Corporate Crisis Prevention and Readiness

By Rob Ferguson

cri·sis (/ˈkrīsis/) noun. A time of intense difficulty, trouble, or danger. Based on this definition, this kind of event might seem like a daily occurrence for some businesses. The reality is that most companies don’t face the sort of crisis that can cripple a business with any frequency. Many disasters are avoided and altogether mitigated by careful planning and by building contingencies into the very fabric of their business.

Still, the best way to avoid and prevent a crisis is to plan and practice for them. Since a crisis can appear in many forms, preparation is the crucial ingredient for businesses that rise above circumstances. “No battle plan survives first contact with the enemy,” and so even the best-laid plans need to be visited and revisited frequently. But more importantly, to plan for a crisis, you must first be able to identify the kinds of emergencies that have the potential to cripple your business.

How to Identify a Crisis

According to Hubspot, “The easiest way to identify a business crisis is to assess the problem for three key elements. First, the problem must pose an imminent threat to the organization. Next, the situation must involve an element of surprise or shock. Finally, due to the severity of the problem as well as its unexpected nature, the situation will place pressure on the business to make timely and effective decisions. Knowing the elements that make up a business crisis can be instrumental in identifying these problems before it’s too late.” They go on to list several kinds of crises that could impact a company negatively. These are some high-level categories to consider, and we have added a couple more groups to the list for your consideration. Keep in mind that this is not an exhaustive list, but one that will get you ahead of the things that can threaten your business.

Financial Crisis
Personnel Crisis
Organizational Crisis
Technological Crisis
Natural Crisis
Man-made Crisis
Communication Crisis

Consider the following:

Financial Crisis:

There are several ways to avoid a financial crisis. You can begin by maximizing your liquid savings. Fine-tune your budget and optimize your cash flow. Negotiate with your creditors. Consider a business line of credit. Avoid mixing business and personal finances. Assess both internal and external vulnerabilities. Maximize your connectivity. Prepare crisis communications ahead of time. Don’t leave your stakeholders in the dark. These are just a few ways to improve your company’s ability to stand firm against a financial crisis.

Personnel Crisis:

Below are two separate quotations from “experts” dealing with the topic of personnel crisis. The first points out the “definition,” and the second dives into a valuable resource in helping you deal with personnel crises.

“Personnel crises occur when an employee or individual who’s associated with the company is involved in unethical or illegal misconduct. Whether it’s within the workplace or an employee’s personal life, these situations can result in a serious backlash against the company. Since the organization employed or supported this individual, their lack of judgment is reflected in the company’s reputation.”

“Nearly 30 percent (29.8 percent) of respondents to a recent Deloitte Advisory poll believe that employees may be the most overlooked stakeholder when their organization is dealing with a crisis. As crises become a more frequent occurrence, companies need to acknowledge that maximizing the potential resources of their employees can have a significant impact on their ability to anticipate, prepare for and respond to an incident.”

In a recent NACD meeting, we discovered that your corporate culture plays a critical role in mitigating personnel crises. They recommend making it safe for people to do the right thing. They suggest that business leaders be clear about the kinds of behaviors for which the company has zero-tolerance. They also suggest creating a culture that promotes accountability. In the meeting, they placed heavy emphasis on the values and purpose in the decision-making framework. They also recommend that business leaders understand how employees are on-boarded, core values communicated, and expectations set. Of course, none of these are of any lasting value without a way to measure results.

In the event of an “incident,” it is also critical that your communications officer or leadership have prepared statements to communicate with media, shareholders, and stakeholders in advance of the crisis. It is a good practice to remember and assume that any electronic message will become public at some time; it is essential to have policies in place which restrict the dissemination of company documents. Still, if an employee leaks confidential information, it is incumbent upon the leadership to have advanced statements to respond quickly to such a breach.

Use high-and-low tech means of communication. Utilizing social media tools can help get your company’s response out rapidly in a critical moment.

Keep in mind that your C.E.O. is not the only person capable of being a messenger in troubled times. Any of your senior leadership can articulate the message just as effectively. Utilizing your management team shows solidarity amid a crisis.

It is difficult enough to convey the consequences of a personnel incident to the rest of your employees while taking on the crisis headlong. Your organization must be in constant communication with your employees so that when an event occurs, you don’t have to scramble to put together a communication team. Having a plan in advance, and utilizing a company portal or communication system will help keep your best allies abreast to the situation as it unfolds.

Organizational Crisis:

There are cognitive limits to which no company is immune. As such, having a crystal ball is not an option for any of us. It would be wonderful to be able to see events that might threaten a significant product line or business unit. It would be nice to detect events ahead of time, which could damage the financial performance of your business. It would be fantastic if we could discover those things which might cause harm to the health and well-being of consumers, employees, surrounding communities, or even the environment. And if there were a way to prevent losing the public’s trust in your brand and corporate image, then you would have no worries at all.

Still, since omniscience is in limited supply, the company’s must utilize their culture to help engage their customers to build mutually beneficial relationships. Since the culprits are most often the very same employees that make up the organization, leaders must engage and set high standards of customer service, attention to detail, quality assurance, and every other imaginable stop-gap between the product or solution your company offers and the consumer who purchases it. Training, cross-training, and accountability are the keys to avoiding an organizational crisis.

Technological Crisis:

Whether you have an internal technology team (IT) or you outsource these resources, it is incumbent upon your leadership to ensure that your business has fail-safes to execute in the event of a technological crisis. One of the best ways to prevent technological disasters is to have a back-up of current systems. In the event of a crash, a back-up is generally the first place that your IT team will turn.

The goal of recovering from a technological crisis is getting back online with limited disruption. Still, the best way to avoid a technological disaster is to test your systems frequently, make sure that critical software and hardware updates are regularly maintained, and keep your tech teams up to date with training and support.

Having a comprehensive crisis plan for the framework your business operates on will keep your team in a state of readiness and afford them the ability to respond in an instant. If you have a redundant system in place, your team can “test” these worst-case scenarios to develop a course of action, should the crisis ever occur.

Establishing a “War Room,” equipped with independent systems such as telephones, WiFi, printers, and whiteboards, can prove essential during a crisis. Your board room or meeting room can double as a “war room” if necessary.

As a leader, you set the tone. Remember that during a technological crisis, your IT team will look to you for direction. Sure, they have the technical understanding to resolve the conflict; still, they will rely on your calming reassurance to bolster their confidence to overcome the problem. There will be time, later, for discerning the cause and for accountability, but during a crisis, you set the tone. Your role as a leader will become that of a communicator. When you become aware of an incident, it will be vital for you to act decisively and activate your emergency plan. To this end, you will first need to have a plan.

Once the crisis is averted, and restoration is complete, take a deep breath; the work has only just begun. You and your teams must understand the impact created by the crisis. It is now time to discover the “why” and the “how” of the incident.

Finally, you and your teams must have an “after-action review.” An audit of your tech is in order. To prevent the issue from happening again, you and your teams should come together shortly after the incident to revisit your plan. These kinds of meetings will help avert future problems and often lead to improvements which will serve to benefit your company moving forward.

Natural Crisis:

For many businesses, especially those in the Southern United States, understand the impact of natural crises on their business. Hurricanes, tropical storms, tornadoes, snow ice, and other natural disasters can shut down a business. Having a plan to combat the forces of nature or recover from a devastating hit is of the utmost importance.

Some ways that you can prepare for a natural crisis include but are not limited to the following:

• Create an emergency operations plan

• Back up important data

• Meet with an insurance advisor

• Maintain communications with employees, clients, and customers

• Regroup in your community

• Consider emergency resources such as back-up generator fueling

The main idea here is that you have systems and best-practices in place before a natural event to mitigate the impact on your business after the fact.

Man-made Crisis

In recent years there has been a slew of crises that range from active shooters to human error. Security and training are the answer to these kinds of emergencies. Having the right response in the event of a crisis can mean the difference between life and death.

Michael Dorn, Executive Director for Safe Havens International, and expert in safety, security, climate, and emergency threat assessments, posed the following in a recent symposium on safety. Dorn suggested that knowing how to react appropriately to an event is critical to getting through the incident unscathed. For example, when an alarm goes off in a building, people may respond by sheltering in place. But if the signal is a fire alarm, sheltering in place would be an inappropriate response. Whereas, approaching a person with a fire-arm who appears distraught would be unwise. He went on to add that empowering all of your employees to act and lead in the event of a crisis is perhaps the best way to avoid the painful consequences altogether.

In the book Outliers: The True Story of Success, author Malcolm Gladwell implies that cultural expectations can be disastrous. Using his theory, we can apply it to our thesis and state that by enabling employees to take charge even when it is not their place can prevent catastrophes. In one example, Gladwell points out how, in Asian cultures, age, and title are no trivial matter. But when you have an experienced co-pilot in a cockpit with a younger, less experienced co-pilot, and the co-pilot does not want to “lose face” by telling the captain that the instruments are wrong and the plane is about to nose-dive into the side of a mountain, you have a problem.

When your employees know how to act, and the authority to respond when a crisis occurs, many of the situations that would otherwise lead to disaster can be diverted.

Communication Crisis:

As previously discussed in the section above on the personnel crisis, having a solid communication plan in place is critical to getting in front of an event that can have severe repercussions if allowed to spiral out of control.

It is an excellent idea to appoint a qualified communications expert to your toolbox of talent. A Chief Communications Officer will not only help you position your company in a good light and offer support to your marketing team, but they will also be your front line of defense in the event of a crisis. Your communications officer will have, at the ready, a list of contacts at local, state, and national media outlets. They will be active in communicating the value of your company ahead of a crisis so that when an emergency does occur, there is ample history showing the track record of your business. While this history may not alleviate the crisis, it will certainly soften the blow.

It is wise to consult with legal counsel to have prepared statements or boiler-plate responses, carefully crafted to address several potential threats. When and if a crisis occurs, your communications officer will be armed to respond quickly and efficiently to just about any likely scenario.

It is essential to keep in mind that during a crisis, response times go from minutes to seconds very quickly. The last thing you want to do is have your communications team scramble to craft a response with the media and community left to their imaginations.

When communicating with the media and the public, be concise and truthful. In cases where it information might prove detrimental if prematurely exposed, defer to legal counsel, but have a statement prepared to address the fact that your company is being responsive and diligent to the incident and will provide information as it becomes available. In some cases, there is a need for an investigation to take place before giving a public statement. In these cases, it is acceptable to postpone any public comment pending investigations.

Many companies in the throws of a communication crisis will ramp up their social communications. If you go this route, be sensitive to your audience, and respectfully offer your willingness to bring the crisis to resolution. Interactions of this kind are especially helpful if you have been engaged with them and have a solid reputation already. In these kinds of communications, your track-record can prove invaluable in shifting community perception in your favor.

Plan, Plan, Plan, and Have a Contingency for Those Plans

The best-laid plans of mice and men often go awry. In other words, no matter how carefully you plan, something is bound to go wrong. It is vital to surround yourself with leaders who have experience. Always be in an attitude of learning. Often, the best and most experienced leaders are those who have made mistakes and learned from them. But having an ally, advocate, and partner to offer wise counsel before a crisis is priceless.

Ferguson Interests is that kind of ally. Rob Ferguson, owner, and business leader has the right type of experience to help you get ahead of any business crisis.

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Posted in Business Management

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