When a company or organization is under fire due to a crisis, it can be hard to look beyond the headlines. Negative coverage can feel like a relentless assault, placing stress on leaders, employees and relationships with customers and communities. Years of work building trust and reputation can be undone quickly, and often there’s a media “pile-on” effect, with one negative story after another.
Painful as negative coverage may be – whether it’s a brief eruption or a sustained barrage – it’s important to look beyond the headlines to truly understand and address the root causes of a crisis and the cascading effects that may follow.
Almost all crises have follow-on “echo effects” that can have profound ramifications for the businesses or organizations involved. Anticipating these effects as part of crisis planning and addressing them quickly and effectively as part of crisis response are among the most important responsibilities of crisis managers.
Here are four common “echo effects” of a crisis and how they further impact your company or organization:
- One of the most obvious cascading consequences is litigation, the almost inevitable result of any crisis. In our litigious society, the smoke may not have cleared – sometimes literally – before plaintiffs’ attorneys will begin enlisting clients and filing lawsuits against any potentially responsible parties. Knowing that litigation is highly likely, crisis managers must work closely with legal advisors to balance potentially conflicting imperatives – being transparent and defending the company’s reputation on the one hand, while bolstering its legal position and avoiding potentially damaging disclosures on the other. Determining how this delicate balancing act will be handled should be discussed before a crisis strikes.
- In many crises, employees can be profoundly affected. Some may be involved in a chain of events leading to the crisis, creating feelings of guilt or anxiety. Others have to clean it up or make it right, which also can cause trauma. No matter how far removed from the circumstances, crises can cause employees to question their commitment to the organization and their belief in leaders, leading to retention issues. Opportunistic competitors may even take advantage by conducting talent raids to peel off employees whose confidence is wavering.
- Crises that attract media attention also attract attention from regulators, who may have legitimate interests in understanding what went wrong or who simply may be looking for a grandstanding opportunity. Investigations by local, state or federal regulators often follow in the aftermath of a crisis and usually generate media coverage of their own, compounding the reputational damage.
- Along with talent, capital is the lifeblood of any business. Public companies have to worry about the reaction of shareholders and financial markets in a crisis, and private companies are not immune. Most companies have investors who put up capital to get a business started or to finance its operations or expansion, and their confidence may be shaken. Lenders could require more collateral, cancel credit lines or even call in their loans. Spooked suppliers may change their payment terms or cut off supplies of components, services or materials. For these reasons, finance departments and supply chain managers need to have a seat at the table for crisis planning and response.
The bottom line is that the acute symptoms of the crisis and media coverage of it, no matter how harrowing, represent the tip of the iceberg. The cascading effects of a crisis on a company’s reputation and relationships with employees, prospective employees, regulators, investors, lenders and suppliers may have far more serious impacts, which is why smart crisis planners need to prepare for these aftershocks.