How to stop worrying and build a crisis management plan

Management Lucas Deal October 28, 2013

When it comes to handling a crisis, Stanley Kubrick’s 1964 film “Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb” is the textbook example of what not to do.

And while it’s safe to say the movie’s plot — U.S. Air Force general orders an unapproved nuclear attack on Russia because he believes it is responsible for, among other things, the pasteurization of milk — is highly unlikely, the communication mishaps and utter lack of preparation shown in dealing with the crisis is all too common.

To effectively withstand and survive a major crisis, even a fictitious movie one, there has to be a plan.

A crisis management plan is a comprehensive, step-by-step guide for combating and surviving a crisis.

POLL: Do you have a detailed crisis management plan for your business?

In the aftermarket, a crisis management plan can be the difference between a recovering from a debilitating incident and being put out of business. Every business should have one.

Successfully constructing a crisis management team requires research, discussion and time.

But before building one, it’s a good idea to first define what qualifies as a crisis.

Getting a stock order three hours late or forgetting to call a customer when his service work is complete doesn’t quality. Neither is ideal, and it’s a good idea to have a strategy for both, but those are problems that can be addressed and quickly solved.

A crisis isn’t just a problem; it’s a problem on the largest possible scale.

A crisis is a problem that puts your entire operation in jeopardy.

“Everything that goes wrong is not a crisis,” says Bill Wade, managing partner at Wade & Partners, an aftermarket consulting firm. “When you run a business things are going to go wrong. A crisis is when something goes terribly wrong.

“It’s when something unthinkable happens.”

Natural disasters and workplace casualties qualify as crises because of devastating affects they have on businesses. Severe financial and employee misconduct also can become crises.

But crises are not limited to these categories alone. Wade says successfully building a crisis management plan requires advance planning for any possible situation.

“I think the easiest way to [plan for a crisis] is during a meeting to just ask the question: ‘What are the five worst things that can happen to us?’ Within five minutes you’ll have a bunch of different options, and then you can go from there and look at how you’d handle each one.”

That’s an important factor to consider in building a crisis management plan. There is no one-size-fits-all solution. A strategy designed to recover from tornado damage will not work perfectly when an employee is permanently disabled in a workplace accident.

A true crisis management plan should have different courses of action for each possible catastrophe. Some steps will crossover from plan to plan, but the overall strategy of each should be unique to the event and the requirements necessary to recover.

Once potential crises have been identified, it’s time to start writing individual action plans.

The Federal Emergency Management Agency (FEMA) says evacuation and/or emergency response should be the first step in a safety-related crises action plan. Once all employees are safely removed from a facility, FEMA says it’s important for businesses to defer to government authorities — firefighters, police, etc. — for instruction during a disaster.

With financial or personnel-related crises, the first step is to identify the source of the crises and discontinue the inappropriate action, says the United States’ Small Business Administration (SBA). Wade advises this is also an appropriate time to contact legal counsel for guidance in moving forward.

For example, embezzlement is just cause to fire an employee, but Wade says proper protocol must be followed to assure a business avoids legal backlash.

After the crisis concludes, the next step should be to activate the largest aspect of a crisis management strategy, the business continuity plan.

According to the SBA, 25 percent of businesses do not reopen after a major disaster. Insufficient business planning is the most cited reason for a permanent shut down.

Surviving a crisis requires a fully developed plan to quickly resume operations in the face of disaster. All employees should be aware and educated on their role in the continuity plan, and management should be able to implement the program with minimal delay.

Wade adds that staff confidence in a continuity plan is another important aspect to surviving a crisis. Employees are perceptive. Visible uncertainty from management in executing a continuity plan can resonate through a staff rapidly, torpedoing a recovery before one even begins, he says.

“You really have to sell your employees that you know what you’re doing and you’re doing it” after a crisis, Wade says. “That’s really critical. You don’t want your employees seeing you as a victim, and you don’t want them doubting you know what to do.”

And while continuity plans are necessary, they should be designed differently for each required situation.

Technology and Maintenance Council (TMC) Recommended Practice 537, “Disaster Recovery Guidelines for Vehicle Maintenance Operations,” says a business continuity plan should perform three primary functions in overcoming a natural disaster.

Step 1 is the process of resuming business operations. Step 2 is hazard analysis response, which RP 537 defines as an outline of “the types of hazards the business may face” during the catastrophic event. Step 3 is mitigation and recovery, which allows for risk assessment and cost-benefit analyses after the crisis, and allows repairs and relocation of essential operations.

If followed correctly, RP 537 says the continuity plan should provide disaster preparedness, mitigation, response and recovery guidelines. “All stages of disaster recovery are equal in importance. One cannot function without the other and be successful,” the document states.

Conversely, a financial crisis continuity plan does not require steps for relocation and repairs, but should include instruction for investigation and documentation into business records, and steps for contacting other financial institutions.

Developing a line of communication with customers, authorities and employees is another requirement in building a strong crisis management strategy.

Wade advises aftermarket businesses to create information parameters for each group. He says while it’s important to keep people in the loop, how a business releases crisis information can alter the way it is perceived in the marketplace.

This is increasingly important when addressing a financial crisis where confidential and proprietary information is relevant to the situation. Discretion is a necessity, says Wade. “If you find out your branch manager is robbing you blind, do you really want to come out and tell everybody?”

But filtering information is different than completely withholding it, Wade says, and adds that a crisis that will enter the public consciousness cannot be avoided.

“If something happens and you don’t say something, the story will get better because everyone else will juice it up and [embellish] it,” he says. “You have to get out in front of a story.”

He adds that it’s a good idea to be more forthcoming after a natural disaster.

Customers will want to know how a crisis in their supply chain impacts their business, he says. Aftermarket businesses that can immediately respond after a disaster with operational information and a description of their continuity plan are at a significant advantage in satisfying and maintaining their customer base.

The SBA notes a disaster course of action also should include communication with FEMA and other government agencies. FEMA provides instruction and financial assistance to businesses recovering from natural disasters, while both the SBA and U.S. Department of Agriculture offer low-interest loans to companies to aid in replacing real estate and property destroyed in a disaster.

No matter what the form of crisis, employees should remain abreast of the situation.

FEMA advises businesses to task human resources with the responsibility of notifying and updating employees on crisis management strategy.

“Close coordination between management, company spokesperson[s], public agencies and HR is needed when managing the sensitive nature of communications,” the organization says.

Adds Wade: “That’s the single most important thing. You have to earn their respect and sell them on what you’re doing and why it’s going to work.”

Unfortunately, like crisis prevention, no crisis management plan is infallible.

It’s in the nature of crises to generate unpredictable problems and complications. That’s why every crisis management plan should be reviewed for effectiveness and altered as necessary after use.

A carefully crafted plan may minimize the effect a crisis has on a business, but an out of date or incomplete plan can accentuate it.

FEMA notes that once a management plan is designed it should be tested and evaluated for effectiveness. The organization also recommends instituting a corrective action step within a crisis management program to note areas where a plan was insufficient, and possible methods for improvement. Potential improvements should then be tested, with the most successful alternative being added to the plan.

And Wade says a business shouldn’t limit its review work to post-crisis situations. Watching how another business handles a crisis also can provide an opportunity to learn and update one’s course of action.

“It’s easy to look at that as a boring, second-rate job, but it’s something that needs to done,” he says. “It’s always best to prepare for the wolf when he’s not at the door, because when he gets there he’s going to be very hungry.”

Here are some organizations that provide literature and instruction on crisis management.

Federal Emergency Management Agency – FEMA is the Federal government’s foremost crisis and management organization, and operates an extremely valuable disaster preparedness website.

U.S. Small Business Administration – The SBA features a comprehensive disaster planning and preparedness section on its website.

Internal Revenue Service – The fiscal organization’s website provides financial advice and guidelines for dealing with a crisis and/or natural disaster.