Crisis Management Case Studies

From the book The Crisis Counselor by Jeffrey R. Caponigro, Copyright 2000. Published by Contemporary Books, a division of NTC/Contemporary Publishing Group, Inc.

The hospital’s president and CEO had earned the trust and confidence of her employees since she became the chief executive five years ago. She was known best for her knowledge of the health-care business, her outstanding judgment, and particularly the warmth and sensitivity she showed all hospital employees.

She established three employee advisory panels from which she sought suggestions, and she would often walk the hospital floors to ask how things were going with the employees and medical staff. Her staff memos and email messages were extremely popular because of their candor, honesty, and humor.

Unfortunately, the president’s assistant had difficulty meeting the CEO’s high standards and eventually was terminated. The disgruntled employee contacted the local daily newspaper and accused the CEO of embezzlement, harassment, and discrimination. A campaign was conducted by the disgruntled employee to seek the termination of the CEO through community and board action.

The CEO took a temporary leave of absence while an investigation was conducted by the board of directors. In the meantime, a group of first-shift employees met after work to plan its own campaign to register its strong support for the CEO. More than 80 percent of the employees and medical staff signed a “show of support” form for the CEO and a rally was held in the parking lot.

The hospital’s executive vice president and COO, who was named the interim CEO during the investigation, kept employees and medical staff informed about the situation through memos and email messages. Employees were self-motivated to write letters to the editor of the local newspaper and sought additional support from local political officials.

The investigation soon ended. The CEO was reinstated, and the community gained a better appreciation of the strong support she had earned as the CEO. She is now in great demand as a speaker on management, leadership, and employee communication and is widely recruited for other CEO positions within the health-care industry.

Three Lessons to Learn
We can learn the following three lessons about healthy businesses from the hospital’s crisis:

• Work hard to establish goodwill with your employees before a crisis occurs. The hospital’s president and CEO survived the false accusations and potential damage by previously establishing a high level of goodwill with her employees. The most important factor in surviving a crisis is, as we’ve discussed, the level of goodwill you’ve earned with your key publics before the crisis occurs. If the CEO hadn’t previously earned her strong base of support, she would likely have been terminated by the hospital’s board.


• All businesses are vulnerable to negative actions by current and former employees. Every business shares the same vulnerability — the potential that some current or former employees will become disgruntled, frustrated, and dangerous. Therefore, all businesses should plan for this eventuality so that they can anticipate and react to these problems before they turn into crises.


• Communicate openly and honestly with employees during a crisis. The hospital’s executive vice president and COO, who was named interim CEO during the investigation, kept employees and medical staff informed through memos and email messages. The hospital didn’t attempt to sweep the problem under the rug, hoping people would forget about it and keep doing their jobs. The communications even helped encourage some employees to take it upon themselves to organize an effective letter-writing campaign, which showed board members that the hospital CEO had plenty of support.

The floodwaters were rising at an unexpectedly rapid pace. The fifty-person law firm, in its Victorian mansion setting next to the lake’s edge, saw its front porch quickly immersed in water, and the first-floor carpeting soon became soggy and smelly.

Evacuation likely would be necessary within the next few hours, as the forecast called for inch-an-hour rains for the next ten hours.

Employee morale has been poor at the firm for the past three years. The managing partner is unpopular because of his puffing on cigars in the office, with little concern for others, and his generous use of four-letter words in even the most serene discussions.

Employees complain of never being informed about important issues at the firm and often feel they are being “used” by the partners. Employee benefits were reduced last year after the firm lost four major clients, and rumors of impending across-the-board salary cuts have circulated the past few weeks.

Now the firm really needs employee participation and teamwork. The partners are concerned that client work won’t get completed during the flood. Depositions can’t be rescheduled, and court dates are as inflexible as some of the judges they will face. They need a small group of employees to weather the flood by slopping through the first floor to work on the second and third floors. They have obtained temporary office space forty-five minutes away, so the remaining employees can continue working there.

The managing partner sent a cold, forceful memo to the staff informing them as to which people have been assigned to each station. He said, “Due to client demands, no flexibility will be considered.”

The partners were surprised when five people said they felt ill and were leaving early. And only fifteen of the fifty staff members came in the next day to fill their respective roles. The others either called to say they were sick or simply didn’t show up.

The managing partner said: “What the hell is wrong with them? After all we’ve done for our employees, they can’t manage to do us a favor when we need them most?”

Three Lessons to Learn
The firm, and its obstinate managing partner, could have benefited from respecting these three laws of crisis management:

• Employees have long memories. Just as the hospital’s employees in the previous example were supportive of their CEO because they were treated well, the behavior of the law firm’s employees was greatly affected by the treatment they received from the managing partner. Unfortunately for the law firm, its employees had only animosity and negative feelings toward their heartless boss. In any business, a time will come when you will need your employees’ help. Start working today to enhance your goodwill with them.


• In a crisis, you should ask for assistance — don’t just expect it. Have you ever stubbornly declined to help someone simply on the grounds that you felt that your contribution was taken for granted arid wouldn’t be appreciated? It is important to remember that your business will sorely need the support and cooperation of your employees in a crisis. When a crisis does occur, don’t take their assistance for granted.
  
  Ask them for help, inform them why it is so important, and thank them for their teamwork. When the crisis is over and things are back to normal, consider holding a thank-you party or doing something else to express your gratitude to them. After all, as the law firm found out, employees may not always be there when you need them most.


• Choose the best vehicle to deliver the message. The law firm made a mistake when the managing partner sent a cold, forceful memo to the staff informing them which people had been assigned to each station: “Due to client demands, no flexibility will be considered.” An impersonal memo was simply the wrong communication vehicle to use in a situation like this.
  
  He would have improved his chances for cooperation by meeting personally with the employees, either in a staff meeting or in smaller groups. And of course, he would try to explain with sincerity why their help was greatly needed and how much he appreciated their teamwork and dedication during this difficult time. Perhaps not everyone would have stepped up to the plate, but he surely would have had greater participation using this communications approach.

The privately owned automotive supplier has just been notified that the National Highway Traffic Safety Administration (NHTSA) is conducting an investigation that has the potential of escalating to a full recall of more than 400,000 of its battery cables.

It seems that more than 300 complaints have been filed from car owners, who said the cables are overheating the battery and — on occasion — have caused engine fires. The problem stems from an inferior installation process that the company used to attach the copper to the tubing during a two-year period four years ago. All 300 complaints are on automobiles produced during this two-year period. No complaints have been reported on the new product.

Since the company has an immaculate record devoid of serious quality problems in its entire fifty-year history, its leadership feels it should notify employees about the investigation before they read about it in next week’s automotive trade publications or the local newspaper. After considerable discussion, managers have decided to inform employees about the situation and to use the opportunity to reinforce the company’s high-quality standards.

The VP-corporate communications, with the assistance of the company’s public relations firm, developed a plan to notify the employees through letters to their homes as well as bulletin-board notices in office rooms. In addition, the company newsletter will discuss quality processes, reinforce the success of the new manufacturing process, and include answers to possible questions on the minds of employees.

A special insert will be included in the next paycheck envelope the employees receive, and small-group meetings with key executives will be held at the individual plant and office sites. A toll-free phone line has been established so that employees can call to ask any questions related to the investigation.

As the investigation evolves and new information becomes available, the company plans to keep employees informed about the situation — which will include answers to questions being asked on the toll-free phone line.

Three Lessons to Learn
The example of the automotive supplier offers three important lessons in conducting your own crisis management:

• Don’t hide the bad news from employees. Most companies are pretty good about telling employees about positive news. It often becomes a more difficult decision when bad news has struck. The automotive supplier informed its employees about the NHTSA investigation before they read or heard about it elsewhere, and used the opportunity to reiterate the company’s high-quality standards. Your credibility and trust will be enhanced with employees if you’re forthright and honest about the company’s blemishes as well as its accolades.


• Use a variety of communications vehicles to reach employees. The company recognized the benefits of communicating with employees in a variety of ways. It notified employees through letters to their homes and bulletin-board notices in coffee rooms.
  
  The company newsletter discussed quality processes, touted the established success of the new manufacturing process, and included answers to possible questions on the minds of employees. A special insert was included in employee paycheck envelopes, and small-group meetings with key executives were held at the individual plant and office sites. And a toll-free phone line was established so employees could call to ask questions related to the investigation. Some people prefer receiving information in writing, while others like to be told in person. Use a variety of vehicles to ensure that you reach everyone, and reinforce your core messages through repetition in the process.


• Keep employees informed and updated on the crisis. The automotive supplier knew it should continue to keep its employees updated and informed about the situation. The company realized that some employees will worry about the problem, others will question how the company is handling it, while others may fear that it will cause irreparable damage to the business — perhaps even leading toward bankruptcy.
  
  It’s important to keep employees current through a regular stream of communications, which can be done by a staff memo, letters sent to the home, newsletter articles, an employee video, staff or group meetings, and special voice mail or email messages.