Monday Mornings with Madison

How to Manage Business during a Crisis, Part 1

Word Count: 1,281
Estimated Read Time: 5 min.

Most business crises are minor ones, like an OSHA safety accident or Netflix’ poorly executed pricing change years ago.  They are short-lived and manageable.  But some aren’t.  Some are major like the BP Deepwater Horizon disaster that poured 200 million gallons of crude oil into the Gulf of Mexico affecting 16,000 miles of coastline, killing 8,000 animals and requiring 30,000 responders to handle the clean-up.  And many are a result of factors beyond a company’s control, such as the impact of the 9-11 attack on Cantor Fitzgerald or the effect the earthquake and tsunami of 2016 on Tokyo Electric Power Company that led to the failure and meltdown of the Fukushima nuclear power plant.   Other predicaments are the result of the reckless behavior of an employee such as the Exxon Valdes oil spill in Alaska or a rookie Dell employee’s poor handling of the company’s social media interactions that led to a firestorm of negative publicity and drove down stock prices.   And some are the result of poor leadership such as the software glitches in the Boeing 737 Max airplanes that led to two plane crashes.  Others are a result of criminal cyberattacks such as the hacking of Target’s computers which resulted in millions of customer credit cards being cancelled.  While all caused by different issues, what these calamities all share in common is that they pushed otherwise sound companies into crisis mode.

In hindsight, some of these crises could have been avoided through more careful planning, greater safety measures or leadership checks and balances.  But, big or small and self-inflicted or unavoidable, a crisis puts a lot of stress on a business.  And, ultimately, there is no such thing as preventing every single possible problem.  Things go wrong.   Machines break.  People make mistakes.  Systems fail.  Bad things happen.  Things conspire to create complex, unimaginable situations. Life is unpredictable that way.   Therefore, the question every business owner or leader should ask is not “Will my company experience a crisis?” but rather “When my company experiences a crisis, how will we manage it?”

The best companies put plans in place to deal with more predictable crisis situations such as those caused by Mother Nature.  Fire.  Flood.  Tornados.  Hurricanes.  Snow and ice storms.  Airlines, for example, train pilots extensively on how to handle bird strikes, weather conditions, water landings, and much more.  That kind of training — coupled with decades of experience — is what saved the lives of the 155 people on the plane that Captain Chesley “Sully” Sullenberger landed on the Hudson River on January 15, 2009.  But some scenarios can’t even be anticipated and can plunge companies into catastrophic situations.  Think Hurricane Sandy or the Paradise Wildfire.  What then?  There are some generally accepted best practices for how to manage business during a crisis.

Best Practice 1 – Try not to make things worse.

Not everyone does well in a crisis.  Some react badly, doing things that hurt themselves and/or the business.  Fear and anxiety often cloud judgment and interfere with clear thinking.  Instinct kicks in causing people to react foolishly or overreact in ways that make matters worse instead of better.  That is part of the problem with crises.  In some situations, even education, training and experience aren’t enough to overcome gut reactions.  Leaders are not immune to failing in a crisis, but how they react can affect the life and livelihood of many and the survival of companies or industries.  While the goal is for the leadership and staff to be an island of stability during the storm and try to make the best of a bad situation, it is seldom easy to do.

When things are going really, really wrong, it is normal for people to panic.  Normal, but not good.  Case in point.  Few business leaders in recent history have handled a crisis as poorly as John Stumpf, CEO of Wells Fargo.  In 2016, it was revealed that Wells Fargo employees had used customer information to create about two million fake customer accounts in order to hit sales goals.  At first, Stumpf made the situation worse by not taking the problem seriously enough.  Then, to compound the situation, he and the rest of the leadership couldn’t get their collective story straight.  And when he finally did respond, the response was perceived as dishonest.  The situation did not improve until Stumpf finally resigned.

If the goal is to try not make things worse, a good rule of thumb is to pause and think.  Do not make unilateral, spur-of-the-moment decisions or react off the cuff.  A serious situation calls for deep reflection and consideration.  In a crisis, seek objective guidance from those qualified to give advice, such as other members of the leadership team and Board members.  Then, gain consensus on the best course of action.

Best Practice 2 – Control what can be controlled.

When panic is everywhere, effort cannot be wasted.  There are likely to be issues that are beyond reach… beyond one’s control.  Identify and resolve the issues that can be solved quickly and efficiently first, leaving more resources to tackle the bigger and harder issues.

Best Practice 3 – Embrace routine as much as possible.

When things are chaotic, staff will often abandon common routines in order to put out fires.  While problems must be handled, abandoning regular responsibilities can create other problems and more chaos.  During a crisis, establish processes that support routine.  If an office closes because of flooding, such as during Hurricane Harvey in Houston, it is important to relocate staff to another location where they have the resources needed (such as phones, laptops, internet connectivity, etc.) to address problems from there.  By providing a place where people can report to work each day at the normal time and follow a typical office routine, a semblance of order is restored.  Then staff can assess and prioritize issues to handle the situation.  This will demonstrate to staff that even in a storm, the company cares about its most valuable resource:  its employees.

If it isn’t possible to create a shared space, then create a virtual space and have staff “meet” digitally at the same time every day to touch base and ensure everyone is on the same page.  If it cannot be done online because there is no internet, do a daily conference call.

Best Practice 4 – Communicate with honesty and transparency.

To manage expectations, it is best to communicate with staff and clients openly and honestly.  Better to tell the truth up front than have the truth emerge in bits and pieces which then erodes trust.  Open and transparent updates builds a deeper bond with customers.  A client can forgive a company that falls short during a crisis, as long as the business explains what is happening and what is being done to rectify the situation.

Best Practice 5 - Seek outside advice from experts or mentors.

A crisis is the time to leverage a company’s support system:  vendors, advisers, and mentors.  Seek expert advice on how to best handle a situation from the company’s attorney, accountant, tech consultant or engineering firm.  Someone who isn’t emotionally invested in the situation can see the situation from a totally different perspective.  A fresh viewpoint can help spot other possibilities and potential solutions.  Engaging people who are trusted and respected will increase the feeling of having a handle on the situation.  That sense of security can help offset stress and anxiety.  And, by working together to resolve a crisis, it will also serve to forge closer bonds with them for the future.

Stay tuned til next week as we explore five more best practices for managing business during a crisis.  Don’t miss it.

Quote of the Week

“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.” President John F. Kennedy


© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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