Two Causes of Crises

What caused a crisis dictates the best way to respond. Be prepared for both.

Wall Street is experiencing a crisis of epic proportions. Once it passes, historians, economists, and other pundits will pore over these events in great detail looking for answers.

Undoubtedly, they will find some decisions (or lack thereof) that allowed the situation to reach the point where it is today. The blame will come fast and furious.

What would the same historians and other pundits say about Hurricane Ike? After all, Ike was another recent disaster that wreaked tens of billions of dollars in damage that will require federal aid.

The difference illustrates the two causes of crises:

1. An event causes a crisis due to a change outside of your control.
2. An escalating issue causes a crisis because someone failed to heed a warning or series of warnings.

One cause can lead to the quick demise of your company and your reputation. The other might actually be an opportunity.

Events

Bad things happen to good companies. Someone commits a crime. A hurricane strikes. A key piece of equipment fails at an important time.

Clients and the public understand that bad things happen. They expect very little other than a quick, honest, and professional response to the situation. The right response can even contribute to a stronger relationship.

Johnson & Johnson’s response to the Tylenol tampering (a crime) is still the gold standard for the right response. Taking all Tylenol off the shelves until the company identified the cause was a difficult business decision and a stroke of genius. Tylenol is the world’s leading over-the-counter medication to this day.

If that’s the gold standard, then FEMA’s response to Hurricane Katrina would be the lead balloon. The response was plagued by lack of preparation, lack of coordination, tardiness, politics, and more. FEMA Director Mike Brown paid with his job and his reputation. New Orleans might never be the same as a result.

Clients and the public have an infinite capacity for compassion and forgiveness when it is deserved. Don’t give them a reason to withhold either when you need them most.

Every company should have a crisis communication plan of some kind. The plan can be as simple as a contact list in the event of a crisis or as detailed as different action plans for different types of crises.

Escalating issues

In his book, Will Your Next Mistake Be Fatal?, Robert Mittelstaedt explores crises caused by escalating issues that could have been prevented. His research finds that most fatal crises – the ones that kill companies – are a combination of poor decision-making and attempts to cover up those bad decisions with other (often worse) decisions. This downward spiral is unforgiving, and the issue eventually reaches a crisis level that is outside of everyone’s control.

The financial crisis is the most recent example of an escalating issue causing a crisis. Enron was another lamentable example.

Client and public contempt magnifies with each attempt to “spin” your way out of an escalating crisis to the point that it jeopardizes the entire business. Think the Ford Explorer rear left tire. Martha Stewart. Bill Clinton. They’re all examples of trying to spin out the crisis. While they have recovered, they have hardly been the same since the crises.

The best public relations response to this type of crisis is an apology followed by a good corrective action. You have to accept the loss of trust and business that the apology will cause as a cost of doing business. That option is better than a continuously escalating crisis, which could jeopardize your entire company.

Companies that recognize the negative potential of issues often have a team of people to routinely monitor and, if necessary, recommend actions. Many issues, such as lawsuits, don’t require frequent action. The monitoring process reduces surprises that can throw an organization into a tailspin.