What Can Recent History Teach Us About Crisis Management?

No company is immune from natural disasters, human error, or scandals. That won’t change. What companies can change is how they deal with crises. 

The Mayans predicted the world would end in 2012. Many people took this warning seriously and stockpiled canned goods, bottled water, and medicine. In some cases, they purchased bunkers and military vehicles. Though the world didn’t end in 2012, those who prepared for it had what we call a “crisis management strategy.” In case of emergency, they knew where to go, what supplies to carry, and what tools to use.  

Corporate crisis management strategies look a bit different, but the core tenet remains the same. When markets crash or your CEO violates company policy at a party, you need a crisis management plan.  

Real-Life Examples of Crisis Management at Work

When a crisis strikes, the results can be devastating. There is no better example of this than what happened to Volkswagen in 2015. In September of that year, the EPA sent a Notice of Violation to the Volkswagen Group of America. The notice claimed that Volkswagen circumvented EPA emissions standards in their 2.0-liter engine diesel cars manufactured between 2009 and 2015. These vehicles emitted 4000% more pollution than the EPA allowed.  

Volkswagen’s crisis management strategy only made matters worse:  

• Volkswagen’s executives did not initially admit to knowing about the emissions deception. They eventually backtracked and admitted having knowledge of it.  
• After the incident, Volkswagen laid off 30,000 employees. It appeared to consumers that Volkswagen was taking less savory measures to make up for its loss of profits by terminating employees who were not involved in the scandal at all.  

As a result of the factors above, consumer trust in the brand was negatively impacted. Due to Volkswagen’s 30,000 layoffs, consumers also had to reconsider whether the company’s values and morals aligned with their own. 

On the other hand, a good crisis management strategy can propel a company to new heights even in the most challenging situations. Johnson & Johnson proved this after poisoned Tylenol capsules killed seven Chicagoans in the early 1980s. Obviously, Johnson & Johnson did not poison their own medication. An unknown perpetrator poisoned the capsules and returned them to the shelves. The incident raised concerns about packaging and anti-tampering measures. 

The key to Johnson & Johnson’s handling of the crisis was a quick reaction and transparent communication. Their crisis management strategy resulted in the following: 

• Johnson & Johnson ceased all advertising of its products 
• It sent 450,000 messages to hospitals, doctors’ offices, and other healthcare organizations 

• It created toll-free hotlines for its customers 
• It issued warnings to consumers not to take Tylenol 
• It recalled all its Tylenol products 

Although the recall alone cost Johnson & Johnson more than $100 million, the company’s handling of this incident has become a case study for effective crisis management. In fact, Harvard Business School uses it as an example of highly effective crisis management. 

KFC UK ran out of chicken in 2018 and temporarily closed more than 600 of its locations. One of the most successful social media crisis management campaigns in history followed.   

Instead of issuing one media statement, KFC began using social media to keep customers informed and up to date about the crisis. One of their Tweets read: “The chicken crossed the road, just not to our restaurants…”. Another featured a bucket of KFC with the letters “FCK” on it and a short statement below it that started with, “A chicken restaurant without any chicken. It’s not ideal. Huge apologies to our customers, especially those who travelled out of their way to find that we’re closed.” 

KFC’s crisis management strategy relied on the following elements: 

• A good dose of self-deprecating humor (which has been a part of KFC’s brand for years) 
• A premortem that was partially shared with consumers related to supply chain issues and supplier hiccups 
• Regular updates shared via social media to keep customers in the loop 
• Owning up to its role in the crisis 

1. Create a crisis management team. Your team should include members from these departments: customer-facing, PR, marketing, legal, and compliance, as well as the C-suite and HR. Your crisis management team is responsible for creating and updating your crisis management strategies and communicating with the media. 

2. Conduct a risk assessment and identify crises your company may face. Different crises will require different strategies. You wouldn’t handle a scandal regarding your CEO’s behavior like you would a hurricane. You will also need to decide what will prompt your emergency protocols. The bad behavior of your CEO, for example, may not warrant launching a crisis management strategy if your company is not publicly traded. It is also crucial to conduct risk assessments. Focus on crises that seem likely (in other words, don’t waste your time devising a crisis management strategy to deal with an alien invasion). 

3. Craft a contingency plan for each crisis. The show must go on. How you intend to keep the curtain from falling should be part of your crisis management strategy. For example, if your production line loses power during an earthquake, you should decide whether to include generators in your contingency plan or inform the public and relevant stakeholders that production will cease for the time being. 

4. Include succession planning in your crisis management strategies. Your CEO has gone off the rails. What next? If you have a succession plan in place, you already know. A key employee leaving can have a significant impact on stock price, operations, and short-term stability. A succession plan identifies individuals who can fill gaps immediately and effectively. Having one in place makes it easier to replace an errant CEO in the event of an emergency. 

Conclusion

It is best to design crisis management strategies during periods of relative peace. You should not wait for a disaster to strike before you start devising one. 

Our consultants are available to assist you if you have questions about succession planning or the effectiveness of your board’s crisis management strategies. 

Not ready to call in the experts just yet? You can also watch our webinar on board crisis management here. 

About the Author

Panos Manolopoulos is a Managing Partner of Stanton Chase’s Dubai office and one of the main shareholders in Stanton Chase Dubai, Greater China, and Moscow. He has served as Regional and Global Practice Leader of Consumer Products & Services, Vice Chairman – Regions, Vice President of Europe Middle East & Africa, Vice Chairman – Business Excellence, and most recently Global Practice Leader of our Board and CEO Services practice.