It’s been a busy year for crises for people and companies alike.
Some of the largest, best-known brands found themselves under fire for months, many with a series of scandals that just kept coming. Some of these crises were caused directly by the caught-on-video bad behavior of key executives, such as Uber’s founder and former CEO, Travis Kalanick. A variety of misconduct crises have dominated the headlines, especially the scores of allegations of sexual harassment and assault that continue to capture attention in the news media, in the workplace and with lawmakers.
In many of these crises, the original problems were exacerbated when leaders underestimated the impact of the event and their communications were (rightfully) met with anger and hostility. Yet despite the rising numbers of crises facing organizations of all kinds, the number of those with crisis management and communication plans in place stubbornly hovers around fifty percent. What will it take to convince executives of the need to prepare for, and more important, to prevent crises from happening in the first place? The investment is a pittance compared to the cost to repair and repent.
Headlines and Horrors
Consider some of the companies who found themselves at the receiving end of well-deserved customer backlash. We are all familiar by now with the United Airlines passenger dragging incident in April. The crisis began when videos were posted online within minutes of the incident on a Sunday night. By itself the incident was shocking. But it was the CEO’s callous original response that threw gas on the fire. His hollow apology for having to “re-accommodate” passengers demonstrated either extreme indifference or incredibly poor judgment. Perhaps both. Then, he added insult to injury by implying that the passenger was at fault. It wasn’t until the crisis reached epic proportion—which only took a couple of days– did Oscar Munoz finally say the right things. Had Munoz and the company quickly fallen on their sword and apologized (and made appropriate restitution) they could have avoided making a bad situation into a costly PR disaster.
Companies would do well to remember that virtually everyone these days is armed with a video camera in their pocket, one they are not afraid to use.
Munoz seems to be learning from his missteps. In an encouraging move recently on another troubling issue, Munoz last week delivered a forceful message to employees about sexual harassment, reinforcing a blunt op-ed piece in the Washington Post penned by Sara Nelson, the often outspoken international president of the Association of Flight Attendants, the union that represents thousands of United flight attendants. His memo to employees applauded Nelson for raising her voice. Munoz wrote that “when it comes to flight attendants, they have a special responsibility to serve all our customers while ensuring the highest levels of safety.” Munoz added: “We have a special responsibility to them to ensure they can do their essential work in the most positive environment possible.”
At ICM, we’ve been researching crisis news for 27 years. In 2016, just one-half of one percent of the stories we tallied were about sexual harassment. We anticipate a huge spike in that category for this year’s report unlike anything we’ve seen in our firm’s history. Allegations of sexual misconduct are rocking organizations of all kinds in the US, from the entertainment industry (Harvey Weinstein) to the news media (Fox News, CBS and NBC) to the halls of Congress (Al Franken and others). The #metoo movement has gained a critical mass that does not look to slow down anytime soon. Companies are on notice to revisit policies and reinforce training, and most important, to assure that complaints are promptly investigated, and offenders appropriately punished.
We always recommend that crisis communication plans include a series of response guides that address specific kinds of crises. In addition to sudden events like natural disasters and massive service disruptions, we believe that every plan should address smoldering, bad behavior kinds of crises like cybercrime, mismanagement, harassment and discrimination allegations, white collar crime and executives accused of wrongdoing. These kinds of issues consistently account for two-thirds to three-quarters of all the crises ICM tracks in its research.
Bad behavior outside the company can also create a crisis. According to a study out of Mississippi State University, Drexel University and Northern Illinois University (The Consequences of Managerial Indiscretions: Sex, Lies, and Firm Value), companies where a top boss is accused of “personal” misdeeds (including DUI and domestic disputes) take an average hit of $110 million or a 1.6% loss of shareholder value. Looking out one full year, the average company in the study saw its stock underperform by more than 14 percent.
Company culture is often at the ugly core of smoldering crises. Consider mega-bank Wells Fargo. Their troubles began last year when a fake account scandal went public. More than 3.5 million fake accounts were eventually uncovered, the result of a culture and sales incentives that encouraged employees to game the system, in many cases just to keep their jobs. Eventually costing hundreds of millions in fines and settlements and the CEO and other executives their jobs, the crises didn’t end here. This year, we learned that same culture led employees to add unnecessary car insurance to more than 570,000 loans, costing more than $130 million. Renters and life insurance policies were also taken out in customer names without their consent. But that’s not all. More than 528,000 unauthorized sign-ups for online bill pay were discovered. The bank wrongly charged homebuyers to lock-in mortgage interest rates. And there have been dozens of complaints and civil suits alleging retaliation of whistleblowers. The crises just keep on coming for Wells Fargo. It remains to be seen whether they will fully recover from the self-inflicted blows to their reputation.
Lessons for Leaders
There are several lessons for leaders in this year’s crisis headlines. First and foremost, leaders need to take a long, hard look at their organizations to identify the kinds of crises for which they are most vulnerable. Examine the culture to determine whether it contributes to potential issues. This kind of risk and vulnerability assessment is invaluable in determining the areas that need to be addressed immediately, and those that require new planning and prevention measures be implemented. Boards of Directors need to take a more active role in risk prevention and mitigation as well as crisis management planning and preparedness.
Second, companies without a crisis management and communication plan need to get started NOW to develop and implement a set of integrated plans that include operational response, crisis communication, and business continuity and recovery. These tasks may seem overwhelming, but the work can be manageable with the help of outside experts.
Those companies that do have plans in place should do two things in 2018: perform a detailed review and update of those plans, and conduct at least one simulation exercise or crisis drill. Outside crisis planning and preparedness, experts like those at ICM and PreparedEx can help accomplish these important tasks.
Finally, organizations should invest in ongoing training for executives and managers alike. Crisis exercises and media training should be conducted annually for the crisis management team and spokespersons. Communication skills training for all those who supervise others helps bridge gaps in internal communication, facilitating important interactions that can prevent issues from becoming full-blown crises. And given the number of issues that continue make the news, updated sexual harassment training supported by zero-tolerance policies should be on the calendar for every organization in 2018.