Crisis? What crisis? Why recognition is critical

Denial is the enemy of crisis management, but that doesn't stop some CEOs sticking their heads firmly in the sand when a crisis comes to call, argues Tony Jaques.

Every organisation should know when it’s facing a crisis. Sadly, it just ain’t so, and that can be a major problem.

With the football World Cup about to begin, consider the notorious case of former FIFA President Sepp Blatter. When football’s governing body was accused of corruption way back in 2011, he famously responded: “Crisis? What is a crisis? We are not in a crisis, we are only in some difficulties and these difficulties will be solved inside our family.” Four years later, facing renewed allegations, Blatter was finally forced to resign.

Sepp Blatter in 1982 (L) Source: Wikipedia

A critical role for leaders is to define reality, including whether the organisation is facing a crisis. This is a genuine skill, and it requires judgement, leadership and honesty. Yet some senior executives will try to emulate FIFA and deny that a crisis is threatening or has already happened.

It’s understandable that executives may be reluctant to declare a crisis, to claim that everything is under control. Maybe it’s ‘justified’ by a desire to protect the share price or to avoid damage to reputation. But as British crisis expert Jonathan Hemus has written: “You can only begin to rebuild your reputation if you recognise you have a problem. Denial is the enemy of crisis management.”

Unfortunately it is not as simple as it seems. A crisis is pretty easy to recognise when it’s triggered by an emergency or major incident, such as a fatal mine accident or infrastructure failure or transport disaster, or warehouse fire or a product recall.

However, it’s much harder to identify when an ongoing or slowly developing problem has the potential to become a crisis, or maybe already is a crisis. Sometimes this is called a creeping crisis, such as repeated computer security breaches, persistent management misbehaviour over time, or a growing tide of customer complaints.

Take for example the infamous Ford–Firestone crisis, when more than 200 deaths were attributed to tyre failures, over half of them involving Ford SUVs. Ford CEO Jacques Nasser admitted before a congressional committee that, despite replacing tyres overseas, Ford held off taking action in the United States “because review of its various databases assured the company there was not a problem here.” The databases might have suggested “not a problem here,” but the eventual result was one of the largest tyre recalls in history.

Two separate forces are at play when senior managers attempt to deny there is a major problem. The first is a bias towards optimism – the assumption is that nothing can go wrong and success is sure to continue.

The second force at play is wilful blindness – when top executives don’t or won’t hear bad news. What’s needed is open, blame-free, upward communication. In the wake of the famous Pentium chip recall crisis, Intel boss Andy Grove observed that “most CEOs are in the centre of a fortified palace.” He said he had been one of the last to understand the implications of the crisis.

Yet it shouldn’t be like that. The reality was captured in one of the most important early books on crisis management when Steven Fink wrote: “You should accept almost as a universal truth that when a crisis strikes it will be accompanied by a host of diversionary problems. As a manager, your task is to identify the real crisis.”

This piece first appeared in Tony Jaques’ Issue Outcomes newsletter. You can subscribe here.


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