The 6 Behaviors Or Steps That Will Either Destroy Your Company Or Save It During A Crisis

June 10, 2016

The 6  Common Mistakes Or 6 Best Practices That Will Hurt Or Save A Compnay

A crisis happens quickly.  Speed, knowledge and communication are vital if a crisis is to be handled correctly with minimal impact on a company’s bottom line or reputation.  Unfortunately, some companies fail to resolve the crisis and fall into the trap of the 6 deadly mistakes.  Those that successfully resolve the crisis instead, follow the pattern of using the 6 basic crisis management steps. In essence, it is 6 behaviors or steps that will dictate how a company reacts to a crisis and whether it emerges unscathed or mortally wounded.

There are 6 basic common, predictable and avoidable mistakes that companies or organizations make during a crisis that will have a major negative impact on the company’s reputation or brand.  The mistakes cause negative effects including making the crisis worse and failing to solve the crisis which in turn has major legal and reputational implications. The 6 common mistakes are:

  1. Ignoring the problem- Management fails to take the problem seriously until it is too late.
  2. Assigning blame- Instead of acknowledging the mistake and resolving the crisis, management blames a third party.
  3. Paralysis- Instead of taking action to resolve the crisis, management panics causing a negative reaction throughout the company  with a loss of productivity as well as talent.
  4. Not telling the whole story- Management tells only a part of the story to the public, causing more bad news to come out during regular news cycles causing negative public opinion.
  5. Failure to engage stakeholders- Management fails to reach out to its stakeholders at the beginning causing them to develop their own negative opinions from the news or lack thereof.
  6. Killing the messenger- Management punishes those that deliver bad news or allows a corporate culture of punishing employees who raise problems.

Other companies, that don’t fall into the trap of 6 common mistakes, survive an international crisis situation by following the 6 basic steps for crisis resolution- or the 6 best practices of crisis management.  The 6 steps to a successful resolution are:

  1. Planning- Management anticipates a potential crisis and plans for it.
  2. The appointment of a Crisis Manager- Management has already appointed a Crisis Manager who is familiar with the company, its operations and products.
  3. The formation of a Crisis Response Team- Management has already appointed a Crisis Response Team that enables a quick response to the legal, reputational, operational and media issues.
  4. Knowledge of the foreign situation impacted by the crisis- In case of a cross border crisis, management has taken steps to learn what the issues are on the ground.
  5. Proper international communications and PR- A communications team has been set up to deal with the international and domestic news and media.
  6. Management of the crisis claims (legal, etc.)- Legal has taken steps to properly manage the claims and government investigations caused by the crisis.

An example of a crisis that involved most of the 6 basic or common mistakes centers on a recent acceleration/gas pedal recall involving a car manufacturer.  The manufacturer was apparently put on notice of a large number of complaints involving acceleration/gas pedal problems.  However, it did nothing to thoroughly investigate the issues or communicate to the public that it was seriously investigating the issue (It ignored the problem).  It denied such problems were due to mechanical issues.  Several years after it first became aware of the potential acceleration issues, it was forced to seriously investigate the matter because of several fatal car crashes potentially involving unintended acceleration.  The car crashes were widely reported in the media.  Because it failed to handle the crisis properly at the beginning, the car manufacturer was severely criticized in the media for its lack of response and apparent disregard of its customers' safety (Management had become paralyzed). The public became outraged when it learned  the car maker began investigating the acceleration problems in earnest only after the fatal car crashes- 2 years after numerous reports had been made ( It didn’t tell the whole story).  The US Congress then got into the act holding hearings on the acceleration issue.( It didnt understand the cross border issues).   The company ended up recalling over 8 Million cars worldwide and finally appointing a safety officer, etc. in the US.  Though it began to communicate more effectively, the car maker's penchant for secrecy, failed communications and lack of a crisis management plan at the beginning severely impacted the company (It didn’t reach out to its Stakeholders).

In the end, the company was hit with over 130 class action lawsuits in the US.   Billions of dollars in share value evaporated due to its stock's decreased share value. Because of its failure to properly manage the crisis, it lost almost 6% market share in the US - reflecting a tarnished reputation.  Though it is now regaining market share, it continues to have recall problems and brand issues.

So, whether a company survives a crisis intact depends to a certain degree of whether it makes the 6 basic common mistakes or uses the 6 best practices of crisis management. Either way, it’s a 6 step process to defeat or victory.

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