Exploiting Change

Every year the Institute for Crisis Management in the United States puts out a report on corporate and business crises that made the news in the preceding year. This organization has been tracking such information for over 25 years and it is truly interesting to see how little change there is from year to year in the nature of corporate crises. This knowledge has contributed two of the five “myths” about crises that I’m writing about this month. Here they are:

Myth # 1 – Most crises are caused by factors or the environment outside the company or organization.

Wrong! In fact, it’s the exact opposite. According to ICM, year in and year out, approximately 80% of crises have internal causes. Of these, fully half are caused by management actions and decisions, whereas employees cause the remaining 30% or so. These causes run the gamut from fraud and theft, to poor decision-making, industrial and workplace accidents and hazards, and defective products.

We just have to look at the most recent problems with GM and it’s recall crisis. It turns out that GM cars have been experiencing severe quality and safety problems since about 2000. The reigning corporate culture hindered or prevented the recalls from going forward. Most crises are therefore self-inflicted. Although the vast majority are not necessarily threatening to the public or the organization’s continued existence, this certainly doesn’t help external and internal perceptions. Which leads to the second major myth.

Myth # 2 – Most crises are unpredictable and appear quite suddenly.

Wrong again! And once again it’s almost the exact opposite that is the case. ICM’s data shows that in an average year 60% of all crises are what they refer to as “smouldering.” In other words, the crises don’t just erupt out of nowhere but instead gestate for a certain period of time before crossing a threshold into significance. This means that crises can be predicted and characterized before they become threats. This also means that they can be managed to a certain extent, through various preventive and mitigating measures.

When we combine the data on the causes and development of crises, we can note that almost 50% (80% times 60%) are caused internally and are susceptible to prevention and mitigation before they occur or grow into major problems.

Myth # 3 – Instinct can save my hide.

This is true, but only to a point, and certainly only during the incipient stages of a crisis. Humans and all other animals have an innate ability to react to danger through the fight, flight, or faint responses. If someone comes at you with an axe, there’s a pretty chance you’ll make like a gazelle and high tail it out of there. If you’re backed into a corner, you’ll try to fight your way to safety, like a wolverine. On the other hand, a small minority—and most people once exhaustion and despair set in—will just lie down and play dead, like an opossum.

Whichever way you look at things, though, the only purpose of these reactions is to get you—and your immediate group—out of imminent danger. In no way can instinctive reactions actually solve the underlying cause of the crisis or help you through the decision-making and problem-solving processes needed to get through the crisis. This is why rational thinking and carefully honed and inculcated intuition are the only sure way to weather the storm.

Myth # 4 – It’s about managing our image and PR.

Once again, this may be true, but only as a component of a much larger approach. Unfortunately, when most people think or talk of crisis management, they automatically think of PR and communications. A lot of crisis management firms tout their abilities to help clients communicate with the public, the media and other stakeholders. The real purpose of crisis management, however, is to solve the problem!

Myth # 5 – I can manage through the crisis from behind my desk.

This is probably the most insidious of all the myths, simply because it shows a complete misunderstanding of the nature of crisis and what is needed, to wit, strong leadership. Executives and managers have to lead from the front; they have to see what is happening and be seen. You can’t do this from behind a desk or in a “war room.” Yes, you need to make tough decisions and you have rational decision-making, planning, and problem-solving procedures in place. But you also have to show the world and the people in your team or organization that you know what is happening, why it’s happening, and that you’re trying to regain control of the situation. You have to inspire and motivate your team and those in your care. You have to exercise judgement, evaluate and guard their morale, and manage their welfare.