Facing a crisis is daunting for any founder, there is no question about that. However, issues are exacerbated when they are completely unprepared to handle them, regardless of whether they are triggered internally or externally.

It is key that companies cultivate a sense of preparedness, and have a practical strategy to follow whenever crisis strikes. This can significantly mitigate the damage — reputationally, financially, and in every other way. In this article, we will share some insights to help you do so.

What is a crisis?

In simple words, a crisis happens when something goes wrong, causing negative reactions from the public, media, or other critical stakeholders connected to an organization. This is when a problem gets big enough that it can harm people’s perception of a business or even the company's finances.

On the one hand, the reason can be outside of a company’s control. Examples include supply chain disruptions, the ongoing energy crisis, skyrocketing inflation, and constant environmental issues caused by climate change, to name a few. In this case, you just need to be thoughtfully prepared.

On the other hand, there are many crises that start inside an organization. Reasons can vary: production mistakes and subsequent recalls, low-quality products, a toxic culture, and much more. This is the type of crisis we’ll focus on here.

Three main drivers of organizational crises

From our experience, there are three key reasons why an internally-triggered crisis may happen.

Disgruntled users/customers

When Uber decided to try to capitalize on a political situation in New York, many unhappy users proceeded to delete the app and encourage others to do so. This quickly became a viral campaign, #DeleteUber, and is a staple example of what happens when a scandal enters the public field, something easy in the age of social media.

Controversial statements by a company’s speaker (even if not official)

With many company executives posting their thoughts on social media, it can be easy for a statement to backfire.

Ask Dave Clark, former CEO of Amazon’s consumer operations segment, whose Twitter feud with U.S. political figures sparked substantial backlash. There is the case of Paddy Cosgrave, who had to step down from Web Summit after his statements related to the Israel-Hamas conflict, and that of Christina Jing Qu, whose videos condemning employees unleashed a wave of criticism reminiscent of when Travis Kalanick was caught on camera scolding an Uber driver. These examples illustrate how little it takes to ruin a reputation.

Operational or technical issues with the company’s products

Amazon’s working conditions, the safety pitfalls related to Boeing 737 MAX, the side effects caused by the AstraZeneca and Johnson and Johnson vaccines and the deaths associated with Tesla’s autopilot feature have all tarnished the reputation of the firms involved.

Yet, the damage does not stop there. For example, Nestlé, which gained plenty of detractors due to its aggressive marketing of its infant formula over breast milk, has faced a boycott from many buyers since 1977. Can you imagine how much this translates to economically? How many more customers could the firm have dutifully earned in almost 50 years?

Five steps to handle a crisis

React fast

In the first few minutes after the incident happens, it is key to promptly inform investors, the board of directors, and any other critical stakeholders about what is going on.

This is of particular importance if the crisis was triggered by an external factor. Send emails, communicate through messaging apps — you must ensure that the message reaches everyone to avoid being caught off-guard. Everyone needs to be in the loop about what’s happening as soon as possible.

Issue an official statement

1-2 hours after your internal stakeholders have been informed, a public appeal needs to be communicated. The main thing here is that the message must be uniform — the press release, your website, and all the social media pages of the company need to communicate the same information.

Make a call if applicable

In 2016, as Disney’s CEO Bob Iger was preparing to inaugurate the much-anticipated Shanghai Disneyland Park, he learned that a kid had died after being attacked by an alligator at the Florida property.

Iger, who is also a father — and a grandfather — went above and beyond to support the boy’s family during this extremely painful time. He personally called the father, who asked him to do whatever was on his hands to ensure a similar situation did not happen again. In 24 hours, Disney had installed security fences around lagoons and other areas of the park to protect visitors.

This is an extraordinary example of how empathy can help a company sort through a crisis. In this case, Iger’s genuine concern for the family averted what could have been a catastrophic situation for Disney, and even for his career as an executive.

Coordinate your actions

To keep problems from aggravating due to poorly synchronized efforts, you need to choose one speaker who will be responsible for communicating with the public. Additionally, you must agree on a schedule of publications in social networks and media, a single channel for collecting information, and establish a crisis team.

Sorting through eventualities is not an easy feat, so get ready to ‘roll up your sleeves’ and work seven days a week to clean up the mess as required.

Launch an investigation

Any crisis is a consequence of problems that were previously present within the company. In other words, the issue was there before, and it was overlooked. Your job is to find out what happened — whether it was a lack of structure, a loss of focus, something that slipped through the cracks, or else. This will give you clarity and visibility to prevent this from happening again.

What’s the role of the founder during the crisis?

As a cardinal rule, the founder and CEO is the key speaker for the company. Therefore, when a crisis strikes, they need to continue to be the main face of the organization — the one that inspires trust and confidence that issues will be resolved.

For example, when Virgin Galactic had an accident that resulted in a pilot’s death, founder Sir Richard Branson flew immediately to Mojave, the site of the crash, and took responsibility. This helped palliate the negative impact of the incident on the company.

We recently worked on a case in which a startup announced a search for specialists to join their team. More than 400 people responded to the post, completed a test task, and realized that no one got an answer. As a result, the candidates found the founder’s contact and wrote them letters threatening to sue.

What did we do?

First, we wrote a personal letter to everyone and sent it on behalf of the founder. Then, the founder personally called those who were more angry about the whole thing, and clarified the situation. Due to this proactive stance, the crisis has now been resolved and was kept from going public. Many candidates mentioned they did not expect a call from the founder, and were pleasantly surprised by this approach.

Additional tips to avert crises and minimize damages

Preparation

The best way to prevent a crisis is to be well-prepared for it. In a study, the Institute for Crisis Management found out that only 14% of all crises faced by businesses are actually unpredictable. This means that the remaining 86% can be foreseen and, if not forestalled, then at least mitigated by being ready for them.

Training

Investing in empowering leadership and staff through media and communication training equips them to respond swiftly and effectively during crises. This preparation not only enhances their ability to convey messages clearly but also helps mitigate potential fallouts as well as maintain trust with stakeholders.

Partner with experts

Partnering with PR agencies and retaining relevant legal counsel ensures that your organization is well-prepared for potential crises. This proactive collaboration provides you with valuable insights and strategies, allowing you to navigate challenges effectively and safeguard your reputation.

Summary

Whether they stem from internal or external factors, no company is immune to crises. Operational issues or controversial statements from executives can, in a split-second, land a firm against the ropes.

To mitigate damage, companies must cultivate a sense of preparedness. And, once a crisis happens, it must establish swift communication with stakeholders, issue a compelling public statement and centralize communication through an official channel to ensure an efficient and uniform response.

As the public face of the company, founders and CEOs must take a leading role in crisis management, as this builds and strengthens trust. Additionally, proactive measures such as training staff and partnering with PR and legal experts are recommended to be better prepared for unfortunate events.

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