“Bad news isn’t wine, it doesn’t age well”

Crisis management- the good, bad and the ugly

“Bad news isn’t wine, it doesn’t improve with age”. I love this Colin Powell quote. I remembered it as I was reading yet another headline about the recent financial sector mismanagement. Unfortunately,  crises - containing them, responding to them and communicating about them -  are back on top of the corporate agenda. 

 A piece of news that made fewer headlines this week was that  NATO conducted its annual crisis response exercise.  The areas they planned for included a range of ‘strategic shocks’ such as pandemics, cyber-attacks, large-scale electricity blackouts, and big shifts in the workforce and human movement.  All these topics are in some way relevant to a business. Although I would hope that you never face quite the same scale of challenge as NATO, this regular stress testing and deep thinking about  decision-making processes is something everyone can learn from. 

I am often surprised by how few organizations think ahead of time about the possibility of a negative event. This could be anything from a small PR incident on Twitter to a catastrophe that might threaten your future. It’s vital as an executive to prepare extensively and create a robust plan, and it's vital as a board member to stress test those plans on a regular basis. Beyond careful preparation and planning, what else is important when disaster strikes? 

As someone that used to work in the travel industry, it pains me to admit that there are far too many examples of bad crisis management in that sector. Monarch Airlines and United Airlines  are both interesting case studies that highlight  the importance of fast response and clear communication.

Monarch’s bankruptcy in 2017 was an unexpected, sudden event that resulted in the loss of over 2,000 jobs and left countless passengers stranded without flights. The company's handling of this crisis was substandard, and it's not surprising that they were criticized heavily at the time for their incompetence in managing the situation. 

One of the main reasons Monarch garnered such criticism was due to a lack of transparency and communication with both its employees and customers. The company  didn't provide clear and timely updates on the situation. This left customers unsure of how to proceed with their travel plans, something that, of course, caused stress and high emotions.

Monarch also handled employee communication poorly. They had to go through significant redundancies, but gave  employees very short notice before announcing that they were losing their jobs. This inevitably caused more stress and uncertainty. There were also reports of inadequate support for employees at their time of need.

 Finally, Monarch's interactions with the media were slow and inadequate. The company did not release a statement until several hours after news of the administration broke, and even then, the statement lacked detailed information and failed to address many important questions. Constructive press relations could have eased customer and employee pain.

Another cautionary tale from travel was the seemingly minor incident of a video from a United Airlines flight in April 2017. The company faced a public relations crisis when a clip of security personnel forcibly dragging a passenger off an overbooked flight went viral. United’s initial response was to defend the actions of its staff, which only further infuriated customers. Its share price dropped significantly, the company faced negative media attention and a public backlash. They eventually issued an apology and changed their policies, but the damage had already been done and was long lasting. The airline had failed to take the incident seriously enough and failed to act with pace to rectify what happened.

Before you start feeling too anxious about all the things that could go wrong in your business, there are textbook situations too. Even if we have to look quite far back in history. One company universally acknowledged to have acted well and quickly in a horrendous crisis was Johnson & Johnson in 1982.

Several people died after taking extra strength Tylenol capsules that had been tampered with and laced with cyanide. Johnson & Johnson immediately protected customers by  recalling all Tylenol capsules from the market overnight -  an action that cost the company over $100 million. It got on the front foot with its communications and talked clearly and transparently with the public throughout the crisis. The company's CEO at the time, James Burke, made a public statement expressing his concern for the victims and the company's commitment to addressing the source of the tampering.

 Johnson & Johnson also quickly implemented new tamper-resistant packaging for its products to prevent future incidents. This proactive and responsible approach not only helped the company maintain its reputation but also set a new standard for crisis management in the business world. Remarkably, Tylenol is still one of their biggest selling brands - a testament to their quick actions. 

Crisis management is tricky. It can seem like overkill - who doesn’t remember the anxiety over Y2K?  Some companies planned for Armageddon only to find a remarkably subdued clock tick from 31st Dec to 1st Jan. As the boss, if something does happen, you might want to remember Colin Powell. Yes, reach for a comforting glass of wine, but drink it quickly and get on with your pre- prepared plan.