An unknown assailant poisons your company’s top-selling product, killing several consumers. A labor dispute paralyzes your firm. A scandal involving your organization hits the newspapers.
Crises are facts of life in business—often through no fault of executives.
Yet every crisis contains seeds of success. To reap them, start with prevention. But when a crisis strike, accept it, manage it, and focus on the long term. The bottom line? Tell the truth and tell it fast. Don’t make a bad situation worse.
The Idea in Practice
Steps to Crisis Management
1. Avoid crises. Crisis management starts with prevention. List everything that could attract troubles to your company—for instance, information leaks during sensitive negotiations. Estimate possible consequences and prevention costs. Ensure unavoidable risks are commensurate with expected returns.
2. Prepare to manage crises. You can’t control everything, but you can respond appropriately. Create detailed crisis-response plans. Install back-up systems and crisis-preparation teams. Practice your responses. By testing their earthquake-response plan in San Francisco, an emergency team skillfully handled a real earthquake six weeks later.
3. Recognize a crisis. It’s often most challenging to admit you’re even in a crisis. Warnings often go unheeded, so listen for alarms in others’ comments and perceptions. Look especially for public-relations problems, since negative perceptions often become reality.
Example:
When evidence suggested Procter & Gamble’s Rely tampons caused toxic shock syndrome, the company recognized the public-relations crisis it was facing. It <Italic>immediately</Italic> stopped production and pulled Rely from stores. By safeguarding customers’ interests first, it protected its own reputation—and emerged a long-term winner.
4. Contain the crisis. Disaster has struck; you’re getting conflicting advice; the public demands answers. To contain the damage, act decisively—and quickly. Some reasonable action is better than none. For example:
• State the facts you know—as well as those you don’t.
• Immediately dispatch the most senior individual to the scene of the problem—usually the CEO. You’ll demonstrate caring and accountability.
• Build a “firewall” between the crisis-containment team and the team managing the business. Ensure your crisis team plays devil’s advocate—noting when the emperor’s naked.
• Identify one person as company spokesperson.
• Inform key constituencies: customers, owners, employees, suppliers.
5. Resolve the crisis. Again, speed is essential. Quickly repair damage and secure your firm’s long-term reputation.
Example:
When ABC-TV’s Prime Time Live accused supermarket chain Food Lion of selling spoiled meat, Food Lion’s stock plummeted. The company swiftly offered in-store public tours, expanded employee training, and wooed customers through discounts. Food Lion eventually earned an “excellent” FDA rating, and recovered sales.
6. Profit from the crisis. The preceding steps help you make lemonade from lemons—recouping crisis-related losses and even profiting from disaster.
Example:
When cyanide-tainted Tylenol caused several deaths, Johnson & Johnson quickly ensured consumers’ safety and restored trust in its top-selling product. J&J ran ad campaigns announcing its intentions, pulled 31 million capsules from the market, and redesigned the product’s seal. Within three months, it regained 95% of its pre-crisis market share—and even strengthened its reputation.
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