The holy grail in issues and crisis management – and any tricky situation we find ourselves in – is not to get the response and actions wrong. Contingency planning, crisis preparedness, scenario planning and war gaming all play their role in helping organisations navigate their way through their most challenging times. They enable a fighting chance of success. Yet many crisis training courses (including CrisisFit®) have numerous case studies which illustrate organisations that have got things wrong. They provide food for thought and discussion. So, despite all the best plans, preparedness, and training, what can cause organisations and individuals managing an issue or crisis to get things wrong?
Process and policy
When under pressure, all too often organisations become focused on established processes and policies and internal facing aspects of managing the risk, situation, or event. Wider stakeholders can often be overlooked or considered as part of the process rather than central to the outcomes.
A good example of this is with data breaches. The process is often driven by a regulatory requirement to inform customers. However, policy failures are usually major contributing factors to a crisis because of a data breach: IT security and customer service. Organisations often feel they are ahead with security and feel less obliged to go beyond what is required of them from a regulator’s perspective.
When British Airways suffered a data breach in 2018, they informed their 16,000 affected customers: technically they had done nothing wrong. It was their IT security and customer service policies that failed. Furthermore, they did little else to support those affected and the consequences of the breach. As a result of this, the Information Commissioner’s Office handed out a fine of £20m, because of their “unacceptable failure to protect customers”, and an undisclosed litigation settlement was awarded to the victims of the breach.
Timing is everything in a crisis. Those who have been practicing crisis management for several years are familiar with the golden hour, which is now the golden 15 minutes – or less. Social media has changed organisational response times once an event, incident, or issue is public.
Once again, plans can prepare all the processes, template statements, decision-making trees and sign-off, but the timing and critical decision-making behind the event and incident can have a major impact on the outcomes of the crisis. You are in the wrong place if you are behind the news and social media curve.
The court of law
A highly effective crisis response will have communication and legal working hand in glove and will understand the limitations and consequences of how critical decisions are made, responses are actioned, and how messages are crafted and delivered.
It is important to point out that a legally correct and compliant statement – one that will stand up in a court of law and mitigate the risk of litigation – does not always protect an organisation from the wider risks identified as the crisis unfolds. There are wider considerations which often get lost in the great crisis management debate when under pressure, most notably loss of trust and the consequences of this.
The most recent example of this was when Rushi Sunak, the UK Chancellor of the Exchequer (Finance Minister), responded to the reports of the non-domicile status of his wife, Akshata Murty, to avoid UK tax on foreign earnings. He initially said:
“We have done nothing wrong”.
He was correct of course, in a strictly legal context, but the wider British public saw things differently – and this had not been considered in his initial statement. He is the senior minister who sets taxation policy and oversees laws related to non-domicile status, so it raised a number of questions regarding the appropriateness of this position. A U-turn followed, with Akshata Murty agreeing to pay tax on foreign earnings, acknowledging public opinion:
“I understand and appreciate the British sense of fairness and I do not wish my tax status to be a distraction for my husband or to affect my family.”
The court of public opinion
As the Rushi Sunak case illustrates, the court of public opinion matters. Not just in politics though. The public are consumers, clients, customers and investors, and any loss of trust can hurt the financial health and future of a commercial enterprise.
The biggest and most recent case is the technical flaws with the Boeing 737 Max aircraft, following two fatal crashes and identification of the flaws in the MCAS system. So many wrong decisions, along with systemic internal management issues and a risk culture not consistent with the wider aviation sector. All largely driven by financial considerations rather than safety and maintaining the prize of trust with the travelling public.
The consequences of these wrong decisions ultimately ended up costing Boeing exceptionally more, and it is on track to be the costliest corporate crisis. The $500m victim compensation for which Boeing was liable paled into insignificance against the $20m paid in FAA fines, their $243m share of $2.5bn criminal charges, the £60bn losses from cancelled orders, plus all the leasing and remedial engineering costs for the hundreds of grounded aircraft. The biggest cost however was in human terms – 346 victims were killed and over 30,000 direct job losses at Boeing.
Investors and the public responded. The share price plummeted and has never recovered, as Boeing struggles to regain the trust of the global travelling public in a challenging post-pandemic travel market.
Issues and crisis management is supported by various frameworks – typically law, policy, strategy, crisis management, business continuity plans, internal culture, and risk management. However, with few exceptions, a crisis is either avoided or escalated as a result of a human reaction, response, decision, or action – or any combination of these. When this is overlooked or underplayed, the risk of getting it wrong and the crisis escalating is heightened.