Crisis Blind Spots
Vianovo | Jan 24, 2012
In business, sports, politics and life, the value of preparation is conventional wisdom. Companies prepare for new product launches, teams practice for upcoming games, candidates prep for debate, and couples plan for the arrival of children.
Yet, sometimes situations seemingly appear out of nowhere – a blind spot. For most, the blind spot contributes to a lack of visibility and planning. We think to ourselves, “We didn’t see that one coming.” All too often, it is from these blind spots that serious crises emerge – crises that cause significant reputational and financial damage to corporations, institutions, and individuals.
What causes these blind spots? As Ralph Waldo Emerson famously wrote, “People only see what they are prepared to see.”
CEOs, boards, and other senior leaders often suffer from an overdeveloped-yet-false sense of comfort and invincibility and thus fail to adequately anticipate and plan for certain types of crises. They wrongly believe that it could never happen to them or their company. Or if it does, they are convinced that they will be able to “handle the situation” because of their managerial acumen. As a result, crisis prevention and planning often narrowly focuses on day-to-day operational issues and fails to account for events that can have much greater consequence.
In our work, we have found four common crisis blind spots:
The BAD (big ass deal) One: This crisis can be a career-ender for a CEO, crippling for an unprepared company, and poisoning for a consumer base. Think BP and Deepwater Horizon. Tepco and the nuclear meltdown. Costa Cruises and its shipwreck. In all three cases, the companies seemingly lacked an up-to-date functional plan for dealing with a major – yet predictable – crisis and suffered enormous blows in the public eye.
The Executive Suite: Major crises often originate in the executive offices of an organization as the result of financial impropriety or personal behavior. Imagining that a senior executive could be caught in unseemly activities such as sexual harassment, embezzlement or insider trading is unthinkable. And planning and practicing for such an event is uncomfortable and thus often avoided. As was the case with crises involving James Murdoch at News Corp and Mark Hurd at HP, these particular situations can paralyze an organization, cause extreme internal conflict and threaten the reputation of the brand.
Social Media and Employees: The rise of social media has created a new source of crises. In a 2010 survey, 34% of CCOs reported that their companies had faced a social media-based reputation threat during the past 12 months. Social media amplifies bad stories and customer reviews – and in particular raises the risk of employee-driven incidents blooming into full-scale crises. From a FedEx messenger throwing a computer monitor over a fence to Domino’s cooks putting cheese in their noses to U.S. Marines urinating on dead Taliban, damaging videos and photos can be taken and uploaded in minutes and go viral and global in a day. However, a recent report by the Altimeter group reveals that most major social media crises “could have been diminished or averted with the proper social media investments” and provides a useful framework for thinking through this challenge.
Data Breaches: In the age of WikiLeaks, the damage that a data breach can do to a brand is becoming clearer by the day. A crisis is literally just a hack away. Zappos, Sony, Stratfor, Yale University, and the Texas Comptroller – among others – have recently experienced significant breaches and resulting crises. However, as PwC has observed, “…too many organizations continue to treat these breaches as technical problems that require technical solutions.”
The first step in mitigating these four blind spots (and identifying others) is recognizing that they exist.
The second step is making a significant investment in crisis prevention and preparation. Research shows that for every dollar spent toward this end, an organization avoids $7 in losses. This estimate includes the potential incurrence of millions of dollars in legal, operational, public relations and marketing costs.
The third step is practicing a response. This is different from planning, which usually means a large binder gathering dust on a shelf. To paraphrase Napoleon, very few plans survive first contact with a crisis. Practice is best done through simulations, where a plan can be stress-tested and updated as necessary.
Finally, regular updating is paramount. Astonishingly, a recent survey found only 29% of companies update their crisis plans once a year. Companies and their leaders must avoid the urge to “check the crisis box” and move on. Because an organization and its market are dynamic, it is imperative that crisis plans be refreshed.
In our next article on this topic, we will outline key principles for navigating a crisis once first contact is made.
As always, we welcome your viewpoint on our Viewpoint.