My point of view

Managing a crisis is the ultimate test of leadership


I learned the basics of solid crisis management when I was 13. My mother had just discovered the stash of 1969-era Playboy magazines hidden under my dirty clothes pile in my closet. Figuring a depository of teenaged boy's month-old toxic PE duds and undies would deter 007 himself, my secret was safe.

So now that I was busted, what was the next logical course of action? Lie, of course! I first tried to blame my two younger brothers, claiming the magazines were planted as some sort of elaborate frame job. She didn't buy that one. Next I tried to convince mom there really weren't magazines in the closet, that she had imagined it. That was worth an extra whack of the paddle. Finally I pleaded insanity. She almost bought that one.

After I completed my weekend grounding, mom confided that she wasn't planning anything worse than a brief admonishment and a dump of the evidence. She said the lies cost me my good standing and harsh sentence. It was a lesson I never forgot.

Even the best products in the best-run companies can be susceptible to a crisis. And even though the crisis can be founded on incorrect information, or it can arise from misuse of a product by a consumer, the way that the news is treated can adversely affect the product in both the short and the long term unless the crisis is managed properly and effectively from the outset.

I once heard a consultant say that major corporate crises are like lint fires. They are low probability/high impact events: they occur relatively rarely, but when they do, they can cause damage to the corporation ranging from a scorched reputation to a near-death experience. And like lint fires, preventative maintenance can be the key to avoiding disaster.

No matter how tightly run a corporate ship you think you might have, every business, every industry - whether it is large of small - can suffer a crisis of confidence. It is during these times when products fail, employees explode or natural disasters wreak havoc that an organization must have two things in order to preserve its brand: One is a commanding presence at the top and the other is a bona fide, tested and realistic contingency plan.

There are no clearer examples of what is happening with BP and Toyota right now to demonstrate how a lack of leadership, truth and contingency planning can send even the most powerful organizations into a tailspin. We have witnessed a parade of major corporations in the financial, industrial, manufacturing and pharmaceutical sectors ignore impending crisis situations until the stench was too putrid to ignore.

Toyota, a brand renowned for its quality and customer relations, totally disregarded the brand factors which made it the world's most profitable automaker. Toyota engineers had told upper management there were mechanical issues with several of their lines. What is more incriminating, so had their customers. Instead of confronting these issues head on and truthfully, Toyota decided it would be economically advantageous to ignore them and hoped the problems would go away. It has now cost the company tens of billions of lost revenue, a loss of market share and a sizeable credibility problem.

Unfortunately, it seems more apparent today than in years past that the manner in which a company handles its crisis moment also defines the character of the company itself. In the case of BP, the picture has not been pretty. BP CEO Tony Hayward is on every dartboard in America as a result of his perceived lack of leadership and truthfulness. Mr. Hayward's bumbling public encounters, the decision to spend $50 million on television and magazine mea culpa advertising and his repeated downplaying of this enormous environmental disaster has turned BP into the poster child for incompetent crisis management. Perhaps BP's most egregious sin was admitting there was no contingency plan in place to address a spill of this magnitude.

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