November 2004 Mfg.Trust

Mfg.Trust is a monthly feature of the
            NCMS InfraGard Manufacturing Industry Association
                        Infrastructure assurance for manufacturers
                                    Powered by NCMS.

This month – CRISIS MANAGEMENT - PART TWO
BUILDING CAPABILITY TO RESPOND

See the Resources Page for this Story 

Editor's Preface:

Information technology (IT) has become crucial to many organizations in ways that would have been unimaginable 25 years ago. Integrating IT has had many benefits for manufacturers but there are also added risks to be managed.

What happens when one of these “risks” turns into a crisis? If a computer virus, server crash, or hacker intrusion threatens to damage your credibility with customers and suppliers, how can you save your reputation? Companies must prepare for “when” rather than “if” a crisis will occur. Planning before a crisis can help prevent damage to a company’s reputation and fiscal health.

This is the second article in a two-part series on Crisis Management. This month we will discuss what you can do to achieve a significant reduction in risk to your manufacturing business environment through use of disciplined planning and preparation for incontrollable events. Theses practices are drawn from current models used in the automobile manufacturing industry and public utilities, where significant reductions in risk has been achieved.

Any organization can benefit from an examination of risks BEFORE a crisis occurs. NCMS offers a “Critical Asset Vulnerability Assessment” which can help companies mitigate these risks.

As usual, the Resources page that accompanies this article offers information for additional study. See http://trust.ncms.org (Publications Index tab). Further, NCMS offers an excellent Virtual Learning Series in Crisis Management by David Cid. You can learn more at http://products.ncms.org/critical_incident_management.htm

Editor

BUILDING CAPABILITY TO RESPOND

Overview

Automotive companies have learned that it is important to speak with one consistent voice during a crisis. This is accomplished by creating a crisis management center where executives can share in the same facts at the same time and then coordinate the response. Crisis management centers vary and may not even be literal physical spaces. Video conferencing and telephone lines can be used to create virtual crisis centers to link teams across continents. Whether physical or virtual these centers have a common purpose – to address “critical incidents.”

The team brought together at the Crisis Management Center includes personnel in three roles:
1. Those who must research and learn the facts;
2. Those who must make decisions about the facts;
3. Those who must communicate the decisions.

1. Plan to Research the Facts

Last month’s lessons point to the lack of accurate information at the beginning of many crisis situations. In a crisis the leader needs methods for getting accurate facts, often on unusual issues. Preparation to address this problem may have multiple layers. Crisis management centers are typically staffed with the right expertise for a variety of situations. They are usually organized to keep current contact information on external experts. But, it is also worthwhile spending some time (in advance) analyzing the impact of disaster on the business to unearth hidden dependencies or risks.

Business continuity plans identify such dependencies, and identify sources of expertise. A business continuity plan is a common-sense document which identifies functions and processes that are critical to the business. Operational and communications contingency plans are designed to deal with the potential failure of one or more of them and how key stakeholders will react.

Organizations with business continuity plans will be in a better position to minimize the business impact and financial damage from a disaster. Executives sometimes find that the process of developing these plans has an additional benefit. Their organizations are more sensitive to possible crisis situations that could disrupt the business and affect its operating expenses, profits and overall growth. As a result their managers respond more rapidly and effectively to head them off.

2. Plan to Make Decisions About the Facts

Last month’s lessons point out two important aspects of crisis decision making:

• Provide a place where all the executives can share in the same facts at the same time and then coordinate the response
• Consider objective, outside expert help as part of your plan

In the rare case where the facts are well known to the leadership, the executive suites and boardroom may offer the privacy and ideal facilities for managing the crisis. More commonly, when substantial fact-finding is required, and the state of knowledge is changing rapidly, a crisis management center is a better setting. The essential elements of the crisis management center are access to topical experts, good communications, and a common meeting space to share in the same facts at the same time and then coordinate the response.

Leaders are often emotionally invested in their business. Objective, outside help from a public-relations firm that specializes in crisis management is an important option to maintain in any crisis, a card to be played when necessary.

The crisis management center is emphatically NOT the “operations center.” The operations center serves a different, important purpose.

For example, the CEO of a utility company shouldn’t make decisions in an operations center where engineers and operators are trying to coordinate service restoration during an outage. Crisis Managers and Emergency Managers require a different set of skills than upper management. Each has a different role in the situation. Each needs a different space to fix their part of the problem. Otherwise, they interfere with each and make a crisis worse.

3. Plan to Communicate the Decisions

As is clear from last month’s lessons, the point of the crisis management effort is COMMUNICATING, by leaders. The supporting team and center simply provide the right facts and the best advice to the decision maker in a situation where there may initially be little trust.

Communications address the needs of the public, the employees, and the shareholders. The company must speak with one clear and convincing voice. Outside help can be effective in forming the message.

One expert describes crisis management as “an opportunity for the CEO to succeed or fail, while the whole world is watching.” Crisis management is a test of the quality and character of leaders as much as it is a test of their skill and expertise.

XYZ Company, a Quick Case Study

XYZ Company is a fictitious entity invented here to show specific measures that might apply to your company. XYZ company is not too large, not too small, lean, running fast, and typical of many other American manufacturers. XYZ appoints a crisis management planning team, with some outside help, to examine their situation.

XYZ has strong, talented leaders at many levels. Many of these skilled managers believe they can “handle anything” on the fly. They are probably right. Yet, viewed differently, the absence of that manager is a single point of failure. If he or she is REALLY important, then it’s a BIG single point of failure. In general, the company is not so large that there are many levels of relief for this special talent. How well XYZ survives the next crisis may depend on how robustly they are prepared to manage disruptions to uniquely skilled middle management.

By comparison, XYZ’s operational forces are in tolerably good shape and spread out over multiple facilities. Business continuity and emergency response plans, although far from perfect, are being put in place at XYZ with modest success. On the first round the risks are normalized and ranked across the company and the initial plans are established. Usually, management learns that some overlooked processes are very important to survival. Stated conversely, they learn that the failure of these processes, which are humming along reliably and unnoticed, will really hurt.

The subsequent updating of each plan and testing of major plans engages each business process owner in a thoughtful analysis of underlying dependencies and external threats. By now they are more aware. The last emergency, a small spill that caused a big evacuation, a huge cleanup mess and more media attention than anyone wanted, helped raise awareness about this need. Positive traditions established through quality programs contribute to readiness, a nice bonus.

The Crisis Management Planning Team comes in with the following recommendations:

• XYZ should establish a comprehensive (operations, facilities, legal, IT, HR, finance, communications, security, medical, etc.) crisis management plan, and ancillary plans (e.g.: mass casualty plan, plans for selected subsidiaries). They should quiz important suppliers.
• XYZ should establish a crisis management center, modestly outfitted and frequently exercised. The point is not spending on an elaborate facility or fancy gear, but raised awareness through exercises.
• XYZ should analyze, identify, and provide for access to special expertise (internal or external) that may be needed to replace midlevel managers in a crisis. Results here may be best implemented through slow organizational change, rather than identifying outsiders.
• XYZ crisis management plan should be exercised frequently, and used in less than full crisis situations, so that the managers retain familiarity with their requirements and can contribute improvements.

Conclusion

Kroll, Inc., the well-known crisis management consultants, point out that on average a large company is hit by a crisis once every seven years. Crisis events may include: workplace violence, major infrastructure failure, natural disasters or fires, leadership failures, loss of life, corporate governance, or technology failures. One of these events may await us. We will fare better if we prepare now.

Every aspect of crisis decision making is improved by a plan and preparation.

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