Posts Tagged ‘crisis’

News of British Petroleum’s Deepwater Horizon oil spill has reached every corner of the globe. The spill has already far surpassed the Exxon Valdez oil spill of 1989, in which about 11 million gallons of oil was spilled off the coast of Alaska. Official figures suggest that the Horizon well is releasing around 200,000 gallons of oil into the Gulf of Mexico every day, and other figures have that number well over 1 million gallons per day. When all is said and done, the Horizon spill will likely become one of the largest oil spills in history.

This story highlights two very important aspects of executive leadership: 1) crisis management and 2) corporate responsibility.

While relatively few CEOs will have to confront a crisis of this magnitude, teaching crisis leadership is still a necessity. Leadership in a crisis can be learned, and it can be appropriately scaled to match the situation.

During a crisis, leaders must:

1. Act Timely. Leaders cannot afford to sit on their hands while the crisis grows unchecked. The longer the crisis continues without intervention, the harder it will be to resolve, and companies do not want to look apathetic.

2. Scale their Response. The response to the crisis must match its size. All personnel required to resolve the crisis should be informed and mobilized immediately. When in doubt, it is better to over commit than under commit resources.

3. Make Amends. After the crisis is under control, leaders must find a way to make amends with those affected by the crisis. This will help companies retain current customers and prevent alienation from potential customers.

It is not enough for a company to resolve a crisis; they must also take responsibility.

BP executive Tony Hayward has put his face on this crisis and has communicated BP’s full responsibility for the cleanup effort. While many people are critical of oil companies in general, Hayward has tried to save face for BP by stating the company would pay for the cleanup effort and plug the leaking well.

By appropriately responding to a crisis and taking responsibility, executive leaders and their companies will have a better chance of maintaining positive public relations, and while many executive leaders may not have to deal with national or global crises, training and preparation will assure a company will not be caught off guard.

Related book summaries in the BBS library: Leading in Times of Crisis, Corporate Reputation, Beyond Good CompanyJust Good Business

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Leadership in the Era of Economic Uncertainty by Ram Charan is a common-sense guide outlining the management practices necessary to weather the current economic storm. Throughout the book Charan explains how to manage for cash and make tough decisions at every level of the business, from the CEO down to customer service. With the right strategies, and a little luck, an overwhelming challenge can become an incredible opportunity.

For a free trial of EBSCO Business Book Summaries click here.

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Toyota’s recent recall trouble highlights the need for companies to respond appropriately to crisis. Toyota President Akio Toyoda’s initial response to the recall of certain Toyota models for uncontrolled acceleration was seen by many as inadequate. In this case his apology was viewed as insincere and disproportionate to the size of the issue. In addition, the company initially tried to downplay the severity of the problem while casting blame on third-party manufacturers. In essence, Toyota’s response left much to be desired, but how can companies learn from Toyota’s mistakes?

In the case of crisis response there are several key factors to keep in mind:

1. Communication. Toyota did not adequately communicate the acceleration issue to its customers. As a result, many were confused over the cause of the acceleration issue and which car models were affected. At  the same time, the company made conclusions as to the cause of the problem before all information was available. While crisis and emergencies are inherently chaotic, companies must keep their customers and employees informed to the best of the ability throughout the ordeal. If a company does not have adequate information to make a conclusion, it should communicate this fact to its internal and external stakeholders and let them know that they will be informed when the information becomes available.

2. Partner Relationships. Before the acceleration issue was fully understood, Toyota blamed some of its third-party manufacturers for the problem. While this move was meant to reassure customers as to the safety and quality of the Toyota brand, the company may have hurt its relationship with some of its partners. While this may not have such a dramatic impact in the automotive market (part suppliers are heavily dependent on automotive contracts for the majority of their income), other businesses may not be able to afford weakening partner relationships by playing the blame game. For this reason, companies should think twice before making any accusatory statements towards business partners or suppliers.

3. Leadership. When the accelerator issue first came up, Toyota leadership was reluctant to take action and make the necessary moves to reassure its stakeholders and solve the problem. Company leaders must be able to quickly assess and tackle the problem before it gets out of hand. This means keeping employees informed of the situation and reassuring customers and external stakeholders. If leaders wait too long before taking decisive action, a problem can quickly escalate into a full-blown crisis.

Related book summaries in the BBS library: Corporate Conversations, Beyond Good Company, Just Good Business

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