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The Anatomy of a Crisis

Anatomy of a Crisis
Compare the crisis manager to the doctor; Why can the doctor make a correct diagnosis and make a treatment plan? Because he understands how the human body functions. Anatomy is crucial. This does not help much in the prevention of diseases  because signals that something can go wrong are easily ignored, or underestimated. Similarly, firemen should know how forest fires start, develop and can be contained. They consider factors like temperature, soil, wind and moist for successfully fighting the fire, as well as for their own safety.
Whether it is a hurricane, a boardroom crisis, an employee committing fraud, or a flawed product killing clients, the anatomy of a crisis is usually the same. Unfortunately the is most clear in hindsight. Autopsy Post-mortem is easier than Awareness and Prevention.

Red Flags

Warning or Prodromal crisis stage, as Steven Fink calls it: there are always signals that an incident is likely to take place: the crisis itself is still hidden but a potential inflammatory situation exists. The faint smell of something smoldering is usually ignored, because of lack of preparation, but also in places where there is strong and ruthless leadership or a blame culture. Raising concerns does not win you popularity contests. Red flags are always there, before the crisis. The Jihadist on the German market had been looking for bomb manuals on the internet, made phone calls to IS – ignored, probably through information overload. The CEO of Lehmann brothers stopped inviting the company’s risk expert Madelyn Antoncic from meetings when she raised red flags on some big deals – ignored, most likely due to the arrogance of leadership and their feeling of invulnerability.

Tipping Point

Trigger: the latent crisis can smoulder on for a long time. It needs either a trigger or a tipping point to escalate. The disgruntled employee just needs one more snipe remark or one more unfavorable review to turn into a fraudster, the cigaret but in the woods needs a gush of warm wind to properly ignite, the airbag needs a specific combination of circumstances to explode into the drivers face. Triggers and tipping points are not easily influenced, unless by the well prepared, who did not ignore the red flags in the first place. Triggers are also hard to spot of course because of complexity, non-linearity and interdependency. Remember the chaos theory and the butterfly effect?

Acute Crisis

Wildfire or acute crisis stage: The point of no return. The crisis has struck. Awareness sets in, sometimes only for a small insider group, but more likely for a much larger audience. There might be a very brief time window to take control of the situation, limit the damage and keep visibility to a minimum. This period used to be called “the golden hours of crisis response”; the five hours or so that the company could use to prepare a response. Now it is a matter of minutes before social media, journalists, lawyers and politician pick up the news.
In a previous blog we called this the Command, Communicate and Cope phase. Now the fire jumpers should arrive. The insiders have the tendency to be caught by surprise, freeze, and stonewall or downplay the crisis. This is bound to backfire, both in terms of coping with the crisis itself (someone needs to put out this fire… Now) and in terms of the media- and reputation backlash (one it is out there, there is no stopping it, just dealing with it).

Chronic Crisis

Chronic crisis stage:  The stage of Corrective actions. The fire is under control, the fire jumpers are replaced by regular firemen, since it will take some time for it be extinguished completely. In some crises the chronic phase can drag on for years, and the aftermath can be as deadly as the acute crisis itself. Whether it is the famine after the earthquake, or the litigation after the exploding airbag, it is still all hands on deck. The aim of course is to survive this stage as well, and put out the fire once and for all and send the firemen back to their barracks. Once that is done, it is time for Recovery of lost assets Compensation for damages. Lessons learned from post-mortems will help prevent and prepare.

Resolution

Resolution. Back to ‘business as usual’. Except it is probably not exactly going to be as it used to be. People will be apprehensive, there might still be damages, court cases or reputation issues. The impact (marketeers call it the “halo effect”) can last years. At the same time there might be positive effects. If the crisis was handled in an effective and sympathetic way, new opportunities might arise. After a forest fire, a new and more interesting landscape develops quickly. If a house burns down the newly built replacement might be more modern, equipped with better preventive measures.
Understanding the anatomy helps in planning, preparing and dealing with the next one.
1 comment on “Crisis Management in five phases”

Crisis Management in five phases

crisis management

Introduction

What if your strategy did not have the desired effect, you did not get the approach off the ground in time or are you completely surprised by an issue? It can happen to any of us; just like that. In these cases you use crisis management to guide the organization through the situation in the best possible way. Good management of crises is a structured process, carried out by well-prepared professionals.

Conditions for good crisis management

Condition 1: prepare

Risk management and audits help to identify and categorize potential threats and to develop models that provide guidance and also give direction to the resources and strategy to be used. Here too, the following applies: for many organizations this is not adequately arranged, but at best focused on the core business of the company. A trading organization will be good at financial risk management, but is perhaps less well prepared for other crises, such as attacks, unethical behavior, or other external or internal factors:

External forces that the organization has no influence on:

  • natural factors such as disasters;
  • political factors such as wars, coups, but also national or international legislation or decisions (BREXIT);
  • financial factors such as business cycle, inflation, devaluation or the bankruptcy of the customer or supplier.

External forces that have been deliberately initiated to harm an organization:

  • reputation damage caused by rumors spread by suppliers or ex-employees;
  • financial factors such as a hostile takeover or active shareholder;
  • actions of Regulatory Authorities

Internal forces that can lead to a crisis:

  • unethical behavior such as bribery, fraud or #metoo issues by management or employees;
  • financial factors such as declining sales or the loss of a large customer;
  • technological environmental factors such as the failure of a product or platform;
  • unrest or strikes among employees
  • mismanagement whereby consciously unethical choices are made;

Condition 2: A multidisciplinary crisis team

It goes without saying that you need a crisis team. By bringing together different disciplines, the chances of sufficient knowledge and capabilities are greater, and the chance of tunnel vision or focus on unrealizable solutions is reduced. Such multidisciplinary teams are ideally led by an experienced crisis manager or the CEO. It is the task of the crisis team to determine the strategy and to create support among the other figureheads of the organization. However, the responsibilities of the team members go even further, they also have to be emotionally well developed so that they can adequately support other employees and team members in times of crisis.

The crisis team needs specialist knowledge, a list of specific experts needs to be drawn up that can quickly be invoked during certain crises (for example, a Cyber attach requires more IT expertise than an accident, and in a case of Fraud forensic skills might be more crucial than in times of personal conflict between shareholders). These are temporary additions to the team and these specialists should never be chosen on the basis of their position but only because of the profound knowledge they possess.

Ideally, the core crisis management team already exists before an issue escalates into a crisis, and plans and scenarios (playbooks) for different types of crises are ready. Experience shows that this is usually not the case.

Condition 3: Response strategy

Once the risks have been identified, or when a crisis breaks out, it is necessary to link reaction strategies. You do this by making a response plan per potential crisis. Based on the previous evaluation, it can be decided which strategy is most appropriate for each crisis. There are six general response strategies that an organization can use in times of crisis:

  1. Denial strategy: denying a crisis is an option, ignoring it in various grades, denying it publically or going into the ‘attack mode’ against the party making the accusations.
  2. Diversion strategy: ignore the noise and shift attention to another more positive subject.
  3. Distinction strategy: recognize the crisis but downplay it or put the blame on someone else.
  4. Victim strategy: try to arouse sympathy by positioning yourself as a victim.
  5. Acceptance strategy: take responsibility for the crisis, apologise and offer compensation, possibly in combination with the promise to prevent such a crisis in the future.

The above five strategies are all of the type: too little, too late (or both).

The strategy that works: tackle the crisis head on, in five steps, whereby different playbooks have to be used for different types of crises. The strategy consists of five phases:

Phase 1: Crisis detected

Detection is the stage in a crisis in which leaders should, but do not always do, sense early warning signals (red flags) that suggest the possibility of crisis. The detection stages of a crisis include: analysis of what the crisis is exactly, what the impact is or might be, and what playbook is needed for next steps. Also, in this phase Perspective-taking is crucial: the ability to consider other stakeholders’ point of view.

Phase 2: Command (assess & assemble)

Especially decentralized organizations, which are based on self-organizing principles that stimulate innovation in normal times, are less adequate in times of crisis. Crisis demands a rapid centralized response and this, in turn, requires a clear line of command. Otherwise the organization responds incoherently. This means creating a centralized parallel organization, consisting for instance of a core crisis response team or five or six people. Ideally this multidisciplinary team is already in place, as mentioned earlier. If not: the first step is to assemble such a team, to give them a broad access to resources and the power to take and execute decisions.

The team now wants to assess the situation, where most damage is done, or where the impact is to be expected. Also this is the time to decide on how to collect, store and share information, as well as how to operate effectively and decisively.

Phase 3: Communicate

Crisis communication is crucial in each of the phases. This is a fundamentally different discipline than PR and therefore requires different skills (proactive versus reactive communication). Partly because the nuances in statements made by spoke persons can lead to enormous differences in the perception of audience groups and stakeholders, subjects are emotionally charged and the unpredictability of a conversation is much greater. From the Command phase onwards it is determined who can speak on behalf of the company or can communicate via other channels (internal and external), always on the basis of the Core statement (of facts).

It is almost self-evident nowadays: monitoring and analyzing what is said about the company on social media, in newspapers and magazines and by other influencers, so that reactions on distorted facts and sentiments can be quickly distributed to avoid further unrest or damage.

Phase 4: Cope (Control, Contain, Countermeasures,  Continuity)

This is the core of crisis management. The goal of this phase is to regain control of the situation, contain the crisis and limit threats to the safety, financial situation and reputation that might threaten to firm’s survival. Countermeasures are defined and executed to end the crisis as possible, and move on to next phase, where normal business is resumed.

Phase 5: Corrective actions (Resumption, Recovery, Compensation, Prevention)

Once back in control, the business can resume its normal operation, meanwhile taking corrective actions to recover from the damages done. Owning up to it responsibility the company would compensate for damages done – also to others, and make sure that lessons are learned to prevent a crisis like this in the future.

After this overview of Factors, Conditions, Strategies and Steps, we will elaborate on the various topics in a series of blogs, whitepapers, templates and tools to be published and provide concrete plans, tips and tricks based on our experiences.

Future publications, per phase:

Crisis detected

 

Command (assess & assemble) 

  • First aid in the emergency room
  • Diagnosis
  • Decision-making during crisis

 

Communicate

  • Crisis Communication – the essentials
  • Playbook for reputation nightmare

 

Cope (Control, Contain, Countermeasure & Continuity)

  • Containment and Cure
  • Playbook for Cyber attack
  • Playbook for internal conflict
  • Tools

 

Corrective actions, (Resumption, Recovery, Compensation, Prevention)Ten negotiating tips

  • Mediation – the essentials
  • Recovery and Discharge