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How Not to Lose Your Head in a Crisis

Nearly one in five businesses suffers a major disruption every year, according to Business Link—the UK government’s online resource for businesses.



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Nearly one in five businesses suffers a major disruption every year, according to Business Link—the UK government’s online resource for businesses. Set that against a backdrop of more methods of media communication than ever before, and a company ill-equipped to handle a crisis may find itself in a dire situation.

The frequency of crises faced by organizations in recent years has led to crisis management now being an important area for executive education programs and one that is being offered at the leading business schools; for example, the Tuck Executive Program at Dartmouth’s Tuck Executive Education includes a module on Leading in a Crisis, and Cranfield School of Management offers a Leading at the Edge of Chaos open program. Each school takes its own approach to this subject; studying crisis management from a leadership and strategy perspective, rather than as an exercise in public relations is Stanford School of Business’s approach. The School’s Leadership and Crisis Management open program was developed by Professor Steven Callander (the Program Director), in conjunction with Professor Sarah Soule.

Both professors bring their extensive research in fields not just related to business to their teachings on crisis management. Soule’s research has examined state-level environmental policies, and she is currently working on a paper on various state-level tax incentives for “green” energy options, such as solar energy. One aspect of her research has looked at the effect of environmental protests and the influence of NGOs on environmental policies. Protests and the techniques for handling them are in fact a key part of the Leadership and Crisis Management program, and participants are taught skills on how to manage and prevent them. “Companies need to take activism seriously,” explains Soule. “In this program, we talk about the methods for preventing these types of crises, such as partnering with NGOs and learning from NGOs before they target a firm.”

Activists sometimes deliberately generate corporate crises, hoping to pressure companies to respond in ways they normally would not. Moreover, the ways they do so are becoming increasingly varied, from staging sit-ins and holding up banners, to providing stockholders with negative information or initiating web campaigns. Speaking about this, Soule stressed that “it is not wise for companies to ignore protestors, especially as much protest has moved online and can quickly become viral. Overnight, firms can come to be viewed as negative players in the global economy, damaging their stock prices.”

Similarly, Callander who is an Associate Professor of Political Economy at Stanford and has extensively researched electoral systems. Calling politics itself ‘crisis management’, Callander explained that “politicians are skilful at simultaneously managing multiple stakeholders, usually under the glare of the media, public attention and intense time pressure.” As such, he believes that executives can learn much from the political organization and leadership that is involved in the aftermath of catastrophic events, such as the 9/11 attacks or the Japan earthquakes; these events are useful in demonstrating what is required of a CEO in a corporate crisis.

One of the case studies on the program is of Target Corporation (a retailer), which made a donation to a political candidate in Minnesota in July 2010. “In what was a complete shock to Target, but highly predictable,” says Callander, “this action led to a call for a national boycott of Target stores by MoveOn.org—a powerful political activist group in the US—as well as unions and other groups. How Target could have predicted this outcome, as well as how they should have reacted when the crisis was upon them, will be the focus of this particular case study.
Likewise, Callander also considers other prominent “disasters” faced by large organizations, such as the BP Gulf oil spill of last year; Goldman Sachs being hauled in front of Congress; and, even “mini” crises, such as the reception issues faced by users of Apple’s iphone 4 after its launch in 2010. All of these studies help form three essential questions for participants to work on:

  1. How do you identify a crisis?
  2. How do you manage a crisis?
  3. How do you learn from a crisis (to ensure it does not happen again)?

Crisis management is a subject that is becoming more and more relevant for companies, as the harsh spotlight that organizations in a crisis face is itself becoming larger. However, Callander rejects the traditional view that a crisis is “an event that can destroy or affect an entire organization” (Mitroff, et all. 1996); rather, he puts a crisis in the hands of management. “You and your organization are a player in the crisis, and the decisions you make in it determine the outcome you receive.” As such, he purports a more strategic interpretation, and teaches a crisis as being “a decisive moment, a turning point for better or worse.”


Executive Education programs at the Stanford Graduate School of Business propel careers and deliver lasting value to organizations that sponsor participants.





 
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