In Crisis Management, Reputation

Andrea Obston Marketing Company, Unsinkable[UPDATE: A version of this post appears in the Feb. 23, 2015 Hartford Business Journal]

Crises happen. And the ones that are the toughest to recover from are those that smolder for a while before they catch fire.

Consider the 11 years that GM’s ignition switch situation simmered while management chose to ignore it. Or the NFL’s silence on player concussions. Or the 13 year gap between initial investigations of Jerry Sandusky’s conduct with young boys and his ultimate arrest in 2011. Where were those in authority while these situations smoldered, gained oxygen and ultimately turned into reputation infernos? Who knew and when? And why didn’t they take action? Because they believed their organizations could do no wrong. Hubris, my friends, often wins out over common sense when it comes to spotting crises.

The truth is that most crises –2/3rds of those over the last 10 years – are slow growing incidents that are so low probability that managers refuse to acknowledge they could happen. But these low probability incidents carry high impact. They do significant damage to reputation and are much tougher to recover from.

Consider the concussion issue: For over 20 years the NFL has sponsored studies about the long-term damage of repeated concussions among their players. These studies were often contradictory. However, by 2010, the NFL finally acknowledged that many of its ex-players were suffering from progressive degenerative diseases brought on by multiple concussions and other forms of head injuries. Meanwhile, participation in organized football is shrinking among players ages six through 14. It went down almost five percent between 2008 and 2012.  In addition, nearly half of parents in an AP poll this summer said they were not comfortable letting their children play football because of concussion concerns. And if you don’t play a sport, you’re less likely to watch it. Football’s already seeing the impact of this festering crisis on its fan base. Millennials aren’t attending college games or watching the NFL the way they used to.

Here’s the deal: if you don’t spot and extinguish a crisis that starts as a “fire in the wastebasket”, it’s going to be much tougher to fight it when it’s a forest fire.

That’s where Crisis Spotting comes in. Whenever we do a crisis plan for a client, we make them go through an exercise that requires them to envision the worst.  Why? Because if you open the door to the possibility that bad things might happen, someone is more likely to identify a crisis in–the-making early on. Before it has the possibility of scorching a long-established reputation irretrievably.

Here’s how the exercise goes: We gather a sampling of people from the organization from management to front-line customer contacts. We ask them to imagine possible activities that could affect their business badly. We offer them various categories of crisis: those involving management, volunteers, employees, the regulatory environment, even the community in which their business operates. We ask them to stretch. To use their imaginations. Could the president embezzle funds and bankrupt the company? Could their main plant be hit by a hurricane? Could regulators impose stricter standards on the company’s most profitable product? Then, we assign a Vulnerability Index to each scenario to help us prioritize them. The Vulnerability Index is the product of the likelihood of the incident (on a one-to-10 scale) times the impact it could have (also one-to-10).

In the embezzlement example, here’s how it would work: There’s a small, but still possible likelihood that the company’s new president could embezzle funds. We’ll give that a two on the likelihood scale. But, it if did happen, that would have enormous impact on reputation, so let’s give that an eight. That makes the Vulnerability Index a 16 (2 X 8). But, if the plant is in Florida, the likelihood of a hurricane is more like a 10, but the impact will only be a three since it’s a known risk in the Sunshine state. This crisis gets a 30 on the Vulnerability Scale and should get more attention early on than the embezzlement possibility.

Envisioning failure seems like something that would offend the Oprahs and the Deepaks of the world, but it’s a necessary step in building a crisis plan that protects a company’s reputation. Do it before you need to.

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