During a crisis situation, the leader of a company is under the microscope. Everyone is watching them closely to see how the leader handles the difficult situation. Do they rally the company and its stakeholders to come together? Or do the pressures of the crisis take over?
Two Types of Crises
Crises can be divided into two types: routine and novel. Routine events are the known risks for which organizations can plan and develop procedures. Examples include safety plans for manufacturers, recall plans for food companies and liquidity plans for financial institutions, as well as disaster recovery and security plans for companies across industries
Novel crises are those risks that exhibit unusual frequency and impact. Organizations typically don’t have plans for such events. Novel crises may be a confluence of two or three events that strike at the same time. Or they may simply be too big or unusual to be imagined like the Corona Virus pandemic.
In recent days, it’s become common place to call COVID-19 an “unprecedented crisis”. It is a politically convenient cliché, implicitly letting leaders in many Organizational off the hook for their manifestly slow and insufficient responses to the pandemic. How could they be expected to know what to do, when confronted by a completely unfamiliar enemy?
In the absence of pre-determined procedures, novel crises like the Covid-19 pandemic can test leadership’s decision-making and strategic-thinking abilities.
Leadership principles for crisis management
A crisis puts to the test the decision-making skills of an organization’s management and employees. If you are too quick to make a decision, you might be basing the decision on incorrect or inadequate information; by the same token, waiting for the perfect set of data can lead to analysis paralysis and slow decision-making or no decisions being made at all. During a crisis senior executives can find themselves overwhelmed by the vast amount of information and the whole information and communications environment.
The following five operating principles can help executives manage the unexpected across different types of crises:
- Continuously frame the crisis: The relative success of the Asian countries and very proactive organizations in tackling COVID-19 began with framing, an essential first step if crisis managers are to have any hope of coordinating a meaningful response. Identifying patterns in how crises unfold and in how people respond to them comes with experience. These patterns repeat themselves and need to be rapidly identified.
Rather than holding fast to the first impression and analysis of the crisis, be flexible to embrace new information as it comes along. If new analysis suggests a remake of the original plan, remake the plan. One of the most important things for any crisis leader is to identify what the impact of the crisis is and to constantly look at that identification every couple of hours, days and weeks because this impact can change and they can become multiple events. What you thought was unimportant yesterday can become extremely important tomorrow. In today’s age of social media and 24×7 press coverage, some things can become much more in a crisis than originally expected. So continually framing the crisis, having the ability to assess on a continuous basis, and having a process to do that is extremely effective in managing any crisis.
- Actively communicate: During a crisis, it’s important to constantly communicate up to lenders and owners, down to employees and vendors, and outside to the media and public. Control the message by designating a crisis manager to be the sole spokesperson and to be the source of honest, consistent information. It’s extremely important to actively communicate up and down in an organization, as well as to customers, clients and employees. Honesty and transparency are critical. Think about the employees at the center of a circle with all other groups in concentric rings around them. Once you’ve completed your employee communications, widen the circle to the next group, and the next, and the next – until all groups have received the proper information.
- Lead decisively: The CEO may not always be the ideal choice to lead a response to an unexpected or unusual crisis as it could distract him or her from the day-to-day business and other important matters. In a crisis, other C-level executives, such as the chief operations officer, chief risk officer, can step forward to lend support, as can an outside crisis manager. However, it’s not uncommon to make mistakes, so it’s important to be flexible and back up, change course, adjust and go forward again.
- Take Action: In a crisis, inaction always makes the problem worse. A failed action may teach you something that leads to a breakthrough. But failure can lead to panic, chaos and a loss of credibility, clients etc. unless you prepare the ground beforehand. Some companies will lose out completely after the Covid-19 pandemic because they refused to take any action.
Crisis managers should go into battle with at least three lines of defense, a strategy also adopted in military, banking (business unit, control function, internal audit) and other contexts. Explain the logic informing your plans and convey clearly to all your stakeholders that should the first attempt fail, there are two less preferred, but still possibly viable maneuvers off your sleeve. Failure to properly communicate proved disastrous for financial markets when US and European central banks introduced early measures meant to staunch economic decline caused by corona virus fears. Without a full explanation, the measures struck the market as a symptom of economic panic rather than the cure, triggering a massive sell-off. If these initial measures had been conveyed to the public as merely the first move in a much larger bid to bolster the economy, they might have fulfilled their intended purpose.
- Be ready for the unexpected: Under extreme pressure, the crisis manager should understand that individuals may act differently than during normal circumstances, and that the usual organizational roles may not apply during a crisis. This can further add to the unpredictability of a critical event. In advance, plot out when and how external parties might be brought in to help address the crisis. In addition, managers should be creative and must be prepared to operate in any given situation. Most proactive companies had started testing their virtual and remote working system even before the lock down. Many predictions have been made over the after effect of the Covid-19 pandemic but it is not clear what the magnitude of it will be and how businesses and life styles will be affected. It is only safe to prepare for the unexpected especially the worse and the best case scenario.
This difficult period has presented many challenges but will likewise present new opportunities. As a firm, you need to up-skill your workforce to survive these times and remain agile.