2018-05-22

Too often, we see organizations take a reactive approach to crisis management. A scandal occurs, a senior executive is called to testify before Congress, and suddenly, everyone scrambles to respond. Lawyers are called. PR firms are brought in. I’ve seen it up close dozens of times over the years.

Unfortunately, these same organizations think they’re being proactive. They spend millions on scenario planning and other preparations, so they’ll be ready to respond when a crisis hits. Whether it’s an environmental disaster, data breach, massive layoff, bankruptcy, product recall or whistleblower lawsuit, they’ve convinced themselves they have it covered.

While preparedness might be reassuring to board members, investors, employees and other stakeholders, it’s still, at its core, a reactive approach. You’re simply preparing to react. I’ll admit, it’s better than nothing; but it does nothing to prevent a crisis.

Rather than focusing so much energy on crisis preparedness, organizations need to start focusing on crisis prevention. In doing so, they can set themselves up to avoid crises altogether. This is the only way to be truly proactive.

Following are several steps organizations can take to help prevent crises.

Have a sense of purpose. In his annual letter to CEOs, BlackRock’s Larry Fink discussed why it’s important for companies to have a sense of purpose:

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential.”

This is the cornerstone of crisis prevention. The more organizations focus on how they can make a positive impact on society and improve people’s lives, the less likely it is they’ll do something that results in a crisis.

Conduct real-world risk assessments. While corporations are diligent about anticipating financial risk – that is, potential threats to their profitability – too few focus as intently on reputation or brand risk. While the former relies mainly on sophisticated analyses of market and economic trends, the latter requires a deep, nuanced understanding of abstract, often fluid concepts, such as emerging societal issues, shifting priorities among consumer advocates, and the ever-changing political landscape.

Consider all the business leaders who ended up pulling out of President Trump’s now-disbanded manufacturing council in the wake of Charlottesville. Or the intense criticism Pepsi and Fiat Chrysler faced over their recent ads that leveraged the current debate over race in America. A simple, real-world risk assessment, done correctly, would have uncovered – and perhaps helped prevent – these issues before they occurred.

When organizations have a more complete picture of the risks they face, it enables them to see around corners and get ahead of issues before they become crises.

 

Bridge internal silos. One of the best ways to keep issues from spinning out of control is by empowering your organization to collaborate effectively. Legal, investor relations, public affairs, HR, sales and marketing, communications, community relations – all the various functions of an organization should be aware of what the other is doing and be able to communicate and coordinate with one another. When that happens, things tend to run more smoothly. When it doesn’t, problems occur – things go unnoticed; critical stakeholders aren’t accounted for; messaging is inconsistent; and issues that might have been able to be resolved are left unaddressed.

In 2012, Harvard Business Review ran an informative piece on how five companies – Nokia, Enron, Star Princess Cruise Lines, BP and Thai Airways – experienced massive crises that, at their foundation, involved a severe lack of internal communications, transparency and alignment.

Furthermore, one of the greatest tragedies in American history – September 11th – arguably resulted from a failure in internal communications.

Organizations today must ensure they aren’t repeating mistakes of the past when it comes to their internal operations and governance structures.

So, while it’s true that some crises are unpredictable, and a reactive approach may be the only answer, the vast majority can be seen from a mile away and averted by being truly proactive. To quote one of my favorite movies:

“There were some who saw it coming. While the whole world was having a big ol’ party, a few outsiders and weirdos saw what no one else could. […] These outsiders saw the giant lie at the heart of the economy. And they saw it by doing something the rest of the suckers never thought to do: they looked.” (The Big Short, 2015)