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PR Perspective: Five False Assumptions about Crisis Management By Mark Schannon
Schannon & Associates
Failing to distinguish between a disaster and a crisis often leads to snatching defeat from the jaws of victory. Too often, what's called a crisis plan is, in fact, a disaster plan, giving guidance to prevent a crisis from occurring. Train wrecks, oil spills and plant explosions are disasters-unexpected, dramatic, but manageable.
The mother of all disasters-turned-crisis was Exxon Valdez. Fifteen years later, there are still people who won't buy Exxon gas. But who has heard of the British Petroleum spill 11 months later off the coast of Los Angeles? The BP CEO did such a superb job, a Los Angeles Times headline proclaimed, "After Spill, BP Soaked Up Oil and Good Press."
Consider these two approaches to negative news:
First, a September report by a special board committee of Hollinger International commented, "Behind a constant stream of bombast regarding their accomplishments as self-described ‘proprietors’, …controlling shareholders made it their business to line their pockets at the expense of Hollinger almost every day, in almost every way they could devise." The company responded in writing (always a good approach) saying "The report is recycling the same exaggerated claims laced with outright lies….The report is full of so many factual and tainting misrepresentations and inaccuracies that it is not practical to address them in their entirety here."
Second, on September 7, Inversco Funds group agreed to a $451.5 million dollar settlement for allegations of predatory short-term trading. Their CEO issued a statement, saying, "We deeply regret the harm done to fund investors and have taken strong measures to prevent any recurrence. Our fundamental commitment has been-and must continue to be-to uphold our clients’ trust…It has been painful for AMVESCAP employees to learn that these core values were not always upheld…"
So, with whom would you want to do business? Why do some companies turn disasters into crises, while others manage to contain the fallout? Part of the reason lies with five false assumptions people make about crisis preparedness and management. False Assumption #1: We're prepared, we've got a binder…or…Operational crisis plans are really crisis plans
Operational plans deal with disasters. A crisis can be defined as a profound violation of trust between organization and its audiences. That violation of trust changes the way even your closest allies look at you, and if you don't understand how that distortion works, you're cooked.
True crises are almost always the result of mismanaging the early phases of an issue or incident. How a company responds is much more important than the details of the response, but few companies focus on this critical factor.
False Assumption #2: One Size Fits All…or…Operational preparedness is the same as organizational preparedness.
Operational disaster plans are used to contain the problem and quickly get things back to normal. They work because they deal with linear processes that can be defined and analyzed. However, those attributes don't apply to organizational preparedness. Dave Snowden of Harvard argues that people are not knowable in the way a train or manufacturing plant is. People have too many conflicting values and beliefs and aren't subject to the traditional laws of cause and effect.1
Why didn't the partners at Arthur Andersen recognize that their management structure was paralyzing them, giving their opponents free reign? Bridgestone/ Firestone, in the early stages of the Ford Explorer rollover disaster, responded with facts, logic, and reason, unintentionally turning anger into outrage and giving their opponents a bully pulpit from which to paint them as heartless corporate thugs.
Organizational preparedness is first and foremost about the creation of a "crisis mind set" among those in charge. Since this environment is alien to anything previously experienced, this mind set is often counter-intuitive and even painful. But the failure to train (and train and train) managers to adopt the proper attitude will likely result in all other efforts coming to naught.
False Assumption #3: I think, therefore I can think…or…People are rational animals who consciously form values, opinions, beliefs, and behaviors. Reason will win out over emotion.
When under attack, most companies fall back on facts, reason, and logic, which is actually an emotional, defensive response that, until the counter attack, creates a false sense of security. A June 24, 2004 Los Angeles Times article, "SEC Calls for Independent Fund Heads," notes that eight in 10 mutual fund boards are out of compliance with the rule to appoint independent chairmen.
Note the empathy and sensitivity in the response by Vanguard Group Inc. CEO John Brennan. "Our senior management team, our crew and the boards are going to continue to focus and serve the interests of the fund shareholders as we have done throughout our existence." Does anyone believe that this quote does anything but further confuse, outrage, and alienate investors?
Peter Sandman, the risk communication expert, offers a fascinating thought experiment: "Imagine you're at a community meeting. People are frightened, outraged, and suspicious about something your company has done. Now imagine the PowerPoint presentation you can give that will result in them leaving the room feeling happy."
None of us is immune from strong emotional responses that impede our ability to be rational. In fact, one of the myths that needs shattering is that rational thinking can be separated from emotion. The very nature of a crisis or serious problem results in emotions overwhelming reason. Daniel Yankelovich, in Coming to Public Judgment, wrote "Paradoxically, in this Age of Information, the importance of information in shaping public opinion is vastly exaggerated." The most important thing a company can do when the barbarians are at the gate is understanding the rules of the game.
Dr. Daniel Kahneman, a Princeton psychologist and the co-winner of the 2002 Nobel Prize in economics, has uncovered a few simple, but disconcerting truths about how rational we human beings are2:
First, losses are more powerful than gains in determining how we form opinions, which means that accusations of harm will always win over responses about benefits. You first must address people's perceived losses or injury first. Numerous scientific studies have found that people won't hear anything you say until you deal with what's uppermost in their minds.
Second, first impressions shape subsequent judgments regardless of the evidence against them. Get into the debate early. Set the context. You won't have all the information you need, but conflicting, inadequate information is endemic to every crisis. However, if you let your opponents set the stage, you're by definition on the defensive.
Third, vivid impressions are a greater factor in decision making than more abstract but more accurate information. If all the world's a stage, business people are some of the worst actors on it. Look again at the quotes, above.
There are exceptions. Consider former Chrysler Chairman Lee Iacocca's response to the 1987 odometer crisis. "Did we screw up? You bet we did. A simple apology is not enough. We asked customers to trust us, and they did. Now they've been given a reason to question that trust. Simply stated, that's unforgivable. We let our customers down. This will not happen again. I promise." A quick, vivid response directed exactly at the issue.
Crisis preparedness must include learning how to diffuse intense, blinding emotions. The crisis team must accept that they too are under extreme emotional stress, which affects their judgment, and they need extensive training to successfully handle hostile audiences.
False Assumption #4: Step back, I can handle this…or…When the alarm bell goes off, seasoned executives know what to do.
In the court of public opinion, a charge is considered proof, and you're guilty until proven innocent. Because you're "guilty", you have no credibility. It's simply a part of human nature that explains why executives have trouble changing their approach when disaster strikes. Among other scientists, Karl Weick, professor of organizational behavior at the University of Michigan School of Business has found, "There is good evidence that when people are put under pressure, they regress to their most habituated ways of responding."3
And so perhaps the line we walk is sometimes thin because it is up to us, as individual practitioners, to decide if what we do for a company and for which company fits within our own comfortable ethics zone.
Initial responses set the stage for what comes later, but many managers under stress succumb to emotion and respond as they always have, not realizing that their actions often create more tension, suspicion, and anger. Here are but a few of these habituated initial responses guaranteed to make things worse:
It's all about me. The very nature of corporate life gives senior executives inflated egos. The outside world can change that perception quickly.
In June of 2003, a flock of brokerage houses agreed to a $1.4 billion fine to settle a Securities and Exchange Commission case. Morgan Stanley CEO Philip Purcell claimed that individual investors wouldn't change their opinion of his company and that his company wasn't one of the worst offenders. The SEC Chairman was apoplectic and countered that the SEC would consider further legal action if Purcell kept it up. I don't know Mr. Purcell, but my guess is that he never considered the consequences of his statements.
The Labrador Syndrome4 . You train your dog to stay off the couch and, one day, come home to find him with his head under the couch. He's obviously thinking, "well, I can't see them, so I guess they can't see me." After the post-9/11 Anthrax attacks, Bayer responded with thundering silence when the issue of the availability of Cipro surfaced, thereby ceding control of the media and government debate to everyone else.
Like I care…or "Don't worry, we're fine." Sorry to pick on Bayer again, but in 2003, company documents indicated that executives knew that their anti-cholesterol drug, Baycol, had problems long before they pulled it off the market. CEO Manfred Schneider commented, "This extraordinarily unfortunate series of problems…poses no threat to Bayer's existence." Phew! Bet Baycol patients were relieved, especially the ones suffering with rhabdomyolysis, allegedly caused by the drug.
These are but a few of the first responses to which managers under extreme stress default. Training executives in advance to avoid them is not a one-day exercise. It's difficult, painful, humiliating…and essential.
False Assumption #5: I Am C-Suite, Hear Me Roar…or…Behaviors that create success in normal times also work in times of great stress.
Wrong. Crises change all the rules, but, in the heat of battle, people default to those rules that brought prior success not realizing that those rules are now toxic. I've identified 17 rules; three are outlined, below.
Power is an essential tool of management. In a crisis, power shifts to external audiences, and most managers are ill-prepared to adjust their behavior accordingly. However painful it is to lose power, losing credibility creates intense emotional distress. Power is defined by external relationships; credibility involves internal values and belief systems. As the CEO of a major chemical company noted back in the late 1980s, "It's tough to get the job done when everyone hates you." In the heat of a crisis, these personal attacks often result in irrational, counter-productive responses that only serve to make things worse.
I will determine when and how information is disseminated. In normal times, information is a tool controlled by management to gain a certain strategic advantage. In a crisis, many managers continue to believe that they have that advantage. Enron, Andersen, WorldCom, Tyco, and a host of others had control over when and how much information they would provide. Look how well they did. Meanwhile, their critics dominated the news with vivid images and explosive charges.
Failing to provide information or at least opening lines of communication creates ambiguity, and, as the business consultant, David Maister has said, "all ambiguous behavior is perceived negatively." There is an information vacuum out there, and someone will fill it. Rapid response does not mean giving away the store, but as a general rule, speculation and suspicion feed controversy; information quiets speculation and alleviates suspicion.
Never let them see you sweat. The great sin in most corporations is to appear uncertain. Start to sweat, and your subordinates go into panic mode. Under intense pressure, this rule tends to morph to never letting them see you as human. What was perceived as strength is now seen as insensitivity, which embarrasses your employees and intensifies external outrage. One can express sadness, regret, and sorrow for the sufferings of victims without admitting liability.
Let me close with an example of how that can be done. A young woman died at a New York hospital from a terrible infection. While the hospital settled with the family, the community was in an uproar. What follows is an excerpt from a news conference:
"It's frankly very hard for me to express what I'm feeling - and to convey to you what everyone at [hospital] feels. We became doctors and nurses…to heal people. Even when someone dies, and we can face their family and friends and say we did everything humanly possible, there's a part of us that questions and second guesses.
"That's why this death is so difficult, because we can't face [patient's] family and say we did everything humanly possible. Today, I would like to tell you…what I've already told [patient's] family: We let you down. And we are deeply, deeply sorry. And we are going to do whatever is necessary to make sure that these problems never happen again in this institution.
"Could we have prevented [patient's] death? We believe that there was nothing we could have done because of the horrible nature of this infection. But we're not asking anyone to accept that. What we believe doesn't matter right now. The fact is she died, the fact is we made mistakes….Our responsibility is to help her family in their time of grief and to the people of [community] - to restore their confidence in our hospital."
End of controversy. End of story.
1Dave Snowden, Director of IBM's Centre for Action Research in Organisational (sic) Complexity (CAROC), Complex Acts of Knowing: Paradox and Descriptive Self-Awareness, "The Journal of Knowledge Management," Vol. 6, No. 2, 2002 (May)
Mark Schannon has over 25 years experience in corporate reputation management. He has written and spoken extensively about issue and crisis management, risk communication, environmental issues, litigation communications, industry restructuring, and other issues. He was selected as one of the "Five Faces to Watch in Public Affairs," by PRWeek magazine, November 2000. Mark works out of McLean, Virginia and can be reached via email at mschannon@cox.net.
If you have links, comments or information pertaining to the editorial you would like to share, please feel free to email me at info@workinpr.com. Space permitting, I'll include them in the next newsletter.
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