Dixon | James Features & News
Corporate crises are dominating the headlines lately. Wells Fargo’s cross-selling scam has brought tremendous negative news coverage, regulatory scrutiny with bipartisan outrage, and now possible criminal charges. Likewise, Mylan pharmaceuticals’ EpiPen debacle has created consumer angst over inflated pricing, higher than necessary executive compensation and fundamental trust issues. And that’s just the news from this past month!
At a recent speech to the Private Directors Association, composed of individuals who currently sit on the boards of privately held companies, I reviewed the important role a governance board plays in making a business “crisis ready.” Research from the Institute for Crisis Management proves that the majority of crises come from within an organization. They are usually known issues, such as pricing decisions, marketing missteps, poor hiring practices, executive behavior, or ethics violations, that smolder over time until an incident ignites scrutiny and it blows up publicly. Crises are usually issues that if identified and addressed properly could be mitigated or at least better controlled. It’s probably why Wells Fargo CEO John Stumpf speaking before a congressional hearing commented, “We didn’t get on this fast enough.”
I shared these 10 best practices that board members should address in their governance efforts to help create a crisis-ready organization:
- Work toward a high functioning board. A survey of Canadian board members found that 75 percent had made decisions without company management in the room during a recent crisis, because management is what posed the problem. Boards may need to act alone in a crisis situation, it is not the time to find you have confidence cracks within board members that might limit your ability to work collaboratively and act with immediacy.
- Support crisis preparedness. Make it a priority among your company leadership as part of their risk management responsibilities.
- Be mindful of the unique cultural dynamics of the organization that will limit its ability to recognize vulnerabilities or respond to crisis. Are employees afraid to speak up, do cross-border operations present risks, do “unwritten conduct rules” or traditions drive risky behavior?
- Require a vulnerabilities assessment be conducted and regularly updated. Know the risks the organization faces.
- Prioritize mitigation of those vulnerabilities. Proper actions can remove most vulnerabilities or significantly lessen their potential impact.
- Demand regular risk management reporting to the board. Ask for a quarterly dashboard update on issues that are being tracked, an annual review of risks and ask to see the current crisis plan.
- Balance legal and marketing perspectives. Not often friends in a crisis, board members must be prepared for winning in both the court of law and public opinion.
- Be the moral compass. Require the company to do the right thing, always.
- Resource appropriately. Make sure that crisis preparedness efforts are funded adequately and the team has all the monitoring tools needed to listen to emerging issues.
- Require post assessment for every crisis. Learn from your actions and mistakes. And always, look for the opportunity each crisis presents, even if it is an opportunity to restate your values.
Tip #13: Share visible signs of progress.
It’s one thing to articulate your values and your strategic plans, but they come to reality when you make visible your signs of progress against them.
Tip #12: Reputation building takes time.
“Someone’s sitting in the shade today because someone planted a tree a long time ago,” says Warren Buffett. Corporate brand building is a marathon, not a 5K. Once those roots are planted they take nurturing and time to grow.
Tip #11: Learn from others’ successes and mistakes.
Warren Buffet commented: “In the business world, the rearview mirror is always clearer than the windshield.” We are surrounded by companies who successfully manage their reputations and regretfully even more who make catastrophic mistakes that impact sales, hurt revenues and erode support from stakeholders. Be a student of best practices when it comes to managing your reputation and learn from others’ strong leadership or mistakes.
Tip #10: Find Opportunity in Crisis
Chicago Mayor Rahm Emanuel once said: “You never want a serious crisis to go to waste.” A crisis, he continued, “provides the opportunity … to do things that you could not do before.” Right on, Rahm. There is always a silver lining. Use this point of undesired over exposure to step it up, take the high road, do the right thing. How you act in a crisis is more important than what you say.
Tip #9: Communicate authentically. Maya Angelou, American autobiographer and poet, wrote “I’ve learned that people will forget what you said, people will forget what you did, but people will not forget how you made them feel.” Address people’s logical needs but more importantly their emotional needs. Then they’ll remember you.
Tip #8: Everything we do (and don’t do) communicates. For leaders and organizations, everything communicates whether we intend it to or not. Given that reality, why not control the communications and covey your desired message and understanding. Otherwise people will interpret your behavior on their terms and assign their own meaning. So be purposeful.
Tip #7: Communications is Leadership Leaders need to be effective communicators. Leading is communicating; you can’t separate the two. Leaders need to use strategic communications to achieve business goals, implement strategies, inspire others to believe in them and the organization.
Tip #7: Lead With Your Actions Warren Buffet is quoted as saying: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.” Always do the right thing first and then you can talk about it.
Tip #6: Don’t delegate your reputation. Something as valuable as your corporate reputation should be managed from the top. CEOs and all executive management should be involved in decisions related to building your desired reputation and should embody its core principles.
Tip #5: Your reputation is defined by the company you keep. Just like high school days, you are judged by who you hang out with. To enhance their reputation companies should carefully choose suppliers, business partners, philanthropic benefactors, lobbying partners and more to make sure they are aligned with their business values. Partners should add integrity to your reputation, not distract.
Tip #4: No reputation is bulletproof. Challenges to your reputation can come from the inside and out. Some can be anticipated and mitigated. Others come unexpectedly and advance planning can lessen their impact. All can leave a scar.
Tip #3: Reputation builds competitive advantage; invest in it! Research show that corporate reputation is worth about 4 to 5 percent of sales per year and it’s the most valuable asset entrusted to a CEO by the board and shareholder. Likewise, a bad reputation costs the company in lost sales and talent. Invest in your reputation and its proper care just as you would any similar asset that delivers such returns.
Principle #2: Protect your good reputation by building a reserve of goodwill. You earn a positive reputation through your consistent actions and behaviors. Should a crisis hit you’ll need the goodwill they’ve created to bridge over the distraction and maintain followers.
Principle #1: Great reputations are not accidental. Sound business strategy + ethical performance + exemplary customer service + internal alignment behind brand promise + purposeful communications and external visibility = great reputation. Shortcutting the process allows competitors and outsiders to define your reputation. And we don’t think you’ll like what they have in mind.