Crisis management - the acid test of leadership

Crisis management - the acid test of leadership

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  CRISIS MANAGEMENT: THE ACIDTEST OF LEADERSHIP Crisis management training, planning & consultancy
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  CONTENTS Introduction 01 1) Createa crisis resistant culture 02 2) Beware denial 02 3) Be true to your values 03 4) Set the communication agenda 03 5) Take responsibility for decision-making 03 6) Never hide behind your advisors 04 7) Be visible 04 8) Be personal 05 9) It’s not about you 05 10) Do the right thing, say the right thing 06 About and contact 07
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  INTRODUCTION Some of thebiggest crises of recent times – not least corruption allegations at FIFA, VW’s emissions scandal and the Virgin Galactic crash – have either centred on organisational leadership or required the CEO in question to apply their crisis management skills under enormous pressure. Some have succeeded; others have faltered. Whilst attention is rightly focused on the development and rehearsal of crisis management plans, ultimately reputations are preserved or destroyed as a result of what people do and say under intense pressure. On the worst day of their lives, leaders must rise to this challenge, or risk losing everything. The blueprint for effective crisis leadership was established in 1989 when Michael Bishop (now Baron Glendonbrook), chief executive of the airline British Midland led its response to an aircraft crash near Kegworth. His speed of response, presence at the scene, personal concern for the victims, pitch perfect media interviews and the confidence he provided to colleagues through his words and deeds were critical elements in British Midland’s recovery from the tragic accident. Much has changed since 1989 (the mobile phone on which Sir Michael conducted media interviews en route to the accident was the size and weight of a brick), but the necessity for effective crisis leadership has not. To the contrary, the demands are even higher. Rolling broadcast news, heightened interest in business personalities, realtime coverage on the internet, greater shareholder activism and, of course, the transparency and speed demanded by social media combine to make a major crisis a pivotal moment in a leader’s career. What they do and say under the most intense scrutiny can shape the future of their organisation and define their career. No training, rehearsal or external advice can guarantee that an organisation will effectively navigate a crisis. However, our experience is that by applying the ten guiding principles outlined in this white paper, leaders can create the framework for successful crisis management. “The test of a company’s leadership, and of a CEO in particular, usually comes during a crisis,” Richard Branson, September 2015 Website: Email us: www.insigniacomms.com [email protected] Jonathan Hemus managing director, Insignia 01
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  1) Create acrisis resistant culture The most effective form of crisis management is crisis prevention. Crisis prevention begins with organisational culture. And leaders have ultimate responsibility for creating and embodying a culture which will minimise the potential for crisis. A crisis resistant culture is one in which the organisation acknowledges the potential for things to go wrong and plans accordingly. Crucially, it is one in which staff are actively encouraged to send word up the line when they spot a possible problem. In July 2015, Toshiba’s chief executive Hisao Tanaka was forced to stand down when it emerged that the company had significantly overstated its profits for the previous six years. The official report into the issue stated: “Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors. Therefore, when top management presented ‘challenges’, division presidents, line managers and employees below them continually carried out inappropriate accounting practices to meet targets in line with the wishes of their superiors.” A crisis-resistant culture is one in which local managers and their teams are not only encouraged to alert senior management to potential issues, but are also empowered to take action to prevent an incident turning into a crisis without requiring three levels of approval to do so. Embedding a crisis-resistant culture requires leaders to champion, communicate and embody the behaviours they want. It requires tough action against those who fail to embrace this culture and reward for those who do. It means for example, commending the supervisor who stops a production line fearing product may have been contaminated, even if he turns out to be wrong and the stoppage costs thousands of pounds. 2) Beware denial To manage a crisis requires a leader to be aware that they are facing one. Denial is the enemy of crisis management. Leadership demands that CEOs are purposeful, confident and positive about the future of their organisation. But they must also be prepared to listen to dissenting voices, to confront problems as well as celebrate achievements. To understand the perils of a leader in denial, one need only consider the fateful words of FIFA President Sepp Blatter when asked about corruption in 2011: “Crisis? What is a crisis? Football is not in a crisis.” Leaders must be constantly wary of believing their own PR or wearing blinkers which prevent them from seeing things are they really are. Encouraging whistle blowers, employing external advisors who challenge the conventional wisdom and spending time “on the shopfloor” are all good ways of avoiding these traps. Crucially, when an issue arises, leaders must have a mindset which allows them to believe that something can have gone wrong. It is only by recognising the issue that they can begin to address it. 02
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  3) Be trueto your values Leaders who take seriously their responsibility for protecting their organisations will have ensured that crisis management plans have been developed, briefed and tested. These plans will help the crisis management team make good and fast decisions. At least as important though will be the requirement to embody organisational values in its crisis response. In a very public, highly pressurised environment, stakeholders will be assessing whether the values so proudly trumpeted on an organisation’s website are deeply authentic or simply corporate puff. Oxford Metrica which researched the financial impact of many crises found that organisations which acted contrary to their corporate values during a crisis were the ones which suffered most damage. As Jeni Britton Bauer, owner of Jeni’s Splendid Ice Creams, who had to recall 265 tons of contaminated ice cream in April 2014 said: “Values exist in the great times, but they also exist in the shitty times. If you abandon those during the worst times, then they’re not yours really”. 4) Set the communication agenda Successful crisis management requires an organisation to do two things: address the problem and communicate effectively with stakeholders. One without the other is never enough. And trying to fix the problem before beginning to communicate is a high risk strategy. Crises are crises because they affect people: their jobs, lives, homes, communities, families. Many stakeholders – employees, regulators, neighbours, the media, investors, government – will want and need information. Social media means they want it quicker than ever before and if they don’t get it from the organisation, they will turn to unofficial sources. AirAsia’s CEO Tony Fernandes understands this and so began tweeting as soon as he received word that Flight QZ8501 had gone missing on 28 December 2014. Later he gave his personal mobile phone number to the families of all victims. His approach to setting the communication agenda was neatly encapsulated in one of his Tweets: “We never hide” Effective crisis leaders seize the opportunity to set the communication agenda. A commitment to communicating quickly and regularly - even at a time of great uncertainty and pressure - will help the organisation to remain in control of its own destiny. Conversely, leaders who instruct their communication team to baton down the hatches, will be met with frustration, anger, suspicion, cynicism and distrust. 5) Take responsibility for decision-making One of the most common pitfalls in a crisis is a failure to make decisions (at all, or quickly enough). The responsibility of the crisis leader is to manage the crisis as opposed to the crisis managing them. Decision-making is difficult enough at the best of times. But in the immediate aftermath of a sudden crisis with lives, livelihoods, careers and reputations on the line, pressure is at an all time high. That poses an enormous challenge for the crisis leader, but it is one to which they must rise. 03
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  In the immediateaftermath of the Smiler crash at Alton Towers in June 2015, Nick Varney chief executive of parent company Merlin was quick to state his position: “Irrespective of the outcome of the current investigations into the causes of the accident…we have accepted full responsibility to those who have been injured in the accident and confirmed that we will ensure that compensation will be provided to them” In a crisis there is rarely a perfect decision, sometimes it’s simply about making the least bad decision. The leader’s responsibility is to make the best decision they can with the information they have at that time. And to do so without unnecessary delay. 6) Never hide behind your advisors Advisors – lawyers, communicators, technical experts – all play an important part in shaping an organisation’s response to a crisis. But the bottom line is this: advisors advise; leaders decide. A particular danger for the CEO is to allow their legal advisors to dictate the organisation’s words and actions in response to a crisis. The lawyer’s role is to brief the leader on the legal implications of a crisis and advise on the course of action which they believe minimises legal risk. It is the responsibility of the leader to listen to legal advice and then commit to actions and words which they believe are in the overall best interests of the business (often not identical to the course of action which minimises legal risk). This issue often comes into sharpest focus when considering whether and how to apologise for a crisis. A sincere, full and heartfelt apology shows empathy, compassion and humanity which will endear the organisation to its stakeholders; but it can also imply liability with the financial cost associated with this. It’s the job of the leader to determine how to square this circle. Michael McCain, CEO of Canadian food manufacturer Maple Leaf which endured a major product contamination in 2008, was unequivocal: “Going through the crisis there are two advisors I’ve paid no attention to. The first are the lawyers, and the second are the accountants. It’s not about money or legal liability; this is about our being accountable for providing customers with safe food”. 7) Be visible Whilst the leader must spend time with their senior team in the crisis control room, they must not retreat to their bunker throughout the crisis. Leadership means being visible, inspiring confidence that the organisation will get through this terrible event, and showing support for those affected. This is especially true for high profile leaders. People – especially employees and customers – will expect to see such leaders during a crisis. If they shrink away, they will create further concern or risk appearing uncaring. 04
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  Richard Branson, perhapsthe highest profile business leader of all, understands this. When a Virgin train de- railed in Cumbria in February 2007, he travelled to the UK from his holiday in Switzerland to be at the scene of the accident, talking to the media and visiting injured passengers and crew. So it was no surprise when he adopted the same approach to fronting up the response to the Virgin Galactic accident in the Mojave desert in 2014. In his own words: “When the chips are down and your company is about to make headlines for the wrong reasons, there is nothing more important for a CEO than being present” Branson’s visible presence as a much trusted leader was a crucial factor in reassuring stakeholders and protecting the future of the organisation. Just imagine how different it would have been had he chosen to remain silent and invisible. 8) Be personal In their normal business lives CEOs will regularly meet analysts, investors, regulators, government ministers and peers from other organisations. Meetings will be formal and structured; talk will be of EBITDA, the latest working time directive, business transformation, strategic realignment and creating a culture of innovation. A crisis is not the time for such esoteric, highfalutin talk. A crisis requires leaders to behave and talk like a normal human being. That’s why leaders with well developed emotional intelligence and the ability to communicate in clear, simple, language will be more likely to succeed in a crisis. When TSB Bank suffered a major service outage in 2014 its CEO Paul Pester engaged in one to one conversations with customers via Twitter. His tone was human and authentic, an impression emphasised with his initials as the sign off for each Tweet. For example: “My apologies to TSB customers having problems with their cards. I’m working hard with my team now to try to fix the problems. PDP” Leaders who allow genuine emotion to come through in their face, body language and tone of voice, and who let their personality come through in the midst of a crisis will enhance the trust and respect bestowed in them. 9) It’s not about you Leaders tend to be strong personalities with a healthy self regard. They are usually confident and comfortable being in the limelight (some may even be a little egotistical). In a crisis, leaders must always remember that no one really cares very much about the impact of the crisis on them or their business. What matters is the impact of the event on others. In a crisis, leaders must therefore demonstrate humility and empathy, qualities which require self-awareness and flexibility of leadership style. 05
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  To understand theperils of ignoring this principle, one need only consider the impact of the words of ex-BP CEO Tony Hayward in the aftermath of the Gulf Oil spill: “I want my life back”. 10) Do the right thing, say the right thing Leadership in a crisis requires courage. Courage to do and say the right thing. Doing the right thing can mean taking actions which are difficult, inconvenient or costly: grounding a fleet of aircraft; firing a high performing colleague for inappropriate behaviour; ceasing to sell a highly profitable product because it may be unsafe. Saying the right thing can make leaders feel vulnerable, uncomfortable or legally exposed: “we care“; “we’re sorry”; “we will spare no expense in putting this right”; “I am accountable for resolving this”. On the day of the Alton Towers’ Smiler crash Merlin CEO Nick Varney communicated exactly the right messages when he said: “I would like to express my sincerest regret and apology to everyone who suffered injury and distress today and to their families” Fine words, but how do Merlin’s subsequent actions match up? Rather well according to the testimony of one of those directly affected. In an interview with the BBC in September 2015, Victoria Balch who lost a leg as a result of the accident, confirmed that she had received weekly visits from Alton Towers staff following the crash and said: “I do think they’re doing everything they can for the families” Being an effective crisis leader requires the instinct to know in your heart what the right thing to do and say is. And having the courage to act on it. Passing the crisis management test Crisis management is indeed the acid test of leadership, and some leaders will fall short, resulting in damage to them and their organisations. However, those who apply these ten principles to crisis management will be rewarded with enhanced trust, respect and a stronger personal and organisational reputation. 06
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  Leaders of successful,dynamic businesses who recognise the importance of protecting their reputation, turn to Insignia for crisis management planning, training and consultancy. We give them the confidence and skills to successfully manage organisation-threatening situations under intense pressure. We offer a range of high quality crisis management services and products around the world, whether delivered personally by our team of insightful consultants who are experts in their field, through technology or via one of our team of specialist partners. Clients trust Insignia to protect their reputations not just because of our deep expertise in crisis management, but equally because of the passion and commitment of our consultants. We care deeply about our clients and they feel that care and quality in every interaction with them. That’s why we have built such strong, trusting and enduring relationships. T: +44(0) 121 382 5304 | E: [email protected] | www.insigniacomms.com DP World “Thank you for delivering such a professional, well-organised crisis simulation exercise for our global management team. The realism of the exercise meant that everyone remained engaged throughout, and felt the pressure as though it was a real situation.” Kate Delahunty, SVP, Corporate Communications England and Wales Cricket Board “Insignia provided valuable insight and advice on a potentially difficult and complex situation. I very much appreciated their assistance in clarifying the issue and their recommended response.” Gordon Lord, Head of Elite Coach Development Henley Business School “Feedback from delegates on the day and subsequently from the Prime Minister’s Office was extremely positive. Against a challenging brief and a tight timeline, Insignia very clearly exceeded expectations with a number of participants commenting that this was the best training experience in which they had ever participated.” Kate Hudson, Associate Programme Director Lundin Mining Corporation “Insignia brings professionalism to a critical business issue. There are few more challenging issues than crisis management and the Insignia team has worked with us as partners to achieve the creation of a sound platform of capability and process on a global basis. Sue Boxall, Vice President HR 07 Crisis management training, planning & consultancy