It's All About Trust

I was asked today to provide some comments about crisis management and crisis communication for an eastern European management magazine. There were some good questions that ultimately came down to a simple question: what works? What strategies do organizations employ that enable them to come out of a crisis in the best shape possible.

Here is my answer to that fundamental question--in about a short of form as I can make it:

First, it is important to understand what "success" in coming out of a crisis looks like. A major crisis affects an organization similar to how a major personal crisis affects an individual. It changes us sometimes in very profound ways. CEOs and executive leaders of businesses tend to think about the impact of a crisis on the value of their brand and their share value. If this is the focus, then the goal is to emerge from a crisis with the brand enhanced, the reputation of the company improved as a result of the crisis and the share value stable or increasing after the crisis.

What does that take? An important study from Oxford University in the 1990s demonstrated the impact of crises on share value. They looked at why some company's share value went down and never recovered and the share value of others was not affected long term by the crisis. The key difference was the perception of the character of the company as seen through the actions of its leaders. This is very important. Essentially the question in shareholder's minds is: do I trust these people to make the right decisions? Right decisions about protecting the safety and well-being of people, the environment and other things I hold important? And do I trust them to protect my interest as a shareholder? For government agencies the issue is similar except their "customers" are the ones who make funding decisions. After Katrina, some agencies lost funding. Others, like the US Coast Guard, received substantial additional funding because of the perception of competence coming out of the event.

This is why I believe that trust is the most important thing to focus on in preparing to respond to a crisis, in managing the response, and in the recovery phase. Trust is dependent on two things: right action and effective communication.

What is right action and who will decide what is right? It is not management who will decide whether what was done in the crisis was right or not. Employees and the families will decide. Major shareholders will decide. Government regulators will decide. Reporters and journalists will decide. Customers will decide. Congress members our Council members will decide.

These are key stakeholders and one of the most important things in preparing for a crisis is to ask the question: who are the people whose opinion of us matters most for our future? These people should be the whole focus of thinking and preparation. What will these people consider right action? There is no better, simpler way of answering this than the age old wisdom: do unto others as you would have them do unto you. In other words, right action is determined by their values, by their ideas of right and wrong, and their view of management's concern for others.

Right action alone does not result in trust. Because if no one knows about it, it is the same as if it never happened. Again, focusing on those key stakeholders, it is critical that in a crisis they be kept closely informed of the events and the leadership's response to those events. Leadership must be visible, and they must be seen making the right decisions. In today's instant news world where more and more get their people through the Internet in very direct ways, it is absolute essential that organizations establish a direct line of communication with their key stakeholders. They must be very, very fast. If they are not, the story will be told by others and it may not be true. They must communicate directly--not like the old days when it was assumed that communication goes through the media. And they must be transparent. In this day of so much access to information, it is difficult if not impossible to hide bad news. And to do so, or even to look like you may be hiding bad news, is to lose all credibility and trust.

The lessons of crisis management are really obvious--through the good stories and bad stories. We all want those in responsible positions to be open, honest and truthful. We want them to make good decisions. We want to be able to trust them and know that when we depend on them, we are in good hands.