In our modern business world, transformation and change management are positive pursuits. Conversely, unplanned and unwelcome change can be devastating. That’s why it’s the unforeseen and uncontrollable problems that keep executives up at night. These transformational crisis issues can destroy a reputation that took decades to build and decimate your business along with it. Most strong companies plan and prepare for operational issues and extreme weather events, but unknown issues are harder. You can still prepare for them, but it requires a willingness to anticipate and explore the prospects that you find hard to imagine.
Fifty years ago NASA imagined the unthinkable when they put the returning Apollo 11 astronauts in quarantine for three weeks after they returned to earth. Scientists considered the risks infinitesimally small, but they also knew the impact could be catastrophic. So, they stretched their imaginations and planned accordingly. Of course, they could have done even more, but what they did was substantial.
If managing the unfamiliar world of a transformational crisis keeps you awake at night, you’re not alone. Many top executives worry most about bet the company, reputation destroying problems and crisis issues they cannot anticipate or control. They can’t even know whether it will be a scandal, terrorism, a sudden change in public sentiment or some other unknown that will bring their company to possible ruin.
One of the problems with a transformational crisis is that you really don’t know with certainty whether, when or where the next shoe will drop. It’s akin to an emergency response where you don’t want to state the reason for a major industrial incident before the investigation is completed, only it’s on steroids. At the same time, you need to do what you can. The best start is to have integrated crisis communications and crisis management programs in place.
In a previous post, we discussed ten crisis scenarios, but that only alluded to the kinds of surprising crisis issues that may confront you. Now, to give you a head start, here are examples of the unexpected situations you may find in transformational crisis issues:
Ten Transformational Crisis Issues
The first three
- Bankruptcy – What do you think when a vendor yanks the water cooler out of your breakroom after your company files for bankruptcy protection? Do you find it amusing? That may quickly change when you learn that your PR firm won’t support you anymore. You may discover that you can’t operate some of your channels without the “non-essential” staff you lost. Many of your trusted vendors are not getting paid for past work. Unless they understand how the rules have changed, they may become your adversaries. Outside counsel is handling Congressional inquiries. Their focus on legal risks doesn’t always preserve the warm Congressional support you used to expect.
- Hostile takeovers/activist investors – With an activist investor or hostile takeover, you can assume they have been carefully studying you for months. They know what they are doing and have thought through the process many steps in advance. You seek additional support from firms or allies only to find them conflicted out. For some, short-term self-interest can override the long-term perspective you used to expect from them. You can’t just address these assaults in the standard way, without entertaining creative thought and analysis. If you do, you may find that every action has already been anticipated and successfully blocked.
- Third-party incidents – It’s the other guy’s crisis, so why worry? If you are a business partner, customer, transporter, industry peer or otherwise associated, it may affect you. You may even be drawn in for comment, comparison or action. Even in industries that consciously avoid criticizing other companies, something will slip. An intemperate comment from a lower-level employee can draw you in. If the public reaction to their crisis is strong, you could face punitive legislation that punishes everyone in your industry for your competitor’s failings.
The second three
- Corporate malfeasance/ government investigations – Prepare yourself for scorched earth. Many people will do anything to protect themselves and the things they value. Plea deals are just one example. You could also find that the good friends and government officials you helped elect have become your most vocal critics. This is par for the course as they scramble to distance themselves from your growing scandal.
- Expropriations/ abrogation of contracts/ sanctions – You had an ironclad contract that was carefully written and negotiated by some of the most brilliant legal minds in the world. This protected all your interests until a sovereign government decided it was in their best interest not to comply. Oh sure, you can take it to international arbitration and enlist support from your government to pressure them. You may also get other governments to support you, but don’t let yourself be fooled into thinking the other interested parties will see your position as their primary interest. In the game of international chess, even the biggest, most powerful companies can become pawns.
- Executive misconduct/sexual assault – Have you ever had someone you deeply trust and admire lie to you or even shift blame for their guilt onto you or another colleague? It is a horrible experience that shakes the very core of your beliefs and often lessens your ability to think clearly and respond appropriately. Just having to navigate through what and who is right is enormously challenging. Imagine how the complexity is magnified when one of the parties shifts the blame to you and the company for your actions or lack of action. Would it affect your judgment, if that person was likely the victim?
The third three
- Cyber-attacks/digital assaults – You learn that one of your trusted employees or vendors enabled a serious data breach. Was it an error or deliberate? Have you corrected every impact? Who and what was affected? How do you notify your stakeholders and what assistance do you offer? Consider what you would do if one of your predecessors authorized the payment of the Uber ransom.
- Litigation – Controlling the company’s legal risks has become the top priority. Likewise, outside counsel’s role may have become increasingly important. Unless you have remarkable counsel, your efforts to build stakeholder relationships may be pushed to the side. You may also find that some of your most trusted internal sources and even top executives are not as helpful. This is probably just increased caution in the face of adversity, but could also be because of their own personal jeopardy. They may even be getting personal legal advice that is at odds with your views.
- Mass shootings/ terrorism/ acts of war – Your company, employees, and customers are the victims of senseless violence. You took steps to prevent this, but some hold you responsible because you didn’t do enough. We used to expect hotels to prioritize guest comfort and privacy. Now we also expect them to deliberately observe the behavior and actions of someone checking in a hotel. Previously accepted protocols often included choke-points to ensure screening and access control. Now we understand that they may also present opportunities to target terror and expose companies to new liabilities. A single event a thousand miles from you can change expectations overnight.
One last, growing risk
- Targeted reputational attacks – An activist group aggressively opposes one of your major operations and extensive research reveals that the funding allowing this expanded activity indirectly came from a foreign government intent on destabilizing our society. You’re both the target and collateral damage. You’re doing business in that country and are reluctant to lose it. You also know that foreign interference has become so politicized that by revealing this information you risk more damage from the reactions of skeptics who won’t believe you.
What to do
Sadly, this list only scratches the surface of the transformational crisis issues that may surprise you. We hope it will jump-start your thinking about necessary preparations before you encounter a transformational crisis. Your best bet is to identify sources and experts who have already dealt with many transformational crisis issues. Here we’re talking about professionals who have weathered the headline-grabbing, major issues that can change entire industries. There’s no easy substitute for what they learned about what works and doesn’t work in these extreme situations.
Managing transformational crisis issues is never easy and many fail. Fortunately, you can succeed, if you line up the proper expert advisers and prepare to the best of your ability. You will get more right than wrong, impress your stakeholders with your resilience and ultimately overcome the challenge. The risk of a transformational crisis may still enter your dreams, but these constructive preparations should allow you to control the nightmares.
by John Ambler