communications

A good crisis communications plan can support your ability to manage a critical incident. A crisis communication plan should include, who will we communicate with, when we will communicate, and what will we communicate. A proper crisis communications plan can serve as stabilizing factor internally and externally.

When managing a critical incident executives must communicate internally and externally. Internally means communicating to the various subdivisions and subsidiaries within your organization. Your communications should include three factors: what has happened, what do we know, and what are we doing? Different parts of your organization may be involved depending on the severity of the incident. Timely communications from corporate leadership can fill the uncertainty gap which may otherwise be filled with speculation. This can improve the decisions that subordinate managers may be making.

Your company will have to communicate with the public and the media. Some corporations and companies use crisis management and public relations firms to represent them. This is fine as long as you have worked with these contractors prior to the incident. Two hours into a critical incident is not the best time to open lines of communications with your contractors.

At some point you may want to employ one of your executives as a public spokesman. There are advantages and disadvantages to this strategy. I do not recommend using the company CEO as your principal spokesman. First there should be a script with agreed upon talking point no matter who is representing you. If there is a problem or a misstatement by the CEO it can be difficult to walk the comments back since they are viewed as the final word.

During a recent PR disaster involving an incident on an airline the company president was the principal spokesman. The president spoke without notes leading to contradictions and misstatements. During one calamitous news conference the president said the airline would never forcibly remove a passenger from an aircraft again. Instead of putting out a fire it started a new controversy about dealing with persons that are intoxicated or commit crimes. The person you select to speak on behalf of the company should be knowledgeable and prepared. By reserving your CEO they can be used strategically in the communications process. They can also intervene to clean up a miscommunication or misdirected statement.

Decision Making and Problem Solving

During a crisis there are many levels of decision makers and problem solvers. The store managers in the local retail outlet are working at a tactical level. Department heads solving joint problems are working at an operational level. The corporate executives are solving problems at a strategic level.  Each is necessary as part of a coordinated response.

An important rule in decision making and problem solving is specific problems should be solved by the problem solvers who are responsible for the level of problem with the authority to solve it. Having a corporate executive working on the after-hours schedule for the call center is as useful as having a retail store shift manager developing solutions for ensuring overseas deliveries. Strategic decision makers should not get involved in tactical problems and tactical level staff should not be working on strategic level policy making.

Decision theorists have examined how persons under stress and uncertainty make decisions. They have found that people constantly underestimate the difficulty of decision making during periods of uncertainty and are over confident regarding how many decisions they can actually make. During a crisis there are two problems: the environment is dynamic and information needed to develop solutions may be incomplete. When coupled with the psychological stress of the incident some people can freeze up.

There are several techniques which can aid in crisis decision making. The farther up the decision chain the more you need information filters. There will be a limit to how much incoming information you can process. You should focus on the most critical or major issues impacting decisions at your level of responsibility. There is a mistaken belief that by having every detail and data point available you can make the best decision.

This can result in decision paralysis. During a critical incident decision windows open and close. A decision window is a point where you can make a decision and take action to take advantage of it. The more dynamic the crisis the more rapidly these windows may open and close. The problem is when you are still evaluating data and the decision window closes. The military refers to this as “OBE” (Overtaken By Events).

Imagine you are on an airplane that is on fire at 10,000’. You have a parachute. The correct decision is to jump out of the plane. You have decided to wait until you have more information. The plane descends to 200’. Even though the jumping with the parachute is the perfect answer the window or opportunity to take that action has passed.

Another related decision trap is striving for the perfect solution. The perfect solution is always preferable but developing it given the dynamic environment may not be realistic. Sometimes you must take an action based on the best information available at a particular moment. The famous American general George Patton said, “An imperfect plan aggressively pursued is better than a perfect plan in an indefinite future.”

Delegation is an important part of crisis management. The higher you go in the crisis management structure the greater you need to delegate problems. By doing so you  preserve the precious decision making and problem solving capital that you have.

Preparedness

The final  key to corporate crisis management is preparedness.  Once the crisis begins its too late to pull everything together. Preparedness must start at the top. In many organizations senior executives take the position that preparedness starts from the bottom. They only engage the process when an actual crisis reaches their level.

I have been asked to develop emergency operations plans for many types of organizations and government agencies. Once the plan is completed I typically train the agency or organization to use it.  Often times the only the only people who miss the training are the senior executives or agency leadership. This can have serious implications.

When a real emergency occurs the executive team is unable to effectively participate because they have no idea what the rest of the organization has  trained to do. Even worse are executives/leaders  who do not engage in training and then attempt to manage a response process they are unfamiliar with. All of the the planning, training, and preparation falter because the persons responsible to manage the process are unfamiliar with it.

The greatest cost for preparedness is the investment in time. Everyone is busy and crisis management preparedness is easily postponed for other priorities. Participation at all levels of the organization sets the tone for preparedness. If the executives participate in crisis management training it sets the stage for leadership throughout the organization to follow.

The first step is having the emergency operations or crisis management plan. The plan should include the three phases of the disaster/crisis cycle:  response, continuity,  and recovery. Once the plan is ready it needs to be communicated throughout the company. Employees should be trained on the plan at the level they will participate in.

The next step is regular exercises to test your plans and your team. This should be accomplished in the form of tabletop exercises. Tabletop exercises can test your plan, refine the plan, train your employees to use the plan, and evaluate their ability to employ it. Tabletop exercises can develop actionable items for improvement that will produce meaningful change in the organization.  

This is best accomplished by using systems similar to the FEMA  Homeland Security Exercise and Evaluation Program (HSEEP). HSEEP is system where annual exercise priorities are developed. Throughout the year the agency does a series of tabletops and exercises targeting specific planning or training issues. These exercises are carefully evaluated and the lessons learned are turned into action items for improvement.

Tabletop exercises should be targeted at the specific problems and problem solvers. The IT security team should be doing tabletop exercises to validate their planning and training for a data breach response. Senior leadership should be doing  executive level tabletops to prepare for strategic crisis management.    

Specific types of incidents and issues can be further explored using business wargaming. Wargaming is useful for exploring possible future scenarios that could negatively impact the organization. This is the Shell Oil approach.  A good example is a   large company expanding into the Pacific rim should be wargaming how a sudden  economic embargo or tariff change could impact their operations and profits. Remember the Shell Oil motto, “You can play through it now or live through it later.”

Final Thoughts

Preparing for crisis management is like buying insurance. Nobody wants to spend money on insurance but people realize that major investments must be protected.

Executive decision makers should prepare for crisis management. A crisis can involve anything from a natural disaster, a data breach, product safety recall, to an insider trading scandal. Any of these can impact or destroy a company. When talking about planning or training for crisis management I ask leaders the following question. The day after this crisis hits how much would you pay to turn back the clock and put the preparations in place that would have limited your damage?

Corporations must have policies and procedures in place to manage crisis. A comprehensive plan covering emergency response, maintaining continuity of operations, and disaster recovery must be developed.  The organization must be trained to use the plan. Tabletop exercises should be offered at all levels. Depending on the size and global footprint of the company business wargaming should be a part of future scenario planning.

My last thought is a question without a definite answer. How much time do you have to your next corporate crisis?  Is it a year, six months, or next week? Running a large corporation is not just a matter of focusing on crisis management. There are many critical business actions and strategic decisions needed to build a profitable and growing company. By focusing a small amount of your time and effort into planning and training you can decrease the amount of time needed to return to normal operations and increase your prospects for survival.  

If you have questions or comments contact me at roger@lecmgt.com