Compiled by Salma Mgandi Chizi
In times of crisis, normal management processes may be abandoned to some extent, in favor of reacting quickly. However, the speed of response has to be proportionate. As Warren Buffett said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
The outbreak of Covid-19 provided myriad examples in which organizations have shed public goodwill in the pursuit of financial stability. The short period after the closure of non-essential services saw many companies scramble to consolidate in the face of uncertainty. These knee-jerk reactions have often embittered potential consumers against them, and the optics of such decisions serve to make the companies seem undignified. The significance of a little patience has never been so obvious.
Individuals who are used to making big business decisions may nonetheless be unsuited to crisis management. With stress building, they can make drastic, uninformed, and precipitate decisions. Consequently, the ultimate decisionmaker needs breathing space to control their physical responses and make rational decisions. Otherwise, the solution conceived could end up creating more problems than it resolves.
Behavioral and cognitive bias
When a crisis occurs, behavioral and cognitive biases often come to the fore. Behavioral biases are all too common, but if we know what to look for, we can stop them in their tracks. Behavioral biases – or behavioral influences – can display themselves in counterproductive ways. Here are a few common influences to look out for in yourself and others;
i. Overconfidence – This is a judgment of performance compared to others and occurs when individuals believe themselves to be better than others, or “better-than-average”. It creates an illusion in individuals that they are right – more worthy, better informed, more powerful – than others. By this reasoning, they believe that they are more justified in taking higher levels of risk or persisting in actions that can – in the worst-case scenarios – defy logic.
ii. Magical thinking – Gambling is symbolic of both magical thinking and the illusion of control, both of
which are sure ways to make the wrong decision. “If I ignore it, it will go away” or “if I want it to stop, it will
stop”. This used to be thought to be the preserve of children, but a surprising number of adults also engage in magical thinking. Magical thinking is symptomatic of compulsive gambling.
iii.The illusion of control -This is a bias whereby individuals tend to underestimate future uncertainty
because of a tendency to believe they have more control over events than they do.
iv. Misleading experiences – These are memories or experiences which seem similar to the present situation, but are not. Research indicates that this contributes to almost half of all flawed decisions. This association with the past tends to result in a misreading of the patterns of events or context of the decision, and an emotional reaction that creates a flawed response.
v. Misleading pre-judgments – These are past decisions that influence current decisions. These can cause decision-makers to become fixated on a particular course of action irrespective of context. They can also create distortions in thinking which causes decision-makers to commit to the wrong plans.
Crisis management teams (CMT)
One step an organization can take to better prepare itself for potential crises is to assemble something called a crisis management team, also sometimes known as an incident management team, crisis response team, or corporate incident response team. The role of the CMT is to avoid excessive reliance on one individual or a group of like-minded individuals.
It should be comprised of employees with a wide range of expertise, experience, and disciplines. Ideally, the CMT should be set up well in advance of any crisis and should game various scenarios – ranging from the likely (fire, flood, new competitors) to the highly unlikely.
Decisions made by the CMT will form recommendations to the ultimate leadership and final decision-makers. It should operate on a basis of majority rules decision-making. This rule is set to ensure all required actions are taken quickly, and poor or untimely decisions are not implemented. Members of the CMT should operate in an open and honest environment, speaking up even if their viewpoint may contradict specific expertise within the team. But what are the benefits of majority rules decision making.
i. prevents behavioral and cognitive biases from unduly influencing the decision-making process.
ii. prevents decisions being ruled by emotion or panic.
iii. avoids deadlock and stagnation.
iv. ensures compliance with the ultimate priority of crisis management (the safety of employees, contractors, e.t.c)
v. draws on the knowledge and experience of many, rather than the limited reasoning capability of one.
vi. allows the team to suppress well intentioned political interference through strength in numbers.
vii. ensures the team remains focused on the evolving and changing impact of an event.
viii. acts as a counter-balance to the antics of bullies’ intent on forcing their views and opinions on others.
One step an organization can take to better prepare itself for potential crises is to assemble something called a crisis management team, also sometimes known as an incident management team, crisis response team, or corporate incident response team. The role of the CMT is to avoid excessive reliance on one individual or a group of like-minded individuals.
Business continuity planning (BCP) in crisis If a crisis escalates, either due to a failure in the organization or due to external factors, it will be necessary to prepare a new process. Here a BCP will help minimize disruption.
When a crisis will undoubtedly cause significant disruption to an organization, the CMT should be developing or reviewing a BCP, to help minimize the disruption. To do this, the CMT needs to identify the critical functions and processes that are necessary to keep the organization running. This part of the planning should be conducted in the earliest stages and is part of a business impact analysis phase that will attempt to establish how much the business stands to lose, not only financially, but in terms of the effect on its workforce and the impact on its brand.
Leadership and decision-making actions Responsibility for decision-making rests with the board of directors or controlling body, and it is they who must be the final arbiters with the CEO as the ultimate decision maker. Conversely, they must take into account the decisions and recommendations of the CMT together with any dissenting opinion as part of their considerations. Leaders must act, they cannot vacillate.
In a crisis, time is a precious resource, and wasting it on indecision can prove fatal. A leader must therefore be able to see the full scope of a decision and to gain this vantage point, a leader must be provided with complete information. The role of leadership in a crisis is therefore to:
i. clarify the decisions to be made and to make them.
ii. identify the composition of the CMT and give it the authority it needs.
iii.support the forum for rapid debate to take place – the leadership must make it clear that managers have a voice but not a vote.
iv. identify who should have a voice, including relevant stakeholders and experts who will be involved with, but not be part of, the CMT.
v. identify and brief those who will be responsible for implementing decisions.
Once decisions are made, the senior management can quickly talk directly to line managers – who were not observers of the CMT but who will be executing some decisions to clarify the actions to be taken, the timelines involved, and the relevant accountabilities.
Senior management must also make themselves available to answer any questions line managers have about what comes next. This not only saves time by removing a communication step, but it can also enhance the potency of the message itself.
Conclusion
Every incident is an opportunity to test the response process and to identify areas that need improvement. The processes should be documented and flaws and mistakes identified. Any near misses encountered during the crisis should be carefully reviewed and lessons learned from them implemented in the
organization.
Clearly, in some cases, a lot of factors are outside the organization’s control but even in the international Covid-19 crisis, there were many opportunities for businesses. If the crisis is successfully weathered, this can improve morale and enhance wellbeing within the business. It can also enhance the BCP, help raise risk awareness and also improve and enhance systems and processes within the business.
Badly handled, the crisis can be compounded, dragging the organization deeper into the mire of failure. In this scenario, the opportunity to learn and change has been lost and management failure has cost the business and all its stakeholders dearly. It may even cost the whole enterprise.
