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Why Some Companies Emerge Stronger and Better from a Crisis
By Ian I. Mitroff AMACOM Books
Copyright © 2005 Ian I. Mitroff
All right reserved. ISBN: 0-8144-0850-8
Chapter One
The Crisis Society: The Rise of the Abnormal The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise to the occasion. As our case is new, so we must think anew. -Abraham Lincoln, signing the July 2, 1862, Morrill Act of Congress providing for the state land grant colleges
The Argument
1. Over the last 24 months, there has been a precipitous growth in the sheer number of major crises. Even more ominous, the number of crises has exceeded that of any previous period in the last twenty years.
2. The number of crises not only is growing rapidly but, of even greater concern, is the fact that the rate of increase in the number of crises is increasing as well. Furthermore, the time, and even the geographical distance, between crises is shrinking precipitously.
3. In addition to the growth in the number of major crises, the extent and pervasiveness of these crises are especially troubling. No major industry, no institution, no segment of society has been spared. Every industry, virtually every institution, and every level of society has experienced major crises. We have become a crisis-plagued society. Our deepest fear is that we have become a crisis-prone society-that is, that the potential for experiencing large-scale major crises has become a permanent and irreversible feature of modern societies.
4. Something even more ominous is afoot. The nature of crises-that is, the types of crises and their qualities-has changed dramatically. Crises have gone from "normal systems accidents"-that is, unintentional system breakdowns due to the overwhelming complexity of modern technologies (e.g., Chernobyl)-to the deliberate, intentional breakup of organizations, institutions, and even society itself (e.g., 9/11). We have gone from normal systems accidents to abnormal systems disasters-that is, to planned catastrophes.
5. Normal systems accidents have also changed dramatically. Twenty years ago, normal accidents were mainly confined to single industries. Normal accidents mainly occurred within a single company or industry. Now, because of the extreme coupling and interdependency of modern societies, normal accidents now occur between different industries and segments of society.
6. Traditional management is poorly equipped to handle intentionally planned catastrophes. It can barely handle normal systems accidents. Indeed, traditional management is a big part of the problem-it is not the solution. As a result, a radically different approach to crisis management (CM) is desperately needed.
7. The abnormal has become the new normal state of affairs.
Long before she got to her office door, Mary Douglas, CEO of Rural Books, could hear that her phone was ringing nonstop. It had a nasty and ominous sound. As soon as she opened her office door, Mary saw that her answering machine was lit up like a Christmas tree. It was filled to capacity. She had already had sixteen calls, and it wasn't even 6:30 a.m.
It was not a good omen. It was, in fact, the beginning of a long nightmare.
A Major Crisis at Rural Books
Headquartered in Montana, Mary had established Rural Books about ten years ago. RB, as its loyal fans called it, produced a highly successful line of field books and guides for identifying and cooking wild fruit, nuts, berries, and the like. Both the books and the guides were extremely popular with rural and city folks alike.
On any weekend, thousands of people could be seen walking in the woods with their trusted RBs at their sides. The books and guides were not only lightweight but also extremely easy to carry and to use. For instance, carrying straps were attached to the bindings of the books so that they could easily be slung over a person's shoulder. They were also designed and manufactured to hold up to extreme elements. Most of all, they were organized around user-friendly pullouts. They not only showed which things were edible and tasty but where they could be found as well.
RB's books were especially known for their clear and simple pictures of the wild foods that were safe to eat versus those that were unsafe. The safe foods were clearly labeled and located on one page while those that were unsafe were located on a completely separate page. The pages even had different colors: green for safe and red for dangerous or unsafe. In this way, RB helped to ensure that there would be no confusion whatsoever. In the ten years of RB's existence, no one had ever suffered any illness from following their recommendations.
Mary picked up the phone. Robert Turnbull, Senior Executive VP and the head of RB's East Coast division, was on the line. He was half shouting and mumbling at the same time. There were unmistakable signs of stress and panic in his voice. Though he was typically calm and easygoing, this was a significant departure from his usual behavior. Mary had in fact never heard him sound more distressed in the five years that they had worked together.
"Mary, have you seen CNN this morning? They are running a story linking us to the deaths of a family of four. The parents were in their early thirties; the kids were just two and three. CNN is also reporting that we are responsible for the serious illness of scores of others. At this time, no one knows the full extent of the injuries. It could be in the hundreds.
"CNN is saying that people became seriously ill after eating poisonous berries. They are claiming that we mislabeled some of the pages in our books. They are also saying something that makes no sense at all. They are saying that it's a case of product tampering. Hell, we don't make food or pharmaceutical products. What is there to tamper with?
"That's all I can tell you at this time. I don't know anything more myself. I have our production and security people checking into it, but what do we say and do in the meantime? I'm getting calls from CNN, the Wall Street Journal, the New York Times, our investment brokers, everyone. It's complete pandemonium here. They are asking tough questions that I don't have the answers to like, 'Was it a terrorist group, a group of disgruntled employees? Can you in fact rule out any of these possibilities at this time? Was it an intentional act of sabotage? Are the reports of labor troubles at RB true?' What do we say and do? I need help fast!"
Mary's mind was reeling. All she could do was mumble, "I'll get back." RB was prepared for fires and explosions that could burn down its offices and ruin its production facilities, but not for anything like this. The possibility of product tampering, let alone terrorism and disgruntled employees, had never crossed Mary's mind. And yet, she recalled that radical environmental groups had recently been making claims that RB was endangering the environment because of all the people who were trampling-or as they put it, "loving to death"-pristine areas. A few had even sent threatening letters to RB, but she had quickly dismissed them as cranks. She recollected that local militia groups were making threats as well because too many people were wandering too close to their compounds.
"Oh my God," Mary exclaimed, "What am I going to do? I don't have the foggiest clue as to where to begin."
Why RB Was Unable to Meet the Challenges of a Major Crisis
Because Mary and her top team had never received the proper training in crisis management (CM), they were unable to think outside the box. As a result, they were unable to imagine and anticipate the particular types of product tampering that were directly applicable to their business. For instance, were the labels of the foods that were safe to eat versus those that were unsafe intentionally or accidentally reversed when the pages were typeset? Either case-that is, intentionally or accidentally reversing the labels of the pages-is a form of product tampering that applies directly to the book business. Altering key information in a product when this information is crucial to the safety and the well-being of people is a major form of product tampering. In other words, product tampering is not confined to the alteration of food or pharmaceuticals.
In addition, if Mary and her top team had received proper training, they would have been especially prepared for the strong and often overwhelming emotions that are a critical part of every major crisis. Events like 9/11, Enron/Andersen, the Catholic Church, Martha Stewart, NASA, and a seemingly endless series of crises in recent years demonstrate clearly that crises exact a severe emotional toll on those who experience or are part of them.
The costs of crises are severe not only in terms of dollars but also in terms of emotional distress. Those who have been through major crises often use the exact same words to describe their experiences as do soldiers who have been in battle and have suffered severe trauma.
If Mary and her team had faced the challenges, and hence, learned the lessons that successful crisis leaders have to teach, then they would have been able to respond faster and better and thereby have lowered substantially both the economic and the emotional costs of the crisis or crises that they were facing. This does not mean that RB would never experience a major crisis at all. In today's world there are no such guarantees. On the contrary, every organization is virtually guaranteed to experience at least one major crisis in its history. It merely means that Mary and her top team would have recovered sooner and with far fewer costs.
We're going to use the example of RB throughout this book to illustrate what Mary, her top executives, and, indeed, her entire company could have done differently both to have anticipated and to have prepared for major crises of any kind. (There is no shortage of other examples from the food industry that could have been used. For instance, all of the copies of the April 2004 issue of Southern Living magazine had to be pulled from the shelves because of a defective recipe. When mixed as directed, the cooking ingredients set off a highly explosive fire.)
The first thing that Mary and her company should have done is understand what is fundamentally different about today's world, that crises are literally built into the fabric of modern societies.
The Failure of Conventional Ways of Thinking
America's organizations and institutions have become veritable breeding grounds for crises of all kinds. It's obvious, looking at (just to name a few) Ford/Firestone, Enron/Andersen, the Catholic Church, American Airlines, WorldCom, Martha Stewart, the explosion of the Space Shuttle Columbia (NASA), or mad cow disease, that conventional management is of little use in either coping with or preventing major crises. Indeed, conventional methods are largely responsible for causing major crises. (In brief, conventional methods are too "rational" to anticipate and to cope with "abnormal states of mind.") And if this weren't bad enough, then 9/11 shows that whole societies are now vulnerable to new forms of major crises as well-that is, state-sponsored terrorism.
Until quite recently, businesses thought of accidents as either "natural" or "normal." Natural disasters-like fires and floods- have been around forever, and most companies know how to use risk-management techniques to protect themselves against them. In contrast, in his important and influential 1984 book Normal Accidents: Living with High-Risk Technologies, the distinguished sociologist Charles Perrow defined normal accidents as unintentional failures of systems because of their inherent complexity. Modern technologies have become so complex that the potential for large-scale industrial catastrophes is literally built into their basic design and everyday operations. Industrial disasters like Three Mile Island, Chernobyl, Bhopal, and Exxon Valdez were not random aberrations but normal system-overload and malfunction problems.
Preparing for normal accidents is challenging, to put it mildly. Nonetheless, over time many companies have developed coping strategies, such as regularly getting together designers, operators, and maintenance managers of complex systems to compare notes. If the operators are experiencing conditions that aren't in line with the designers' assumptions, then a normal accident is in the offing.
But in the last few years, a new and more ominous category of crises has emerged. I term these "abnormal accidents." These are intentional accidents that are the result of deliberate acts of evil. They include bombings, kidnappings, cyberattacks, cheating, stealing, manipulation of the truth, and so on. These are accidents caused by betrayal and sabotage, whether by employees or outsiders. Especially since 9/11, it is apparent that preparing for these sorts of events is no longer something that can be put off.
The key difference between normal and abnormal accidents is as follows: normal accidents represent the unintentional breakdown of complex technical and organizational systems. In contrast, abnormal accidents represent the intentional breakup of complex technical, organizational, and social systems. (See Table 1-1 for a more complete listing of the differences between normal and abnormal accidents.)
While hardly unheard of in the past, the number of abnormal accidents has risen sharply in the past ten years. Indeed, my analyses suggest that there were at least as many abnormal crises in the past ten years as there were normal. (See Figure 1-1; Appendix A provides a summary of these events.) In addition, the impact of Enron/Andersen, and 9/11 (both of which were abnormal accidents or had strong elements of the abnormal) now rival natural disasters in both their scope and their magnitude. (As one would expect, most major crises have both normal and abnormal elements.) To put it mildly, this is a "first" in human history.
It isn't as easy, of course, to prepare for abnormal accidents as it is for normal ones. It is difficult and distasteful to imagine that fellow human beings would want to destroy businesses deliberately, sometimes with the collusion of employees, and might even be willing to kill themselves in the process. This notion threatens to destroy our deeply held beliefs about people, society, and business. Thus, companies such as RB are inclined to deny and to disavow the size and the scope of abnormal accidents. Even a year after the World Trade Center was brought down, the vast majority of the executives that my colleagues and I interviewed were not willing to consider the possibility of a similar attack on their offices or factories.
Continues...
Excerpted from Why Some Companies Emerge Stronger and Better from a Crisis by Ian I. Mitroff Copyright © 2005 by Ian I. Mitroff. Excerpted by permission.
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