Strategies Behind Crisis Management

Humpty Dumpty sat on a wall
Humpty Dumpty had a great fall
All the king’s horses and All the king’s men
Couldn’t put Humpty Dumpty together again

This past week I attended a conference of business leaders desiring to take their business to the next level. On the second day, I met a leader who lives in Pensacola, Florida and we began to discuss the oil spill and its impact to the local area. As the leader shared personal photos taken of the beached oil, like many of you, we began to discuss strategies for cleaning up the oil and most importantly its long-term impact on the Gulf Coast, the seafood industry, the tourist industry, the wildlife and possible long-term impact of such a disaster.

And yes we did discuss the politics of the matter – in that this should not have a “we versus them” political spin because it is a “WE” issue. WE are all impacted (or will be impacted) by this disaster … and perhaps for generations to come. After our discussion, I began to wonder how many businesses go into any type of depth in building a disaster recovery/crisis management strategy on an organizational level as well as on a project-by-project level?

You’re probably wondering what disaster recovery/ crisis management has to do with Humpty Dumpty. Think about Humpty Dumpty being that great project … that great idea … that great solution which will propel your organization so far ahead of others in your industry that they will need to spend years just trying to recover from your advancement. Or the idea which has such a global impact that everything will be better because of the implementation of that idea! Or that new product/service which will increase your stock value by 200%.

This is Humpty Dumpty sitting on the wall – setting the standard for extraordinary greatness! Then something happens within or beyond your control which causes Humpty Dumpty to fall and this fall impacts others on a grand scale.

The question becomes – did you pull together the best of the best (All the king’s horses and all the king’s men) to discuss Humpty Dumpty’s fall before he fell (strategic) or as a consequence of his falling (tactical)? Very few business leaders conduct an in-depth program on crisis management/ disaster recovery/risk management associated with the various projects/products/services they desire to introduce into the market. Of course there are many reasons for such actions; however, present history tells us that failing to have a disaster recovery/crisis management plan in place can have negative long-term effects on your business as well as the global economy for generations to come.

Leaders must plan for crises, that is, any dangerous events threatening injuries, deaths and financial trouble which could deeply damage or even close your company. However, if you can muster specific abilities, you can better equip your organization to overcome a crisis.

Recent crises and disasters included events that many once thought impossible. These calamities included terrorist attacks, natural disasters large enough to take out a major city and/or industry, cyber-attacks and corporate fraud. Today’s organizations must adopt a mindset of being ready when – not if – a crisis strikes. Crises occur more frequently now; they have become part of doing business. No industry or organization is safe, but you can spare your organization the most serious consequences by drastically changing how it plans and handles crisis management.

Comprehensive risk management goes through stages which require advance planning and proactive investments. First, prevent and mitigate a disaster’s damage before any risk occurs. Then prepare a robust response. Third, build recovery infrastructure. Fourth, offer an adequate response by addressing the damages sustained during the event – remember to take responsibility for your organization’s part in the crisis. The fifth stage, proper recovery, requires rebuilding infrastructures to provide for the general welfare. The final stage, lessons learned/adjusting other strategies, based on what occurred, what does your organization need to do to prevent this from happening again?

Below you will find Before the Fall Strategies and After the Fall Strategies your organizations can implement to ensure you are able to put Humpty Dumpty back together again.

STRATEGIES FOR DISASTER RECOVERY/CRISIS MANAGEMENT BEFORE THE FALL

1. Risk forecasting – The field requires more precise prediction techniques

2. Communicating risk information – Most people assume that low-probability disasters will not affect them. Enlarging the time horizon for disasters helps your employees better assess how they could be harmed. To help the owners of a production facility with a 25-year life span understand their flood risk, show them data indicating that the chance of a “one-in-100-year flood” happening during that 25 years is greater than “one-in-five”. Presenting the possibility as a “one-in-100 chance” in a single year is not as compelling.

3. Economic incentives – Cash can motivate people to protect themselves from disaster, for example, cutting the insurance premiums of Mississippians who buy flood protection.

4. Private-public partnerships – Disasters affect public and private organizations, so they should unite in advance to create mutual emergency strategies and defense plans.

5. Resiliency and sustainability – Organizations must determine if they will be able to continue to function after a sudden disaster. This question also pertains to nations, notably developing countries burdened with “low-quality structures, poor land use, inadequate emergency response,” and so on

Mitroff (2005) recommends that business leader’s go through the following Spinning the Wheel of Crisis exercise with their leadership/project teams before releasing a new product or service: The physical prop for this exercise is a large wheel which spins until it hits a flexible needle, which slows and then stops the wheel’s motion. Once it stops, discuss the possible crisis which could occur and what actions need to be in place to prevent such a crisis and/or what actions should be taken after such a crisis occurs. This tool should be part of every project manager’s toolkit for success. Each segment of the wheel lists a major area in which crises occur:

1. Economic – This crisis affects the economy
2. Informational – Information gets lost, by break-in or computer error (for example, Y2K, the millennium bug)
3. Physical – A crisis affects your buildings, equipment or products
4. Human resources – Labor issues, fraud or criminal acts generate a crisis
5. Reputational – Rumors and defamation hurt your organization
6. Psychopathic acts – Violence, product tampering or criminal behavior strike
7. Natural disasters – Hurricanes, fires, floods or mudslides breed crises

To ensure your organization covers all of its bases, combine elements (for example combine items #4 and #7); what plans need to be in place to ensure a quick and maximum recovery)?

STRATEGIES FOR DISASTER RECOVERY/CRISIS MANAGEMENT AFTER THE FALL

Risk-related decision making involves weighing probabilities and benefits versus losses, creating an accurate statistical analysis and considering alternative actions. Follow these principles for perceiving, assessing and managing the risk of extreme events:

1. Appreciate the importance of estimating crises – While such calculations are filled with uncertainties, organizations need good information to deal with risk

2. Recognize the interdependencies associated with the crisis – Every risk is connected to outside circumstances. Such linked dependencies create dynamic and evolving uncertainties which can mutate depending on events. Keep your risk forecasts up-to-date

3. Understand people’s behavioral biases when developing crisis management strategies – People must acknowledge their prejudices to make mitigating them possible. For instance, leaders may put off dealing with possible catastrophes due to a stubborn form of denial called not in my term of office (NIMTOF)

4. Recognize the long-term impact of the crisis/disaster – A catastrophe can create enduring change

5. Recognize transboundary risks by developing global strategies – In disasters, national boundaries are moot. The 2004 tsunami killed people in 11 countries

6. Overcome inequalities in the distribution and effects of catastrophes –Be ready to assist others in need

7. Build leadership for averting and responding to disasters before it is needed – Planning and preparing for disasters is far better than waiting until emergencies strike

Your post-crisis push is to get back to business; Barton (2007) recommends the following Pillars of Business Continuity:

1. When disaster strikes, you cannot possibly over-communicate with victims
2. Be in 24/7 contact with shareholders, employees, customers, contractors and vendors
3. Get your off-site IT recovery operations and EOC up and running as soon as possible
4. Make sure the staff receives full salaries and benefits. Give the incident commander authority to pay for “equipment, hotel rooms and consulting services” as needed
5. Document everything, including damages. Plug in your insurance carrier ASAP
6. One and only one spokesperson communicates. Employees should refer all questions to that spokesperson. Avoid policy infractions. Control rumors
7. Designate psychological counselors and make them available for anyone affected
8. Update stakeholders three times daily concerning all activities and progress
9. Stay on top of all suppliers. Make sure they aid in the recovery in a timely manner
10. Make sure the disaster is over before you declare it done. Consider “scenario testing” to ensure that things are again as they should be. Plan a “multi-tiered return to normalcy
11. Assess event fallout. Establish accountability. Reward anyone who deserves it

Now, what about “putting all the pieces together again” – we are living in a time where there is more information available to us in one day than our predecessors had to wait for years to receive. When your organization has trouble identifying solutions to a crisis, do not hesitate to put the best brains together (inside and outside of your company and industry) to come up with the solution.

As an organization, your responsibilities include putting as many Humpty Dumpty’s together through creativity and innovation. And at the same time be proactive in your planning and have a through crisis management/risk management / disaster recovery strategy in place just in case he does fall – being proactive in your planning allows you and your organization to survive through unplanned catastrophes/crises. Wisdom would say that your best creative and innovative ideas will come out of how you handle the crisis and what you learned through resolving the issue which caused the crisis/disaster.

When speaking to the business leader last week, I shared that my solution for the oil spillage crisis would be to take the best minds from all the oil companies, colleges and universities, government and even the general public – put them in a room – and have them develop a solution to this crisis as well as develop a standard operating procedure for ensuring that a crisis like this does not happen again. This is how, together, we can put “all the pieces together again” and making Humpty Dumpty stronger and better than he was before!