Surviving a Crisis

Recent events have shown us just how important it is to be prepared for a crisis. From individuals to businesses to the government, Hurricane Katrina made it obvious that advanced planning to deal with a crisis is critical. Of course, you can’t plan for every situation — especially one as catastrophic as a major hurricane — but every business should have basic plans in place to help deal with a crisis.

Jack Welch, former CEO and chairman of General Electric, recently wrote an opinion article in the Wall Street Journal. He discussed five stages that people go through when dealing with a crisis — including a business crisis. The first stage is denial. The problem can’t be that bad, because bad things don’t happen to good people. The second stage is containment. At this point, people, including perfectly capable business executives, give the problem to someone else to solve. The third stage is shame-mongering, in which everyone points the finger at others for things that went wrong and takes the credit — deserved or not — for what went right. The fourth stage is blood on the floor. In almost every crisis, a high profile person loses his job. Often, this executive wasn’t the reason things went wrong — he’s just the fall guy. In the fifth and final stage, the crisis gets fixed and, despite predictions of total failure, life goes on, usually for the better.

When companies develop their crisis plans, they need to take these five stages into account. Good advanced planning may very well mean that some — or none! — of them even take place. In fact, we’d like to suggest a new set of stages that a company will go through if it has planned for a crisis. The first stage is recognition. The sooner a crisis is recognized, the sooner appropriate steps can be taken to minimize its effect on the company. The second stage is containment. Often, an initial crisis will lead to another crisis and another — escalating in severity. For example, downsizing often leads to low morale, which could lead to poor quality work, absenteeism, and possible mass exodus by the remaining employees. Effectively and efficiently dealing with the crisis at the start can often stop the downward spiral. Stage three is recognition of things that went right and fixing the problems. Publicly acknowledging who went above and beyond during a crisis is very important. Quietly and quickly fix what went wrong and learn from the mistakes so they don’t happen again. The crisis gets fixed in the final stage, and indeed life at the company does go on, frequently for the better.

Communications during a crisis are vital. Another vital component is continually reviewing and updating your crisis plan. Finally, as we’ve said before, practice, practice, practice! Keeping these items in mind will help to ensure that your company goes through the four stages that we’ve proposed, rather than those detailed by Mr. Welch.