What does good leadership through a crisis look like?
In this contributor article, Sophi Rose shares four examples on how boards and leaders can step up to deal with a crisis.
A good rule for any board is ‘noses in and fingers out’ – shorthand for maintaining proper boundaries between board and management. However, in a crisis the natural inclination can be to stray over the boundaries, which in turn can add more risk to an already fraught situation. When the stakes are high and the organisation is under scrutiny, what should the board do to support the business and minimise the fallout from the situation?
Be ‘in the know’
Actively use the risk register and ask ‘what if’ questions about potential threats to your reputation and brand. This should be both an outward- and inward-facing assessment. Once you have identified the potential issues and crises that are at the top of your list – take some time to think about how each might play out and what you can agree with your management team in advance.
For example, cybersecurity is at the top of many organisations’ risk register, with recent high-profile cyberattacks at Waikato Hospital and major media and financial services companies. Ask yourself what would need to happen immediately if there was a data breach, when the board should be alerted and what will you need to make decisions. This should be a regular topic of conversation for boards and thinking through what the scenarios might look like – anything from an IT error within the business to a ransomware attack from without – will save time and stress and provide clarity and the ability to be agile and recover quickly.
Plan, plan, plan
It’s not enough to just have issues on your radar and regularly discuss them. Having a plan is critical – and while this seems like common sense, it’s easy to get busy with the now and for the plan to never quite be finished. As a board, you need to have seen the plan and ensured that your management team has tested its response and is trained and able to activate it. Ensure the plan outlines what you will need from management in terms of information, oversight and input so that you have a good strategic overview during any response. Decide on your spokespeople in advance, agree how you will elevate the issue, and ensure you know how you will cascade information through your organisation and to your external stakeholders.
Failing to plan can be catastrophic. In 2010, BP’s Deepwater Horizon oil-drilling rig in the Gulf of Mexico exploded, killing 11 employees and causing an oil leak that went on for months. It caused lasting damage to the environment and tourism in the area – with one study valuing the impact at US$17.2b. Meanwhile, facing US$70b in clean-up costs and legal bills, a plummeting share price and consumer backlash, BP – then the world’s second-largest oil company – looked on the verge of collapsing altogether.
Studies since have pointed to BP’s high-risk corporate culture and weak regulatory supervision. BP’s leadership was said to be overconfident because of its incident-free record, which lead to a lack of planning for low-probability, high-impact oil spills. One report from the Centre for Catastrophic Risk Management at the University of California Berkeley said: BP “forgot to be afraid.”
Value your brand – in advance
Reputation will take you a long way in a crisis. Research shows that stakeholders are more likely to forgive you if they have a strong and trusting relationship with your brand. Relationships with stakeholders, customers and your staff are important at any time, but during an issue or crisis, they can make the difference between a blip and a hit. Prioritise your brand and be clear on your values. Values form a good basis for how you communicate, the decisions you make and will guide you through making the best decisions you can. There are of course brands that have faltered as a result of an issue – but often on investigation it is because they were not true to their values, they betrayed trust or they had neglected to invest in protecting their brand ahead of an issue arising.
A case study that is beautiful in its simplicity is Dutch Airlines KLM who some years ago used social media to help their passengers locate items lost on flights. In a video, KLM employees talked about their efforts to monitor social media and check their airplanes for lost items after each flight. While this activity will not likely mitigate a crisis, it does signal care and attention. It demonstrates that you are thinking about what is helpful and these kinds of activities can build trust. While this is a simple example, it is the sentiment that is key. Over time, as you build trust and signal care, you build connection. When issues arise, that is a reference point and it’s helpful to start from a positive, known and respected base.
This anticipation of customer challenge and a simple proactive fix could be all it takes to steady the ground in a crisis. My own experience during a previous lockdown was my gym who without any request from me, put my membership on hold, refunded any part of the payment made, and reinstated the payments when the gym re-opened. This more than absolved the irritation at lower levels when I could not book the classes I wanted to join because of distancing. My reference point was ‘they made my life easy’ so I gave them a break. And the important thing is, in current lockdown they have made it easy again. They have my trust and my support.
Learn and have a long lens
Reflection is a wonderful, if sometimes uncomfortable, thing. When a crisis passes and you have got through it, there is often a ‘high-five’ moment. Do take time, while celebrating, to objectively assess how things went, what could have gone better and what tweaks you need to make to your plan. It’s also good to reflect on what you can do now to build your reputation and your brand as you move forward. You may even share your reflections with your stakeholders, if appropriate, and show your human side. Done sensibly this can help earn back trust and repair any damage.
In 2015, car-maker Volksawagen – a brand built on reliability and engineering-led competence – was brought to the brink when it was revealed it had been writing software that made its diesel cars appear cleaner than they were. Its CEO resigned, its share price tanked and it faced around US$30b in compensation-related costs.
Today, Volkswagen routinely tops the list of the world’s largest and most valuable vehicle manufacturers. And, it has transformed itself by embarking on an ambitious programme of electrification. Its leaders now go as far as suggesting that the emissions scandal was a good thing, forcing them to ask hard questions about operations and strategy and consider what a carmaker would need to look like to survive the 21st century.
What opportunities has the crisis presented, and how can you build something positive from the challenges you have overcome? Use your long lens to help your management team move forward and plan for the future.
Sophi Rose is GM of the Brand, Marketing and Communications team at the Institute of Directors and has a background in these fields and PR in New Zealand, Australia, the US and UK across a range of sectors. She previously worked at Chartered Accountants Australia and New Zealand, Save the Children, Plunket and New Zealand Trade and Enterprise, among other organisations.
If you are a director on a board, or business leader, wanting to prepare for issues and crises, you might also be interested in our other blog posts.