Even in companies, things can go awry, sometimes in the split of a second. Problems may come in many ways.
From cyber-security breaches, major industrial accidents, product recalls, scandals or even a significant PR faux pas, a crisis can be a trying time for any organization.
Due to the unpredictable nature of most crises, most Boards are caught unawares, unsure of what to do.
In that confusion, well-meaning employees and Directors can make an already bad situation worse.
Therefore, Boards need to consider their role in times of crisis well before the situation occurs.
In this sum up, we explore the crucial areas the Board must look at when designing their crisis response policies.
We also discuss what the Board can do to mitigate the effects of a crisis once it happens and propel the company forward post-crisis.
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Table of Contents Show
Preparedness
Although most emergencies are unanticipated, it is advisable that the Board endeavor to prepare a crisis management plan with clarity about who will do what, the lines of accountability- particularly around communication and appropriate crisis responses.
Pre-conceived crisis responses enable the Board to adapt and deal with any eventualities that may arise.
One way to go about it is by engaging the services of a governance consultant who will present hypothetical scenarios and help the Board formulate appropriate crisis responses to them.
The consultant will also assist the Board in determining reasonable response timelines for every crisis.
Hypothetical scenarios present a perfect opportunity to test the robustness and any gaps in the board and management’s responsiveness to crises before they occur.
However, in preparing that crisis response policy, the Board should think broadly and avoid being too specific as this can be limiting. The past year has taught boards and executives to expect the unexpected and to challenge the assumptions that may have permeated conventional responses to crises.
Limited or too specific scenarios can lull the Board into a false sense of security.
Instead, the formulated policy should be capable of handling even the unknown unknowns.
It should define the hierarchy or chain of command during the crisis, i.e., who does what and when.
An organized response framework promotes a cohesive reaction and coordinated communication from the management.
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Prompt Action
The moment disaster strikes, the Board needs to take swift action.
Seldom does a company have to be quiet during a crisis to let the storm pass. More often than not, they are required to actively address the issue.
The first course of action by the Board to ensure effective communication of the matter.
Here, reliance on technology is advisable, to ensure that information on the problem is conveyed quickly.
The Board must convene an emergency meeting where crisis response is the main agenda.
For an even more efficient and thorough outcome, consider breaking down the issue and forming sub-committees to deal with the smaller themes.
Agile responses to a big crisis are possible when you simplify the decision-making process by breaking down the problem.
Following the crisis meeting, the communication channels to be followed under the company’s governance policy are activated.
Also, the Board must develop processes through which the company can keep track of investor feedback.
All these steps serve to reassure stakeholders that the company management is working to resolve the matter and safeguard their interests.
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Coordinated Response
When communicating with the company’s stakeholders, the Board and management need to render a cohesive, consistent and coordinated response with empathy and tone of voice that aligns with the company’s values.
That communication involves press statements and official responses to investors, employees, other partners, and the general public.
Therefore, depending on the nature of the crisis, that response needs to be crafted so that it calms all the stakeholders involved.
However, please note that a response needs to be well thought out, as it can either diffuse an otherwise volatile crisis or worsen it.
An example of a company whose immediate crisis response averted a crisis is Pepsi. In 2020, at the height of the ‘Black Lives Matter (BLM) movement, Pepsi ran an ad campaign starring Kendall Jenner.
It depicted Ms. Jenner as one of the protestors holding protests against the police. Midway through the march, she steps off the front line to deliver a Pepsi to one of the police officers.
Despite their good intentions, Pepsi managed to antagonize the BLM movement’s proponents and become the news story for all the wrong reasons, as the movement felt that the company was making light of a grave issue.
Pepsi swiftly apologized, explained their intentions but pulled down the ad, thereby averting a crisis.
In contrast, in 2017 United Airlines was embroiled in the ‘leggings scandal’ where an airline employee refused to let some paying customers board their flight due to the leggings they wore.
The airline defended the employee’s action saying it was justified as the passengers in question were ‘pass-holders.’
Hot on the heels of that scandal, a video emerged two weeks later, showing one of their customers being forcibly removed from a flight. United Airlines took on the mantle of the airline that put the “hospital” in hospitality and suffered significant damage to their reputation and value of the company.
It emerged that the reason behind the customer’s bloody ejection was so that the airline could make room for its crew, who, due to overbooking, had been left without enough seats.
When asked to give up his seat, the customer had declined, hence the forced removal, during which he sustained injuries.
Faced with public outcry, the airline once again defended its employees’ acts, and in just 24 hours, the airline had lost over $800 million in value.
These examples show the difference that critical, timely, and well-calculated crisis responses make.
Conclusion
The aim of crisis response should be to calm the waters- to provide assurance and clarity but not to over promise or apportion blame.
When formulating a crisis response policy, the Board must aim to:
- Identify the response suited to a particular situation.
- Design a communication plan and identify its spokesperson.
- Use the best intended and reassuring voice.
- Monitor the effectiveness of the crisis response.
- Stipulate a business resumption plan post-crisis.
- Be aware that executives may be under significant additional pressure during a crisis and ensure that the proper support and help are available for the staff dealing with the crisis.
Moving forward, it is critical for the Board to ask itself why the crisis happened in the first place and explore ways to avoid a recurrence.
Governance specialists come in handy when dealing with such matters, as they guide Boards on how to be better prepared for the unexpected and how to ensure that crisis management plans are effective, actionable and dynamic.
