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Crisis Just Ahead Sign With A Bad Day

Any Crisis Can Ruin a Business – If There’s No Plan

Crisis Just Ahead Sign With A Bad Day

December 16, 2021 Posted by in Business Continuity, Crisis Communications

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Warren Buffet

No one likes to think about disaster, but being unprepared can impact businesses on many critical levels. Taking the time to craft a careful crisis plan, monitor for smoldering issues, and executing thoughtful communication can make the difference between being a good example and possibly going out of business.

Current Crisis Environment

What drives crises? Often it can be too much complexity, deficiencies in warning systems or risk perceptions, or a collapse of vigilance. Many crises begin with normal mistakes or lack of foresight, snowballing into bigger problems.

Crises aren’t new, but our current environment does impact how we prepare for and react to them. COVID has changed so much about how we work, and at this point is also causing a lot of fatigue, which can lead to increased risk. There are also extraordinary challenges for businesses around supply chains, inflation, and staffing, all of which can compromise safety. Political turmoil at home and abroad, as well as more social activism (particularly on social media) has created new scenarios and eroded trust in the media and government. Stakeholders have higher expectations of work leaders to take a political stance, and employees are more willing to speak up about the companies they work for.

There have been a lot of changes on a micro level, too. Individual stakeholders have different behaviors and expectations than they did even a decade ago:

  • Technology has created so much interlinking that a failure in one area can easily impact others
  • Attention spans are shorter, increasing possible mistakes
  • The public is no longer satisfied with a news media summary
  • Decisions and communications must happen faster
  • Stakeholders expect authentic answers and two-way engagement; ‘corporate-speak’ is not tolerated
  • They expect you to make it right and won’t be shy about their criticism

Goals of a Crisis Plan: Management and Communication

Business crisis  as defined by ICM: “Any issue, problem or disruption which triggers negative stakeholder reactions that can adversely impact the organization’s reputation, business and financial strength.”

In the current climate described above, a crisis plan is an insurance policy. Ultimately insurance is about mitigating your risk of financial damage – you hope to never need it, but you better have it just in case! As the saying goes, hope for the best but plan for the worst.

Yet it appears most businesses do not have a  crisis plan. PwC Global Crisis Survey 2021 reports that of the 2,814 business leaders surveyed on  how they are managing through COVID,  just 62% used a crisis plan, yet 84% have discussed the value of organizational resilience. A whopping 95% of business leaders report that their crisis management capabilities need improvement, and 7 of 10 organizations reported planning to increase their investment in building resilience. 

In a related study, Vulnerability Gap:  Deloitte, we see a similar statistic: “Disparity between feeling ready vs. being ready: More than three-quarters of board members (76%) believe their companies would respond effectively if a crisis struck tomorrow. However, only 49% of board members say their companies engage in monitoring or internal communications designed to detect trouble ahead, and only 49% say their companies have playbooks for likely crisis scenarios. Even fewer, (32%) say their companies engage in crisis simulations or training.”

The startling gap between realizing the need for preparedness and taking the actual steps of preparing is stark, despite the high stakes. And having a plan is just the beginning of effective crisis management –  implementation, creating awareness, regular practice and tests of scenarios and communications, and incorporating it into organizational culture are the only way it will work effectively. 

Goals of a good plan:

  • Prevent a crisis from occurring, if possible
  • Alleviate effects if prevention fails
  • Minimize financial impact
  • Restore reputation and trust
  • Facilitate a return to “normal”

Why Crisis Plans Fail

  • Too much focus on writing the plan and not implementing it
  • Unrealistic feeling of safety
  • Can delay reaction times and decision-making processes
  • Rarely updated and contain irrelevant information
  • Not integrated

Predict and Prevent Crisis Through Understanding and Assessing Risk

Crises are about people. They range from disasters and disruptions to physical and cyber crimes. We can all think of several high-profile examples that often destroyed organizations or leaders. Even small businesses can learn from these examples to examine possible brewing crises and prevent them before they happen. 

Often when thinking of a crisis we recall extreme weather or emergencies, but often business crises can begin as something much smaller that grows, called a smoldering crisis. Lacking safety protocols, poor reporting, and human errors are just a few. While these sound less dramatic, they can be just as damaging and should be planned for just as thoroughly. 

Having a method for assessing the relevance of a risk is an excellent exercise. By gathering management perceptions of vulnerability across organizations and ranking each crisis scenario in terms of its potential probability and impact, you can more easily focus your time and attention on those situations that are the most likely or can have the most devastating impact on your organization. 

RISK = Threat x Vulnerability x Impact

  • Threat is any event or circumstance with potential to adversely impact organization’s operations, mission, function, image or reputation, financial performance (example, a workplace death)
  • Vulnerabilities are any weakness in a component or system that can be exploited by a threat source (how the employee was performing his/her job,  safety policies and procedures and whether they are consistently reinforced)
  • Impact is the magnitude of harm expected to result from a particular event (the reputational, financial and overall business impact that such an event would cause)

These are some ways you can categorize vulnerabilities as you assess risk, keeping in mind to also assess and prioritize stakeholders for each crisis (victims, customers, employees and their families, the community, media, etc.). 

  • Operational Threats
  • Natural disaster, safety, cyber, product defects, transportation issues, labor disruptions
  • Personnel/ Facility Threats
  • Workplace violence, casualties, bomb threat, civil disturbances, active shooter
  • Reputational Threats
  • Alleged employee wrongdoing, less of key executive, damaging rumors or criticism, litigation and class actions, activism, whistleblowers

Crisis Plan: Communication

Serious business problems don’t become a “crisis” until your stakeholders find out. But the longer a crisis goes on, the more damage it does to reputation, sales, earnings, stock price, and competitive position. Management denial is the biggest obstacle to effective crisis management, as often they are only concerned with legal implications rather than stakeholder perceptions. Using effective communication throughout is critical to a more positive outcome. 

Communication will happen on two fronts, internal and external. Often internal communication is a secondary focus, but for safety and reputation it should be given proper attention. Employees can be powerful advocates or critics (particularly on social media) depending on their perception of inclusion, trust and transparency of management. 

Internal Crisis Communication Goals

  • Providing instruction to protect people and property
  • Contribute to processing the crisis and reduce stress, anxiety, uncertainty
  • Strengthen loyalty and engagement and increase workers’ identity with the organization

What you say is important, but so is when, how, and where you say it. Most importantly, do not delay. Stalling, delaying and denying reality creates unseen victims and avoidable collateral damage. Additionally, cad news gets worse in a vacuum of the facts. Stakeholders will forgive communication missteps in the name of responsiveness; they won’t forgive a lack of information and will interpret it as excuses to stall or deny.

Messaging Strategy

  • PROMPT – don’t delay
  • Consistent
  • Connected to Goals
  • Reinforce mission and values
  • Just the facts
    • No speculation
    • What happened
    • What we are doing
    • Apology if appropriate
    • How we will fix it
    • How we will assure it does not happen again

Crisis Plan Best Practices

ICM Principles of Crisis Management and Communication

  • Tell the truth. Do it quickly and repeatedly. Apologize when you should.
  • Prove it.  Walk the talk. Don’t just say the right thing, do the right thing.
  • Listen to your stakeholders. Carefully and with an open mind.
  • Manage forward. Anticipate stakeholder reactions to the crisis and be prepared to respond.
  • Make decisions that consider the impact on stakeholders and their values, expectations and influence.
  • Understand where your company’s reputation lives;  in the words and actions of every employee. Employees are your best ambassadors, and your toughest critics.
  • Remain calm and carry on. Build the framework for reputational success with consistent attention to acting and speaking consistent with your core values.

As technology and events continue to change the types of crises we experience, it is critical to anticipate potential problems and develop a crisis plan for managing and communicating throughout. 

This information is taken from the webinar Not Every Crisis Makes the Headlines: Managing Issues to Prevent Damage to Brand, Reputation and the Bottom Line featuring Deb Hileman, President and CEO of ICM. Click this link to watch the webinar replay. 

About Pocketstop

Pocketstop is a communication software solutions company who empowers companies to create personalized, automated messages designed to provide rapid ROI backed by the industry’s best support at a cost customers can afford. Our commitment to excellence propelled us to become the industry’s pioneer in innovative and effective technologies with a portfolio of customer-focused products designed to drive audience behavior, improve efficiency, provide insight and actionable data for decision making by improving their existing internal, employee, stakeholder or customer communication strategies. For more information, visit https://pocketstop.com.

About the Institute for Crisis Management

Founded in 1990, The Institute for Crisis Management® (ICM) was one of the first crisis management consulting firms in North America. Unlike other general communication and PR consulting firms, crisis management and communication is all we do. ICM offers a variety of products and services designed to help your organization’s executives to lead effectively before, during and after a crisis.

 


 


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