Problems are always lurking for those running a startup; however, this should not throw you into panic. The way to overcome crisis situations is there and it is called Crisis Management. It is precisely to this delicate subject that the next few lines are devoted: here you will discover the best strategies for managing and, where possible, preventing business crises.
Crisis management: what it is and what it is for
The definition of Crisis Management refers to the set of strategies and practices that enable a company to best prepare itself to deal with a crisis, understood as a situation that can damage its reputation, performance, and overall business. To best prepare to manage a crisis, in this view, means to mitigate the negative effects of an unforeseen and potentially disruptive event by preventing, when possible, the risks associated with it.
We mentioned it already at the beginning of this guide but it is useful to reiterate it because it is a very important principle, which you should never forget: in the normal operation of a startup (and, more generally, of a company) internal or external events can occur that can cause even serious damage to Brand Reputation and business performance. Beware of underestimating the consequences because, in the rarest cases (and, especially, in small or newly established companies), these crises can even lead to bankruptcy.
You will discover in the next few lines how to deal with these incidents, but it is essential that you know, first and foremost, how to recognize them. For now, suffice it to know that a crisis occurs in all its disruptiveness when the problem becomes public knowledge and ends up at the center of brand conversations that the brand cannot directly control.
To avoid the negative consequences of a crisis, you must equip yourself in advance with adequate resources and structures to proactively manage possible dangerous situations. Crucially, you must develop a crisis plan, which must include guidelines on who to activate and what actions to take to manage incidents in a timely manner.
Stages of Crisis Management
The Crisis Management process can be divided into 4 different stages. They are all very important and, therefore, it is necessary to devote a paragraph to each of them. Let us start with the first one.
Preparation and prevention
The first phase of the Crisis Management process is to prepare for and prevent potential problems that could damage the company.
During this phase it is necessary to conduct an analysis of the internal and external environment so that limitations, shortcomings and vulnerabilities that could represent business risks can be identified. At this stage, it is also essential to conduct research that also considers possible new types of crises.
Precisely on the basis of the results of this 360-degree monitoring one must then develop the plan for crisis management and prepare “for the worst” through simulations and theoretical and practical exercises.
Crisis identification and assessment
It is with the second phase, i.e., the one devoted to crisis identification and assessment, that we get to the heart of the matter: this, in fact, is the moment when we need to identify an ongoing crisis (or an impending crisis) and assess its possible negative consequences on the business, so that we can put the right measures into practice.
Crisis response
In the third phase, the crisis response phase, the guidelines established in the crisis plan must be put into practice and all necessary actions must be implemented to restore the status quo and minimize the damage resulting from the crisis (possibly, including through compensation to those affected).
Recovery and learning from crisis
Do not underestimate the fourth and final stage, that of recovery and learning from the crisis: once the incident has been successfully handled, it is crucial to draw the right lessons from it to prevent a similar situation from occurring again.
Crisis manager: who he is and what he does
The importance of proper corporate crisis management, a subject also known as Crisis Handling, is evidenced by the fact that, by now, companies provide for the figure of a manager ad hoc within their organizational chart, called a Crisis Manager.
Skills and responsibilities
The Crisis Manager is the figure responsible for planning and implementing the response to a corporate crisis, as well as managing resources during the incident. Thus, his or her duties include identifying possible risks, preparing the crisis plan and implementing it, as well as monitoring to assess the effectiveness of the strategy put in place.
As for his or her core competencies, however, a Crisis Manager must be able to correctly read crisis-related situations and connect a large amount of information, must have a good amount of personality to make quick and efficient decisions, and must know how to create a work team and make it perform at its best.
Effective communication during a crisis
We have already mentioned that a corporate crisis is such when it becomes public knowledge and directs public conversations about the brand without the company being able to control them directly. Knowing how to communicate effectively during a crisis is, for this very reason, crucial. If you want to succeed in doing so, you need to know some basic principles.
Principles of crisis communication
The first principle of crisis communications is: choose the right spokesperson for crisis communications. In fact, sending a company representative to the brink who does not have the right skills to fully and correctly respond to all inquiries from customers, suppliers and the media can seriously damage the company, even more than the crisis itself.
Issuing a public statement quickly in the event of a crisis is important, as is providing frequent updates. You need to keep customers and all stakeholders informed about what is going on. Remember: better to give too much communication than too little.
Responding publicly to the crisis is not enough: it is necessary to respond in the right way. Fundamental in this regard is not to hide the truth because this, sooner or later, will come to light. Equally important is to provide clear information so that everyone can understand the problem and the actions put in place by the company to solve it. But that is not all: it is also necessary to respond in an empathetic way, so as to show the human side of the organization and demonstrate that it has taken the issue and the people affected to heart.
Examples of well-managed crisis communication
To further explain the basic principles just stated, it may be useful to introduce some concrete examples of well-managed crisis communication.
Net of the controversy that such a topic inevitably brings and some mistakes that he himself has publicly admitted to making, it is fairly widely agreed that Anthony Fauci, director of the National Institute of Allergy and Infection Diseases, has handled his role as head of the U.S. Coronavirus Task Force effectively, putting his expertise at the disposal of the public and conveying clear and consistent messages to them on a very complex subject.
On the other hand, in terms of the need to respond to the crisis in a timely manner, one can cite the case of KFC, which in 2018 had to deal with major supply problems that resulted in a shortage of chicken in its restaurants in the United Kingdom and the closure of more than two-thirds of its locations. Although the company had little information about the problem at the outset, it addressed it head on, acknowledging it publicly and explaining how it would be solved.
A similar argument can be made for Samsung and the way the company, in 2016, handled a major crisis when its Galaxy Note 7 smartphones began to explode due to a battery problem. Airlines at the time decided to ban passengers from bringing their phones on board, but Samsung took responsibility early on, transparently, even though it still did not know the precise cause of the problem. Once this was later identified, the company clearly communicated its solution.
Examples of Crisis Management
If, in the previous lines, we have mentioned some virtuous examples of Crisis Management limited to communication, we are now going to present you with some case studies that, more generally, can be useful for you to understand how to deal (or how not to deal) with moments of crisis.
Case studies
One of the most famous case studies when it comes to Crisis Management and, specifically, mismanagement is the one involving the Cambridge Analytica scandal that, in 2018, hit Facebook. Let us briefly summarize the issue: earlier that year, it was revealed that Cambridge Analytica (a British consulting firm) had collected the personal data of 87 million Facebook accounts without their consent and used it for political propaganda purposes. Mark Zuckerberg kept quiet for days before publicly admitting that mistakes had been made. The delayed response and the steps taken to respond to the crisis, which were deemed inadequate, created serious reputational damage for the social network, which lost the trust of large numbers of users.
A virtuous example of Crisis Handling, on the other hand, is that of Odwalla, a natural fruit juice company. In the 1990s, due to a failure to pasteurize, an outbreak of E. coli occurred, resulting in the death of a child. Odwalla immediately took responsibility for what happened and apologized for its mistakes, and also made significant changes in the way it did business. Consumers appreciated the company’s conduct, which managed in this way to communicate its positive values despite the tragedy that occurred.
Crisis Management Tools and Resources
As you must have realized by now, there are many actions to be taken to prevent and manage crisis situations; fortunately, however, modern technologies and new software available on the market provide valuable help to Crisis Managers and companies in general.
Supporting technologies and software
One of the most useful tips for dealing with crisis situations in the best possible way is to use real-time work management software: by automating and monitoring workflows in real time and keeping the work team connected and up-to-date on the state of things, you have the ability to detect signs of crisis earlier and take timely action to make the right adjustments.
Conclusions and recommendations
We have come to the conclusion of this guide dedicated to Crisis Management, but one more thing needs to be clarified: we have repeatedly (including in the previous section) stressed the importance of taking early action to solve the problem as soon as possible, but this recommendation should not lead you astray. The important thing, in fact, is not to get out of a crisis early (or rather, not only), but to get out of it better. We can only conclude the guide, then, with this wise reflection by Paul Graham:
“When a crisis hits, don’t think about how long it will take you to get out of it; rather, think about how you will come out of it better than before.”
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