How to emerge stronger
As the world becomes more complex and interconnected the threat of a corporate crisis grows.
We see instances everywhere: a gas pipeline explodes, destroying an entire neighbourhood; a corruption scandal takes down a corporate leader; a data breach shakes customer confidence; quality issues give rise to a massive product recall. These are just a few examples among many of that show why companies need crisis management plans.
Shocks come in two main forms: ‘incidents’ and ‘crises’. Incidents are operational disruptions often stemming from accidents or natural disasters. Companies aren’t usually held accountable for these unless they’re poorly handled.
However, if incidents are poorly handled they can escalate into crises that threaten an organisation’s viability. Crises can arise anywhere, anytime, for myriad reasons. Usually triggered by significant internal or external factors, they have enterprise-wide impacts, disrupt normal business operations, and bring the potential for reputational damage. All of this means their effects can be catastrophic – to brands, people and the bottom line.
Yet either type of shock brings opportunity. Having effective crisis management plans helps an organisation learn what works and what doesn’t, so it can spot and address future threats more quickly and effectively.
The author Nassim Nicholas Taleb cast an interesting light on this in his book Antifragile: Things that Gain from Disorder[i]. In it, he suggests that organisations shouldn’t aim to develop resilience to crises. Why? Because being resilient means simply getting back to where you were before. Instead, organizations should strive to be “antifragile” and come out of the crisis better than when they went in.
[i]Taleb, Nassim Nicholas. "Antifragile: The things that gain from disorder". Random House, 2012.
It’s a bit like personal fitness. If you lift weights in the gym your muscles feel sore. But a couple of days later you'll be able to lift more weight.
Now imagine that in the context of a company crisis and the responses that the company takes. It does the hard work needed to fix the problem and learns from the experience. Result? It gets stronger. And will respond even better next time.
At PwC we call this ‘Emerging Stronger’. It’s something your organisation needs five ingredients to achieve. Here’s what they are.
Until about a decade ago, many companies were woefully underprepared for a crisis. Why? Because – outside of physical security measures such as running fire drills – they’d failed to do the basics, like putting crisis management plans in place and allocating clear roles and responsibilities in readiness.
That began to change with the rise of social media and cyber-attacks – both of which are fast and unpredictable, calling for rigorous incident response planning. These plans then expanded to other types of crises, from ethical to environmental to behavioural.
So, how can you ensure you’re as ready as possible for a crisis? By taking four key steps.
First, if you don’t have a crisis plan in place, make one. If you do have a plan, conduct an assessment of your readiness – an in-depth review of your current plan to check it’s still relevant and pinpoint gaps and blind-spots. This should include interviewing the people who’ll execute the plan, checking how ready they are and whether they practise them.
Step two is using the maturity assessment to enhance and update the current plans. Some improvements might be obvious: perhaps your plan is on paper in a physical filing cabinet, and needs to be digitised to enable faster and wider access. Or there may have been changes in the business or external environment that need to be reflected in the plan.
Third, train the people involved in executing the plan to be sure they’re ready at a moment’s notice. Then move on to step four,test out the plan: stretch your organisation’s muscles by running crisis simulation exercises with the relevant teams, based on creative but realistic as-live scenarios.
When an organisation is in the midst of a crisis, what it needs most is solid facts. What happened? Why? How could it have been prevented? Whose actions contributed to it? What is the current status so strategic decisions can be made quickly?
Establishing these facts isn’t easy. It means taking a cold, hard, objective look inside the business. But doing this is imperative.
Why? Because, in a crisis, information is power – and the basis for an effective and credible response. What’s more, a business that doesn’t make the effort to uncover the facts can end up in a vicious circle, doing the same things over and over while expecting different results. Guess what: it’ll be disappointed.
In trying to establish the facts, the challenge is that the time pressure is heavy and unrelenting. Amid today’s 24/7 news cycle and constant scrutiny on social media, there’s a constant push to get information out quickly. But go public with anything inaccurate, and it’ll almost certainly come back to bite you later.
In addition to getting a grip on the known facts, it’s also vital to be aware of what you don’t know. Once the crisis hits, it may be impossible to establish the real facts on day one, two or even three. But people outside the business accept this. And if you know what the gaps are in your information, you can at least say you’re seeking all the facts but don’t yet have them. This honesty may even boost your credibility and win trust.
Three key participants are at the heart of any crisis response. First, the public relations and communications teams. They’re responsible for developing and delivering the organisation’s messaging internally and externally. Second, the legal and regulatory teams. Their role is to understand the organisation’s risk exposures and advise on appropriate responses. Third, the operational response teams. They essentially handle everything else – including establishing the facts that the other two groups need to do their jobs. Depending on the type of business and the crisis it’s facing, they could range from gas pipeline experts to anti-fraud professionals.
As the crisis unfolds, the ownership “baton” can move between the three teams on a daily or even hourly basis. But whoever’s holding it at any given time, they must all work in sync. It’s especially vital that the operational teams share the most accurate and timely information they can with the others, so the communications and legal strategies are rooted in fact rather than speculation.
Achieving the close orchestration needed between the communications, legal and operational teams is not always easy, partly because they’re often used to working in separate silos. The best way to remove these barriers is to include all three areas in the response plans. Then, when the crisis hits, you can create a small core committee drawn from across them, empowered to make tactical decisions and escalate important issues to board level. This approach creates the orchestration that’s the “secret sauce” for an effective crisis response.
Another action that top management might consider – both during and coming out of a crisis – is to “look around the corner”: create space to scan the longer-term horizon and consider what happens not just today, but tomorrow and beyond. This may involve allocating dedicated resources who are freed up from the day-to-day pressures of managing the crisis. The resulting wider and longer-term perspective can help make the company’s emergence from the crisis even stronger and more sustainable.
As well as being coordinated across its teams, a company’s messaging during a crisis also needs to be authentic. This means everything the business says and does must be aligned with its brand values, and tailored to the various stakeholders who’ll influence its future.
Recent research has revealed some interesting trends around crisis communication with different stakeholders. For example, studies suggest that female customers are much more tolerant than male ones of product failures, and much less tolerant of ethical failures. So companies need to think carefully about their customer base when framing their messaging.
Another key factor can be who acts as your public face during the crisis. When an organisation is led by someone with a strong personal brand, it tends to fare better in a crisis – especially if that individual plays a prominent role in the communications effort.
Why? It seems that if the public already know and trust the spokesperson, they’re more receptive to believing them. So a well-known leader may be the best choice for the role. That’s why some businesses deliberately build up the social media presence and profile of a selected member of their senior leadership as part of their crisis preparation.
Finally, it’s important to address all the organisation’s stakeholders. In past crises, we’ve seen some corporations focus narrowly on particular stakeholder groups – perhaps investors, regulators or highly vocal consumers – while neglecting others like business customers, employees or suppliers. The communications strategy should incorporate a clear understanding of all the audiences it needs to reach.
Having blended the first four ingredients of an effective crisis response, it’s time to add the final element: learning from the crisis to make sure you respond better next time.
This is imperative if you’re truly to “emerge stronger”. But it doesn’t always come naturally. After weathering a crisis, any organisation can feel tempted to put the whole experience behind it and never think about it again. This is a big mistake.
Instead, it’s vital to learn lessons about two things. First, the root causes: what triggered the crisis, and what could we do differently to stop it happening again? Second, how to respond more effectively in future: what did we learn about our crisis plans, and how can we improve them for the next one?
Not all organisations learn these lessons. We’ve seen cases where companies are found guilty of criminal acts, but their people steadfastly maintain they just got a “raw deal”. This state of denial is dangerous. Far better to accept a share of the blame and work out what to do differently in future.
A business’s ability to learn from a crisis comes down to its leadership. If your senior leaders are willing to accept fault and learn lessons, then this “tone from the top” shapes behaviours at all levels – and employees will feel empowered to learn lessons as well.
It’s said that those who don’t learn from history end up repeating it. Take the run-up to the 2008 global financial crisis: the focus then was on insulating banks against the impacts of a crisis rather than identifying and tackling the root causes.
Returning to the analogy of physical fitness, this was akin to tying pillows round your body to avoid harm rather than working out to build up core strength.
Whether it’s corporate crises or personal wellbeing, what’s clear is the vital importance of recognising, facing up to and tackling the real issues. Even if these appear small at the time, addressing them enables your organisation to exercise its muscles so it’s in better shape when a major test arises.
The ability to respond effectively to a crisis is reflected in an organisation’s share price. Companies seen to have responded well to a crisis gain a 22% premium in share value over to those who didn’t. That’s the edge gained from emerging stronger.
In today’s interconnected and fast-moving world, no corporation is immune from crises. The question isn’t whether one will occur, but when. So it makes good sense – and good business – to be ready, and equipped to emerge stronger.