The Big Picture of Business – Achieving the Best by Preparing for the Worst: Lessons Learned from High-Profile Crises, part 2 of 4

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Wrong Actions, Mis-Actions

Ford Motor Company and the Firestone Tire Company had partnered and collaborated for almost 100 years, stemming from ties of their founders. In the 1980s, Bridgestone Tire Company purchased Firestone.

In the 1990s, another international conglomerate purchased Bridgestone-Firestone. Business shift from the retail dealer customer service mentality of Firestone shifted to a high-production tire operation. Not only was this a shift in company focus and customer orientation, but it put high-volume tire production and sales as the only priorities. Along the way, many defective tires hit the market, subsequently causing SUV rollovers, damage and, in some cases, deaths.

Rather than stick together in crisis situations and collectively investigate the problems, both Ford and Firestone distanced themselves from each. Ford blamed Firestone for tires that would not hold up. Firestone blamed Ford for unsafe vehicles. Each blamed the other for losses in quality control. The media circus jumped on all facets of the conflicts, as well as lawsuits filed. Both Ford and Firestone turned the tragedies into shouting matches. This sad chapter is a tarnish on the legacies of two longstanding corporate families. Current management of both companies were ill-advised on handling the crises.

K-Mart closed 617 of its under-performing department stores and filed for Chapter 11 bankruptcy reorganization in 2002. K-Mart, long the dominant discount chain had gotten comfortable with its leads over competitors. During the years while K-Mart did not plan for change, Target and Wal-Mart did plan, change and established defined marketplace niches.

K-Mart had become the odd retailer out but still kept 1,500 stores for its reorganization. Inevitably, when retailers contract, they blame poor performance upon bad locations.

Sadly, the criteria for retail stores opening is the availability of property, not marketplace studies and strategies. That’s why so many chains rapidly expand and subsequently contract so frequently. Real estate consultants are not business strategists, but the retail system gives them the say-so in establishing community presence. This is yet another example of niche consultants skewing the client in the wrong directions. Similarly, it is poor business to suddenly wake up one day and wonder why the marketplace passed you by. Retail stores are about more than just storefront locations.

In 1999, the U.S. economy spent one trillion dollars fixing and treating the so-called Y2K Bug, which we now know was a manufactured “crisis” by technology consulting companies. Certainly, aspects of the bug were treated successfully, and troubles were averted because of professional actions. Overwhelming public hype contributed to a “sky is falling” mentality that made computer consultants rich.

As was discussed in Chapter 8, technology constitutes one tenth of 1% of any organization’s overall Big Picture. Computer activity constitutes less than 1% of the technology picture. Thus, efforts to treat a fraction of one percent took resources away from addressing the other 99.999% of companies’ full-scope planning, training and marketplace development. Money was diverted from most other aspects of organizational wellness toward treating one symptom of one disease.

Among the lessons which we learned from the Y2K Bug exercise were:

  • When they want to do so, company leadership will provide sufficient resources to plan for the future, including crisis management and preparedness (of which computer glitches are one set of “what ifs.”)
  • When they are compelled to do so, company leadership will provide leadership for change management and re-engineering…two of the many worthwhile concepts that should be advocated every business day.
  • People are the company’s most valuable resource, representing 28% of the Big Picture. Today’s work force will need three times the amount of training that it presently gets in order for the organization to be competitive in the millennium.
  • Change is good. If you like change, then don’t fear it. Change is 90% positive. Without always noticing it, individuals and organizations change 71% per year. The secret is to benefit from change, rather than become a victim of it.
  • Pro-active change involves the entire organization. When all departments are consulted and participate in the decisions, then the company is empowered.
  • Fear and failure are beneficial too. One learns three times more from failure than from success. Failures propel us toward our greatest future successes.
  • When we work with other companies and the public sector, we collaborate better. All benefit, learn from each other and prepare collectively for the future.
  • In the future and in order to successfully take advantage of the future, make planning a priority…not a knee-jerk reaction.

What Causes Crises

Crises can have many liabilities upon companies, including loss of profits and market share. Inevitable spin-offs include government investigations, public scrutiny, and a tarnished image. This causes loss of employee morale and, as a result, company productivity.

Based upon research and experience with hundreds of client situations, I have found that seven types of crises exist:

  1. Those Resulting from Doing Nothing. The biggest problem with business, in a one-sentence capsule: People exhibit misplaced priorities and impatience…seeking profit and power, possessing unrealistic views of life, and not fully willing to do the things necessary to sustain orderly growth and long-term success.
  2. Doing Things as We Always Have. Resulting from inflexible conditions, obsolete policies-procedures, procrastination, attitude, resistance to innovation, failure to change.
  3. Those We Bring Upon Ourselves. Don’t have sufficient management skills or resources to do something well. Ignore small problems when they occur. Won’t listen to advice.
  4. Circumstances Beyond Our Control. Miscalculations, manmade disasters, natural disasters, shifting resources, changing marketplaces, regulations, bureaucracies.
  5. Bad Work, Poor Planning. Damage control for what someone else did wrong, sub-standard, behind schedule, in poor taste, without regard for quality or ill-prepared.
  6. Averted. 85% of the time, planning and forethought will avert the crisis. So, why don’t organizations and individuals remediate trouble by planning on the front end?
  7. Intervention. Getting past the current crisis does no good unless you take steps to assure that it does not recur. Planning is necessary to remediate current and future problems.

Crisis management and preparedness can minimize negative impacts of any emergency. Going through the planning and implementation is a quality assurance process that strengthens any company. Crisis communications means banking goodwill for those times when the plan is called to the test.

Continue to part 3 of 4.

Return to part 1 of 4.

About the Author

Power Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.

Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.

Power Stars to Light the Business Flameis now out in all three e-book formats: iTunes, Kindle, and Nook.

The Big Picture of Business – Achieving the Best by Preparing for the Worst: Lessons Learned from High-Profile Crises, part 1 of 4

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Just as we gain wisdom from the business failures and corporate scandals, we can learn equally valuable lessons from crisis situations that were successfully handled. The insightful companies examine their own backyards… applying the discussions, uncoverings and applicabilities to how they will better manage in the future.

For many years, we will be measuring how loss of corporate credibility has tainted all facets of business, in terms of remediation, replacement, litigation, make-good, rework, damage control, recovery process, settlements to victims, decreased stock market value and sagging retail sales. The Enron scandal alone has cost each taxpayer twelve dollars.

Some of those events that had profound impacts upon us recently (and which were covered in Chapters 2 and 3) included corporate fraud, accounting irregularities, earnings misstatements, hiding expenses, Enron, Arthur Andersen, the dot.com bubble burst, Worldcom, Tyco, Qwest, Imclone, Martha Stewart and Global Crossings.

It’s not enough just to handle a crisis effectively. The follow-through and crisis preparedness planning process helps to divert other crises from transpiring. Recommendations for crisis management and preparedness as part of macro planning are offered.

Every organization and community in America is presently at a crossroads. There exist two current options. Business can be seen and known as a dynamic community that addresses its problems and moves forward in a heroic fashion…as a role model to the rest of the world. Or, the organization can bury its head in the sand and hope media attention dies down… thus becoming a generic tagline for troubled communities.

Purposes and expected benefits of reviewing business crises include:

  • Understanding the difference between good and bad handling of crises.
  • Comparing crisis follow-ups that help heal and rebuild, versus those that fester and bring destruction to cities.
  • Preparing the community to utilize the concepts of bridge building and problem remediation.
  • Implementing methodologies to address problems sooner, rather than later.
  • Creating cause-related marketing opportunities, so that local businesses can sponsor the community healing process.
  • Benchmarking the progress made and communicate it outside the community.
  • Rebuilding the community image.
  • Involving the widest base of support in pro-active change and growth.
  • Establishing safeguards against future trouble.
  • Putting more emphasis upon the positive ingredients and happenings in the community.
  • Taking hold of the future.

Some of those events that had profound impacts upon us recently, examined in this chapter, include examples of crises that were handled well, thus increasing public trust and respect.

Actions During the Crises

In times of crisis, business does what it should have done earlier: study, reflect, plan and manage change. Sadly, business adopts a “head in the sand” mentality when the crisis seemingly passes. Many rationalize that they dodged the bullet.

In the aftermath of Three Mile Island and the Exxon Valdez crisis, companies increasingly became scrutinized under the public microscope… thus affecting its Wall Street book value, reputation in the marketplace and employee morale. It became incumbent to communicate openly to media about the crisis and what was being done. Companies had to overcome the poorly handled crises, as well as mount their own proactive strategies.

In times of crisis, advisors are called upon more frequently. Crisis Management and Preparedness has been one of my areas of expertise for many years. Among the types of crises that I advised clients through were government reorganizations, plant explosions, contaminated food and drugs, school shootings, executive kidnappings, plant bombings, hostile company takeovers, natural disasters and problematic employee behaviors. I have learned that strategic planning for crises can avert them 85% of the time.

The NASA community and the entire world were saddened by the disaster of the Space Shuttle Columbia on February 1, 2003. During and after the crises, NASA adopted its policy of forthright communication. They continually reinforced the determination to find out what went wrong and take whatever steps necessary to get it right. That’s laudable, and NASA is to be respected for this posture. Not every company would have approached each crisis this correctly and honorably.

There have been far-reaching business after-effects from the attacks on September 11, 2001. 1.5 million jobs were affected by the. Unemployment is at an eight-year high. September 11 is attributed as costing New York City 83,000 jobs and negatively impacting its economy by $1 billion.

In the fourth quarter of 2001, there were 408 extended mass layoff events, involving 114,711 workers, directly or indirectly attributed to the attacks. Thirty-three states reported extended mass layoff activity related in some way to the September 11 incidents. Fifty-four percent of these events and 56 percent of these separations occurred in just five states—California, Nevada, Illinois, New York and Texas. Among the workers laid off because of the terrorist attacks, 42 percent, or 44,756 workers, had been employed in the scheduled air transportation industry. An additional 28 percent, or 32,044 workers, had been employed in hotels and motels.

The U.S. airline industry reported an operating loss of more than $10 billion in 2001 and a net loss of almost $8 billion, according to Air Carrier Financial Statistics Quarterly, a compilation of airline financial reports issued by the U.S. Department of Transportation’s Bureau of Transportation Statistics.

Losses reported by the airline industry for 2001 compare to an operating profit of $7 billion and a net profit of almost $3 billion in 2000. In 1999, the industry reported an operating profit of almost $9 billion and net income of more than $5 billion.

The U.S. Department of Transportation paid air carriers a total of $3.8 billion in direct payments made available under the Air Transportation Safety and System Stabilization Act, which was enacted to compensate airlines for losses suffered as a result of the September 11, 2001, terrorist attacks. Without these payments, which are reflected in the carriers’ results, industry losses would have been substantially greater.

The major air carriers (with annual operating revenues of more than $1 billion) reported an operating loss of more than $9 billion and a net loss of more than $7 billion. Operating profit or loss is the profit or loss from performance of air transportation and does not include non-operating income and expenses, nonrecurring items or income taxes. Net income or loss includes those items.

As new security procedures at the nation’s airports has significantly increased ground time for airline travel, interest in business aviation also increased as companies were drawn to the productivity, efficiency, safety and security of business aircraft.

Continue to part 2 of 4.

About the Author

Power Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.

Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.

Power Stars to Light the Business Flameis now out in all three e-book formats: iTunes, Kindle, and Nook.

Risk Management Best Practice 5 – Ongoing Risk Monitoring

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StrategyDriven Risk Management Best Practice ArticleEvery organization is challenged by risks manifest through its many different day-to-day operations. To help monitor and manage these risks, most organizations employ groups providing performance and compliance risk assurance so that significantly adverse consequences are avoided. These groups typically carry out their function through the conduct of periodic, in-depth assessments of those areas representing the highest risk to the company. Such assessments are both costly and time consuming; their accuracy rapidly diminishing with the passage of time since the assessment’s performance.

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About the Author

Nathan Ives, StrategyDriven Principal is a StrategyDriven Principal and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.

StrategyDriven White Paper Advises Leaders on Preventing Catastrophic Industrial Accidents

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StrategyDriven’s Preventing Catastrophic Industrial Accidents reveals how high-risk industry leaders can reduce their significant event risk exposure through application of safety-first principles.
 
 
StrategyDriven Safety Culture Point of View DocumentStrategyDriven released Preventing Catastrophic Industrial Accidents, a white paper revealing how high-risk industry leaders can reduce their significant event risk exposure through the cost effective adaptation of key aspects of the U.S. nuclear industry’s safety-first principles.

After the several recent catastrophic industrial accidents within the United States, including the devastating explosions at a Texas fertilizer plant and Louisiana chemical plant, StrategyDriven wanted to help industrial and utility leaders reduce the risk of similar accidents at their facilities.

“Many of today’s significant industrial accidents are preventable, the byproduct of human errors made when safety was subordinated to other priorities,” explains Nathan Ives, StrategyDriven’s President and Chief Executive Officer. “By fostering an organizational culture that puts safety-first, executives and managers create a workplace environment where errors are recognized and proactively corrected before they result in a material event.”

“An effective safety culture is far more than slogans and posters,” continues Greg Gaskey, StrategyDriven’s Chief Operations Officer. “It permeates the organization’s performance standards, operating processes, training programs, rewards systems, and, most importantly, the decisions and behaviors of everyone from the C-Suite to the shop floor.”

Nathan and Greg authored Preventing Catastrophic Industrial Accidents based on their decades of experience managing nuclear and industrial complex operations. Additionally, Nathan led the development of the nuclear industry’s operational risk management, high-risk decision management, and plant operations performance standards while working at the Institute of Nuclear Power Operations.

Highlights from Preventing Catastrophic Industrial Accidents include:

  • Safety Culture Attributes – safety focused executives, managers, and employees collectively assume responsibility for both their and their co-workers’ safety; embody a questioning attitude; encourage issue reporting and priority-based resolution; employ error reduction techniques; embed safety-first features within operational, training, and rewards programs; and embrace ongoing organizational learning
  • Identifying the Strength of Your Safety Culture – artifacts of the safety-first values are not only found in the outcomes achieved, but also reside in the organization’s goals and performance measures, standards and expectations, policies and procedures, rewards systems, training, and organizational learning and continuous improvement programs
  • Improving Your Safety Culture – individuals at all levels of the organization must be engaged in order to foster a robust safety culture; originating from executive defined attributes and goals and translated to the day-to-day decisions and actions of all employees

Preventing Catastrophic Industrial Accidents is being distributed to StrategyDriven’s clients, including some of the world’s largest utility operators. Download the white paper by clicking here.

About the Authors

Nathan Ives, StrategyDriven Principal is a StrategyDriven Principal, and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.

Greg Gaskey, StrategyDriven PrincipalGreg Gaskey is a StrategyDriven Principal with over twenty years of nuclear plant operations, maintenance, and large-scale program and project management experience. An experienced Operations Manager, he has managed critical Department of Defense programs, projects, and business lines; spanning multiple engineering maintenance disciplines including mechanical, electrical, hydraulic, and instrumentation and controls systems. To read Greg’s complete biography, click here.

StrategyDriven Launches Operational Risk Management Resource Forum

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StrategyDriven is proud to announce the launch of a risk management resource forum; providing innovative thought leadership and collaboration opportunities to help leaders effectively address their most pressing operational risks.
 
 
StrategyDriven Risk Management Resource ForumAfter seeing the devastation from the Texas fertilizer plant and Louisiana chemical plant explosions, StrategyDriven wanted to help industrial and utility leaders better identify, mitigate, and control their operational risks to prevent similar accidents from occurring at their facilities.

“The unfortunate reality is that industrial accidents are increasingly likely in a world challenged to produce more, faster, and with fewer resources while also dealing with the significant loss of operating experience resulting from the retirement of baby boomers,” explains Nathan Ives, StrategyDriven’s President and Chief Executive Officer. “To help clients combat these risks, StrategyDriven advisors, applying decades of nuclear and high-risk industrial operations experience, authored a library of operational risk management tools easily accessible from our online risk management forum.”

Developed by highly experienced nuclear and industrial complex leaders, StrategyDriven‘s risk management resource forum provides actionable methods and tools executives and managers can use to identify, assess, prioritize, monitor, mitigate, and control their operational risks. Thought leadership items contained within the forum focus on topics such as:

  • Operational Risk Quantification – identification of unique risk index values associated with potentially adverse events enabling prioritization of their mitigators relative to the organization’s portfolio of operational activities and strategic initiatives
  • Integrated Enterprise Risk Assurance Mapping – visualization of the relationships between enterprise risks and their associated processes while concurrently revealing the degree of oversight applied to these processes
  • High-Risk Decision Management – identification, selection, and implementation of action plans to address strategically important and operationally hazardous circumstances, the outcomes of which impact the safety and reliability of employees and assets

The risk management forum’s thought leadership documents are being distributed to StrategyDriven‘s clients, including some of the world’s largest utility operators. These documents can be accessed by clicking here.