Why Good Companies Fail During a Crisis

Share:

Rick Lyke

Executive Vice President, Managing Director
04.07.2022

Sometimes bad things happen to good people. That’s the case for companies, too. How a company reacts during the first minutes, hours and days of a crisis has direct implications on the organization’s future. Getting it right protects and maintains a good corporate reputation. Failing during a crisis can shift perceptions from positive to negative almost overnight.

When good companies fail during a crisis it’s usually a result of poor strategic, tactical or logistical planning, preparation and execution. Being “crisis ready” is one of the most important investments a company can make in its long-term success. Research indicates there is an 80% chance during any five-year period of a company facing a crisis that will negatively impact brand equity by 20%. Readiness is the best defense against seeing the inevitable turn into the insurmountable.

During more than 50 years of working with hundreds of clients in crisis situations, the Mower PR & PA Group has identified the factors that determine how rapidly companies contain and emerge from potentially damaging situations. Like an insurance policy you hope you never have to utilize, advanced preparation is critical. Daily news coverage is filled with examples of good companies that failed in meeting a challenging crisis. The lack of readiness shines through in case after case.

Here are the primary strategic, tactical and logistical failure points to watch out for with your organization.

Strategic

The axiom “If you fail to plan, you are planning to fail” perfectly describes the most common strategic blunder companies encounter in a crisis. We’re not talking about some dusty three-ring binder labeled “crisis plan” that goes unread and ignored. Think about the last time your leadership team discussed things like crisis-response protocols, disaster-recovery plans and the “what ifs” that every organization encounters during daily business operations. Is your organization ready? Is it honestly prepared at all levels? Sadly, most are not.

You need a crisis strategy that includes a few critical elements such as a basic emergency response plan, the designation of a cross-functional crisis team and a commitment to a regular crisis training regimen. At Mower, we’ve seen the benefits of bringing company leaders together for crisis simulations on at least an annual basis. Committing to being prepared is a strategy that pays dividends by not only having a structured team that understands how to come together effectively, but it can also even help an organization identify and mitigate issues before they reach the crisis stage.

Tactical

From a tactical standpoint, good companies can fail during a crisis for a variety of reasons. It often starts before the situation reaches the crisis stage. Most companies lack monitoring capabilities such as social media listening or employee exit interviews to spot potential issues. Culturally, it is critical to create an atmosphere where employees are empowered to raise issues about safety, sustainability and DEI in a constructive way.

Once an organization has made the strategic decision to establish a crisis response team, from a tactical standpoint there are several things necessary to make sure it functions effectively when it is needed. The company should appoint a crisis team leader, typically not the CEO. The crisis team leader is responsible for declaring the crisis, convening the team and coordinating the response.

You can expect your CEO will be pulled in a million different directions during a crisis. Besides serving as the face and voice of the organization, they will need to deal with everyone from regulators to employees and customers to community leaders. The crisis team leader can be another member of the C-suite or high-ranking member of management who is both respected in the organization and has the authority to act when minutes count.

In most cases a well-built and frequently drilled crisis team will come together quickly and provide meaningful advice, measured thinking and consent to key decisions, but there are times when having a crisis team leader—a battlefield commander—to make the tough calls will save critical time and prevent organizational paralysis.

Logistical

The majority of logistical failures during a crisis fall into two basic areas. The first involves the failure to prepare frontline managers to recognize and report a potential crisis during the early moments. Most plant managers or executives in remote locations know to call headquarters when there is an incident that requires a police, fire or emergency medical response. However, we have encountered numerous crisis situations that started as smoldering issues. The frontline manager thought it was “no big deal” or that it had been handled. Perhaps they felt reporting the incident might hurt their career. Or they simply did not recognize the situation might attract the attention of critical stakeholders. That’s why it is important to involve these frontline managers in crisis-simulation drills and give them a clear roadmap to follow when they encounter an issue.

The other logistical issue is the failure to build a crisis-response infrastructure. There are many elements to creating the essential operational backbone needed when a crisis strikes, including having ways to reach employees and other audiences rapidly—even when the issue makes it impossible for you to access your office or company computer system. Depending on your business, the infrastructure you create may involve local first responders, access to the company’s website and social media channels, networks of trusted industry and business partners, and technology tools that make communicating remotely easy and simple.

One benefit of the pandemic is that most of us have become quite proficient in working offsite and using online remote meeting platforms. However, how would you reach key executives in your company or convene the crisis response team if your corporate email and phone system suddenly went down?

Strategic, tactical and logistical mistakes by good companies have led to many out-of-control crisis situations. These unfortunate unforced errors are preventable. Taking steps to plan, prepare and execute efficiently when a crisis strikes is a core responsibility that needs to be discussed in every board room across America.

Rick Lyke is Executive Vice President—Managing Director with the Mower PR & PA Group, which provides issues management, media training and crisis simulation services for clients.

Hey! Our name is pronounced Mōw-rrr, like this thing I’m pushing.