Business 911: Triage for trying times
Humpty Dumpty sat on a wall.
Humpty Dumpty had a great fall.
All the King's horses and all the King's men
Couldn't put Humpty together again.
Crises happen even in the best of kingdoms. Any organization that doubts the wisdom of preparing for the unexpected need look no further than the bomb at the World Trade Center, the oil spill from the Exxon Valdez, or -- the worst industrial accident ever -- the leak at Union Carbide's chemical plant at Bhopal, India. Nevertheless, crisis management is often neglected in organizational planning. Kingdoms and companies operate on the assumption "It'll never happen to me" -- until it does.
Last winter, Eugene J. Webb, Lane Professor of Organizational Behavior, introduced the Business School's first elective course in crisis management. Using as a backdrop the actions of the Kennedy administration in coping with the 1962 Cuban missile crisis, Webb and his students discussed ways of contending with situations as diverse as the syringe-in-the-can hoax that threatened Pepsi-Cola, the fall of Drexel Burnham Lambert, and the attempted takeover of Chemical Bank of New York by the (then) upstart Saul Steinberg.
There are several stages to any crisis, they learned. The first is prevention -- all too quickly followed by detection, interpretation, resolution, and, after the smoke clears, learning from the experience in order to prevent a repeat. The trick, guest speaker Steven Fink, president of Lexicon Communications in Los Angeles, told the class, is to go from the first warning of a crisis directly to resolution of the problem. To decide what steps to take to defuse the crisis, Fink suggested the crisis team ask itself, What is the likelihood that the situation will:
- increase in intensity?
- fall under close media or government scrutiny?
- interfere in normal business operations?
- jeopardize the positive image of the company or senior management?
- damage the bottom line?
Sometimes you have to cut your losses, warned guest lecturer Dr. Paul Auerbach, Sloan '89, head of emergency services at the Stanford University Medical Center: "Sometimes the patient isn't going to live. The house is going to burn to the ground. Sometimes you perpetuate the system if you have an ineptitude or unwillingness to perceive the reality of the crisis. Then you're just throwing more money or more people at an impossible situation. This is where you need a reality check."
Reality in the form of an actual crisis intruded on the class. Fink's scheduled visit was postponed for nearly three weeks by the Northridge quake in Los Angeles. Another guest, Thomas L. Reilly of the Restoration Company, was also involved in Northridge, and his visit to Webb's classroom in February marked the first time he had been out of the quake zone since the initial tremor.
"We come in when CNN leaves," Reilly said of his firm. In the past few years, Restoration -- general contractors who deal with the aftereffects of smoke, fire, and water damage --Êhas cleaned up after the Iraqi invasion of Kuwait, hurricanes Andrew and Iniki, and the World Trade Center bombing, where, in two weeks, the firm surely set some sort of record as it went through more than a quarter of a million towels a day to clean 220 floors of offices. Reilly, too, advocated planning for the inevitable. "More and more companies are seeing the need to appoint a contingency planner," he said. "But the problem is that the people they appoint are usually pretty low in the company hierarchy."
Makeup of the crisis team is crucial, and Auerbach listed potential team members to avoid. "People you don't want around you in a crisis," he said, "are egodriven, self-righteous, catatonic, inept, adept at shifting fault, or trying to gain from the crisis."
Add to that: "awarded a degree in law." Most of the guest speakers argued that lawyers have no place at the top level of a crisis management team. Attorney Constance Bagley, lecturer in law and management, disagreed. There is a place at the table for an attorney, but only for a certain type. "The problem with lawyers is that their training makes them risk-averse," said Bagley. "The kind of lawyer you want for a crisis is the one who is capable of identifying what the legal risks are and what the business risks are and then is able to stand back and say that the legal risk is like any other -- an engineering risk or a PR risk -- so that the manager can make an informed decision. That," she added, "is lawyering at its best, when the lawyer is literally a counselor-at-law."
Guest speaker John Holusha, business writer for the New York Times, had his own reason for blackballing attorneys. "They hoard information for the courtroom," he said. And information is crucial. The sharing of information with the public -- or the appearance of sharing it -- can defuse a crisis. In fact, Fink advised that the most important person at the crisis management table is not the CEO, but the person who can communicate.
"Corporate communications directors, public relations officers -- whatever you call them -- understand business management skills and the use of psychology," Fink said. "There are two forces at work in a crisis -- reality and perception. Be aware that the force of perception will far outweigh the force of reality." When a crisis is handled quickly and adroitly, the image of the company may even improve. The Chinese seem to realize this, said Fink. Their character for crisis, wei ji, he said, is made up of characters for two other words. One is "danger"; the other is "opportunity."
Janet Zich
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