Category Archives: Lucien Canton

Why Good Managers Sometimes Make Bad Crisis Leaders

By Lucien CantonLucien Canton

You are the manager of a big company and you know your business. Each day, you make important decisions regarding money, policy and strategy. You’re in total control. Without warning, you are confronted with a major crisis: an earthquake, a fire or a reputational risk. Now you find yourself uncertain and unsure. You don’t know what to do and you realize that everybody is looking to you for guidance—and the decision you are about to make will directly affect the survival of your company.

We see this all the time. Otherwise capable and competent managers appear to self-destruct during crisis, making bad decisions and stumbling in public. Consider the decision by BP to try to “spin” the oil spill crisis and the poor performance of CEO Tony Hayward, for example.

Why do your decision-making skills seem to desert you during a time of crisis? To understand this, we need to take a closer look at what happens during a crisis.

We sometimes forget that, although we are 21st century people, many of our reactions to stress are based on reactions developed in more primitive times—the “fight or flight” response. This means that at the time we are faced with a crisis, our bodies undergo physiological changes that prepare us for a response. Among these are increased respiration and heart rate, auditory exclusion and tunnel vision. These changes can inhibit our ability to think rationally and limit our decision making capacity. The greater the crisis, the more extreme the reaction.

Response to crisis can be roughly separated into three phases. When confronted with a crisis, the strategy with the highest success rate in prehistoric times was simply to freeze in place. Even today, the initial reaction of many people to crisis is denial: a failure to recognize or believe a crisis is occurring. This is why so many people appear to be dazed and unresponsive at the scene of an accident. Once we recognize the crisis, we begin to gather information and consider options for responding. This is where the physiological changes take place and the level of stress becomes a significant factor in our ability to assess the situation. The final phase making a decision and acting on the option we consider most viable.

The problem is that the length of time for these three phases varies based on the individual, the nature of the crisis and the people with whom we interact. Some people never progress past the first phase unless subjected to an outside stimulus. Others move from phase 1 to phase 3 in a matter of seconds.

The key to success lies in the identification of options in the second phase. Managers are trained to use a standard problem-solving model that works extremely well in day-to-day business: we define a problem, gather information on the problem, consider alternatives, decide on an alternative and implement it. The problem is that this model does not work during a crisis.

A crisis is characterized by ambiguity and conflicting information. There are usually severe time constraints and very high stakes. Using a structured decision-making model may, in fact, lead to a certain paralysis as the decision-maker attempts to gather more information and keeps putting off making a final decision. Couple a complex problem with inadequate time for analysis, add in the physiological changes induced by stress, and it becomes apparent why so many managers make bad decisions.

Crisis requires a more intuitive decision-making process. Research into military and emergency services’ decision-making shows that leaders reacting to crisis rely on pattern recognition rather than a structured decision making process. That is, they unconsciously attempt to find a correlation between the current problem and their past experience. Once a match is found, the decision-maker runs a quick mental simulation to see if it actually fits the current problem, makes any necessary adjustments, and acts. This process happens extremely fast and the decision-maker may not even be conscious of it, often claiming that they acted on a hunch or a feeling.

Recognizing that decision-making in a crisis is different from day to day decision-making is the first step to successful crisis leadership. Once this is understood, it is possible to increase the amount of available patterns through three ways:

1. Direct experience – While there is truly no substitute for actual experience, crises have a way of involving the people least equipped to handle them. The crisis for many will be an once-in-a-lifetime event. However, remember that we are considering patterns, not identical situations, so experience gained in one situation could be applicable to a different one.

2. Learning from the experience of others – There are numerous case histories of organizations that have successfully survived crisis. There is even more literature on those that did not. Research demonstrates that reading accounts of other crises and the decisions made during them is almost as effective as gaining direct experience. Reading articles in business magazines, reviewing case studies and after action reports, and viewing documentaries all can increase the patterns available for recall. This is why so many military officers study historical campaigns.

3. Simulations – Simulations or exercises combine the best of both worlds. They can be based on hypothetical scenarios or actual scenarios found in after action reports or articles. In addition, they can provide direct experience to participants, allowing them to become familiar with the physiological changes brought on by stress. Even something as simple as a short discussion-based exercise can provide additional pattern sets to decision-makers.

Decision making during a crisis is not the same as decision making for routine business. It requires a shift from a structured decision making model to a more intuitive one. Recognizing that decisions must be made using this intuitive process and preparing yourself to use it is the best way to prevent a leadership failure during a crisis.

Lucien G. Canton, CEM is a consultant specializing in preparing managers to lead better in crisis by understanding the human factors often overlooked in crisis planning. A popular speaker and lecturer, he is the author of the best-selling Emergency Management: Concepts and Strategies for Effective Programs. For more information, please visit www.luciencanton.com, or email Info@luciencanton.com.

Exercise Your Crisis Decision-Making Skills

By Lucien CantonLucien Canton

On July 19, 1989 United Flight 232 crash landed at the airport in Sioux City, Iowa killing 111 of the 296 people on board. Many of those who survived owe their lives to a coordinated interagency response by the county. The outcome might have been much different. The Sioux City airport was not rated to handle the large jumbo jets such as Flight 232’s DC 10 aircraft. However, the county’s emergency services manager, Gary Brown, understood the strategic implications of the many flight paths that crisscrossed Sioux City airspace and anticipated that there might one day be a need to respond to an emergency involving large aircraft. Against much opposition, he exercised local responders and hospitals in dealing with mass casualties. This strategic thinking meant that county agencies and hospitals were ready to respond on that fateful summer’s day.

In any crisis situation, there are three levels of activity taking place. The most obvious is that at the tactical level where people are actually dealing with the immediate effects of the crisis. The operational level provides support to the individuals engaged in the tactical response. These are the people that comprise your incident management team who attempt to get ahead of the crisis and anticipate the short-term needs of the tactical responders. Finally, there is a strategic level, which normally consists of senior executives whose emphasis should be on the long-term impact of the crisis.

Unfortunately, this strategic level is often neglected. One reason is that it is easier to solve problems than to make decisions. The problems created by a crisis are fairly tangible and the solutions are often obvious. It is easy for senior executives to be drawn into the relatively easy work of solving these tactical and operational level problems than it is to take a step back from the crisis and try to see the big picture.

But there may be an even more subtle reason for failing to think strategically: organizations tend to build exercises around operational issues rather than strategic ones. It is a cardinal rule of emergency planning that no plan can be considered complete until it has been tested through exercise. Consequently, our exercises focus on solving operational problems using the organization’s emergency plan. This is completely appropriate but it does not truly prepare senior executives for crisis. Instead, these types of exercises focus the attention of senior executives on short-term issues that could, in most cases, be delegated to the crisis management team.

Consider the following example:

A major fire has occurred at your principal manufacturing facility, severely limiting your ability to produce your key product. People working at the tactical level are busy clearing away debris and assessing the damage while the operational staff is considering options for regaining the capacity to produce product. In the typical exercise, senior executives are usually drawn into this operational level by being asked questions such as:

  • What should we tell our customers?
  • Should we authorize over time?
  • Should we pay people who can’t work?
  • Should we ask a competitor for help?

If we think about questions of this type, it soon becomes noticeable that many of them can be answered by asking for recommendations from the crisis management team or through existing company policies. In other words, they really do not require serious decision-making on the part of senior executives. In fact, they can lead to a mistrust of the ability of the crisis management team to deal with these issues. They also may fail to engage senior executives in the exercise.

To truly increase the ability of senior executives to make decisions in a crisis it is necessary to ask questions that truly challenge them. Using the same example, consider asking questions such as the following:

  • What is the true risk to the company that is posed by this crisis? In the example, the problem is not the loss of production capacity; the true crisis is what that loss of capacity represents. The true risk might be reputational; by failing to fulfill contracts the company develops a reputation as unreliable. The risk may be financial; failure to provide product on schedule could result in severe financial penalties. The reason for asking this question is to get senior executives thinking beyond the immediate and obvious event to identify the true crisis.
  • What decisions will I need to make? With an understanding of the true crisis, it is now possible to identify strategic decisions that may need to be made. For example, does this crisis offer an opportunity to modernize production processes? Will the organization’s customer base or labor pool be affected and require changes to company strategies?
  • What information will I need to make decisions? Understanding risk and the decisions that need to be taken generates a need for information. That information may be related to the organization or may require analysis of the operational environment and the local community. In some cases, the crisis management team can be used to collect this type of information.
  • How will I implement these decisions? There is an old saying that, “the devil is in the details”. Decisions that do not include some thought to implementation are doomed to failure. This is because thinking about implementation sometimes forces a re-examination of the decision. This is particularly true when resources are limited or information is not readily available. Thus, an important part of the decision-making process is to test decisions by making sure there are sufficient resources to implement them.

Operational exercises are absolutely essential to good emergency planning and the participation of senior executives is critical. However, it is important to include senior executives not just as observers or by giving them work but by offering them opportunities to improve their crisis decision-making skills. A carefully crafted exercise will both engage them and help them understand their true role in crisis response.

Lucien G. Canton, CEM is a consultant specializing in preparing managers to lead better in crisis by understanding the human factors often overlooked in crisis planning. A popular speaker and lecturer, he is the author of the best-selling Emergency Management: Concepts and Strategies for Effective Programs. For more information, please visit www.luciencanton.com, or email Info@luciencanton.com.

Three Questions to Ask After a Disaster

By Lucien CantonLucien Canton

Just surviving a disaster or rapidly resuming operations is not always sufficient to guarantee the future of a company. Physical damage is often the easiest problem to deal with following a disaster. But quick repairs alone do not equate to business survival if you cannot produce goods and services or there is no one to buy them. Once the immediate crisis is passed, it is essential to have a business recovery strategy.

A prime example of this is the experience of the Sheraton Hotel following the terrorist attacks in New York City on September 11. The hotel had not been damaged in the attack and initially enjoyed several days of sustained bookings from stranded travelers and rooms provided to rescue workers. But it soon became apparent that the attacks had dealt a heavy blow to the tourist industry. Room cancellations soared and the outlook for the future was bleak. The Sheraton needed a new strategy if it was to survive.

That strategy took the form of a partnership with Lehman Brothers, the global financial firm. Lehman’s offices were located in World Trade Center Three and had been severely damaged in the attack. The firm was desperately seeking an operating location for its 6,500 employees. Owing to a pre-existing relationship and aggressive marketing by the Sheraton staff, within a few days Lehman Brothers contracted to use all 665 rooms of the hotel, its lounges and restaurant as office space. This relationship continued for several months until Lehman Brothers was able to purchase and renovate a new building and insured the survival of the Sheraton Manhattan hotel.

Developing a recovery strategy requires an understanding of the impact of the crisis. This impact is not limited to physical loss; disasters produce ripple effects that can have a long-range impact on the survivability of a company. There are three basic questions that must be asked when developing a business recovery strategy:

  1. What is the impact on your labor pool? For most companies, their ultimate competitive advantage lies in its employees. Employees are the repositories of intellectual capital and represent a significant investment in training. However, disasters can have a disproportionate impact on hourly employees. Damage to housing stock may encourage employees to relocate to other areas or seek higher-paying jobs to meet unanticipated expenses. Disasters also create new opportunities such as high-paying construction jobs. One need look no further than the mass-evacuation of the city of New Orleans following Hurricane Katrina for an example of the effect of disasters on local labor pools.
  2. What is the impact on your supply chain? Disasters frequently create spot shortages of goods and services, particularly those related to reconstruction. They can also generate significant transportation infrastructure damage that can affect the delivery of goods. Large numbers of manufacturers go out of business following disasters either through destruction of their facilities or their inability to resume normal business operations. All of this suggests that the resources needed to continue business may not be readily available or may be spoken for by competitors. In the classic supply chain study of microchip shortages following a clean room fire, Nokia was able to secure all future production runs of the microchips in question and dealt a devastating blow to its competitor, Erickson.
  3. What is the impact on your customer base? Disasters can frequently lead to demographic shifts that can alter your customer base. Demand for products and services can increase, decrease or be unaffected depending on the nature of these changes. Disaster may actually offer an opportunity for increased sales in some sectors. However, these changes can be temporary or permanent, so increasing capacity may be a risk. Following the Northridge earthquake in California, many of the existing population of middle-class, retired aerospace workers chose to relocate to other states. They were replaced by an influx of largely Hispanic immigrants. This demographic shift resulted in changed demand for products and services such as grocery items, clothing, and restaurants.

These same three questions can, of course, be asked in the immediate aftermath of a disaster and can certainly help guide response activities. However, just considering immediate impacts can blind you to future problems. The long-term effects of a disaster can initially be very subtle and not manifest themselves for a considerable time. It is critical, therefore, to consider the potential impacts of a disaster on employees, suppliers, and customers over an extended period.

Strategy is not static. Asking these three questions once is not sufficient. Disasters are complex and so are their effects. A good strategy needs to be reassessed periodically by asking the same questions again and again.

Many businesses have recovered from disaster by developing a recovery strategy based on the effects of the disaster. The story of the Sheraton Hotel is not unique and there are many stories just like it. Let yours be one of them by asking the three critical recovery questions.

Lucien G. Canton, CEM is a consultant specializing in preparing managers to lead better in crisis by understanding the human factors often overlooked in crisis planning. A popular speaker and lecturer, he is the author of the best-selling Emergency Management: Concepts and Strategies for Effective Programs. For more information, please visit www.luciencanton.com, or email Info@luciencanton.com.

Don’t Go it Alone in a Corporate Crisis

By Lucien CantonLucien Canton

During the Midwest floods in 1993, White Star Textile Services in Des Moines found itself faced with an ironic situation. The encroaching flood waters had shut down all six pumps at the local water plant and there wasn’t even enough water to flush toilets, let alone process 100,000 pounds of laundry each week. The situation was expected to continue for some time. White Star implemented a plan to truck laundry to two sister plants in other towns but it wasn’t sufficient. The company desperately needed water.

White Star employees rose to the challenge. A maintenance worker who lived on a farm on high ground had a well and allowed the company to draw 2,000 gallons of water to keep the boiler running. Other employees worked overtime to keep up with the demand. Others kept track of which roads were open or closed and helped expedite customer deliveries. Despite being without water for over a month, White Star never missed a single day of customer service.

Crisis requires a team approach: The story of White Star points out the importance of having a team approach to crisis. Success in a crisis hinges on leadership and decision making but those decisions are best when informed by trusted advisors and implemented by capable people. To be an effective leader, one needs the support of a good crisis management team.

The importance of a strong support team becomes important when you consider the three phases of decision making in a crisis.

  1. Information collection and analysis. The early stage of a crisis is characterized by confusion and uncertainty. The immediate cause of the crisis may or may not be evident and the long term impact, the true nature of the crisis, is usually obscure. An organization that can quickly gather and analyze information about the crisis and display it in a way that can be readily used by decision makers has a distinct advantage. It is critical, therefore, to have people who know what kinds of information to collect and where to find it.
  2. Decision making. Once crisis leaders feel they have enough information, they begin the process of considering options and developing an action plan. This process benefits from input from people who understand the nature of the crisis and are intimately familiar with the organization, its customers, and its supply chain.
  3. Implementation. Having a sound plan is meaningless if it cannot be implemented. This will require support staff to obtain resources, direct the operations of employees, and communicate with customers and vendors. The job is just too big for one person.

Building the team: Building a crisis management team is not all that complicated if you build on day-to-day problem solving. A major mistake is to develop a team that only meets during a crisis. A much better approach is to use the people you rely on each day, who are used to working with each other, and, most importantly, trust each other.

There are four questions you should ask when developing your crisis management team.

  1. Whom do you trust? Successful managers surround themselves with people whom they trust. These are the people you turn to for everyday problems, the people whose opinion you seek on new ideas. Most importantly, they’re the people whom you will listen to when they tell you that you are wrong. These trusted advisors are the most likely choices to form the core of your crisis management team.
  2. Whom do your employees trust? In any organization there is a formal organizational structure and an informal one. The closer these two mirror each other, the more efficient the company. This informal structure is represented by employees that other employees look up to and trust. While these individuals may or may not be added to your crisis management team, they can be used to “take the pulse” employees, act as conduits for information, and help implement your action plan.
  3. What skills will you need? Some people are obvious choices for your team, such as your management team. But consider others who may not be so obvious. For example, many crisis management teams neglect to include people who interface with customers and suppliers on a regular basis. Administrative staff are usually not included, as are human resource staff. Not all of these people need to be decision makers but they can provide important advice and suggestions.
  4. Who has the information you need? Information is the cornerstone of decision making. Some of that information is internal. Do you know where to find it? For some problems, a maintenance person with intimate knowledge of a plant’s operating systems might be more useful than the manager who supervises her. What about external sources? An employee who has built a solid working relationship with public safety agencies or your insurance company can get information that is not always available through the media. Speaking of which, who will monitor broadcast and social media?

A crisis management team shouldn’t be just for crisis. It should be comprised of the people you trust and rely on for normal operations and problem solving. Augment that core group with the additional staff and skills you need as a crisis escalates and you significantly improve your ability to manage crisis.

Lucien G. Canton, CEM is a consultant specializing in preparing managers to lead better in crisis by understanding the human factors often overlooked in crisis planning. A popular speaker and lecturer, he is the author of the best-selling “Emergency Management: Concepts and Strategies for Effective Programs.” For more information email Info@luciencanton.com.

Leading in Crisis: The Four Traps of Decision Making

By Lucien CantonLucien Canton

During the second day’s fighting at Gettysburg on July 2, 1863, Colonel Strong Vincent, a brigade commander in the Army of the Potomac, learned from a passing courier that the Union left flank was undefended and that the Confederates were advancing on Little Round Top. Seizing this position would allow the Confederates to fire on the entire Union line and force the retreat of Union forces, opening the road to Washington. Recognizing the tactical significance of the position, Vincent, without waiting for orders, moved his brigade into a blocking position. What followed was one of the most dramatic and pivotal engagements of the war, one that decided the battle of Gettysburg and most probably the war itself. Though Vincent fell in the battle, his ability to recognize the crisis, to make critical decisions under pressure, and to deploy his resources inspired his brigade to hold the vital position on the Little Round Top.

Leadership in crisis is ultimately about decision making. Other critical steps, such as recognizing and isolating the crisis prepare you to make decisions, while the deployment of resources are based on the decisions made by the leader. The pivotal point in any crisis is the making of the decision about how one will deal with the crisis. Unfortunately, without recognizing the four traps of decision making, it is too easy to make the wrong decision.

Trap #1: Maintaining the status quo: One of the major problems in leading in a crisis is the psychological tendency to do nothing. There is a tendency to normalize events – to see what we expect to see. It is easy to miss cues or indicators. If there are no consequences for doing, there is no need to make a decision. Unfortunately, this is the default mode for many decision makers.

Trap # 2: Taking the easy way out: Assuming that there are consequences for inaction, the next consideration is whether there is a risk in taking action. If there is no perceived risk in taking a specific action, there is really no need to make a decision or to consider alternative courses of action.

Trap #3: Giving up: When available courses of action all carry risks, the tendency is to search for a better solution. The trap here is that it if there is a perception that no low risk solutions are available, the decision maker may become fatalistic or apathetic, exhibit behaviors such as ignoring or selective interpreting information, or attempt to pass the responsibility for decision making to someone else.

Trap #4: Running out the clock: Hesitation is not uncommon among decision makers in a crisis. Information is incomplete or contradictory and there is usually little time to wait for better solutions. This is the fourth trap of decision making: continuing to seek for solutions rather than deciding on the best available alternative, even if it carries considerable risk. Under heavy time constraints, this can even led to panic and bad decision making.

So how does one avoid the four traps of decision making in a crisis? The first step is recognizing that these four traps exist and understanding that they are heavily influenced by time and the availability of good information. Failing to see the risks of inaction or accepting low-risk actions are both linked to a failure to recognize that a crisis is occurring and to put it into the context of the potential impact on your organization. This in turn is usually the result of failing to take the time to gather and assess information related to the crisis. Consider, for example, the classic case study on supply chain management involving Nokia and Ericsson in 2000. The crisis was precipitated by a fire in the clean room of the manufacturer of the chips used in each company’s phones. Nokia recognized and reacted to the potential crisis; Ericsson did not. The resulting losses cost Ericsson millions in lost revenue and market share and put the company into a financial crisis that lasted almost five years.

Understanding the nature of the crisis can also help avoid the bad decisions caused when considering high-risk alternatives. Knowing how much time you have to make a decision and the potential availability of alternative actions are precious commodities in a crisis. Time allows you to weigh risks versus alternatives or consult with advisors and subject matter experts. Knowing you have limited time can help you to focus on what you know and bring clarity of thought. In the case of Strong Vincent at Gettysburg, the knowledge that he had only a short time in which to act caused his decision to move without orders, an action that could have cost him his career if he failed. However, the risks of inaction far exceeded the risks of the alternative he chose.

It is easy to avoid decisions in a crisis. The four traps are always there waiting for the unwary and they all lead to the same place: failure due to non-existent or poor decision making. The hardest part of managing in crisis is having the willingness to accept responsibility for decisions made with limited information in too short a time and the courage to follow through on those decisions without second-guessing yourself. It’s what makes a leader truly effective in a crisis.

Lucien G. Canton, CEM is a consultant specializing in preparing managers to lead better in crisis by understanding the human factors often overlooked in crisis planning. A popular speaker and lecturer, he is the author of the best-selling “Emergency Management: Concepts and Strategies for Effective Programs.” For more information email Info@luciencanton.com.