Why Every Company Needs a Crisis Management Team

Crisis Management

1 Jun

Crisis response or crisis management team is a term well known to many of us. In my opinion, every company needs one. But do we know what this term means and what the purpose of these teams is?

In some institutions these teams are constantly maintained and train for crisis scenarios and do not do anything else. If army special forces or police special forces popped into your head, you assumed correctly. Teams like this also exist outside the military or police force, for example in disaster management. You may also consider some PR agencies to be crisis management teams, especially if they are known for managing media in times of negative press. Are crisis response teams worth considering in other industries though? From my personal experience that is a definite yes and we will cover the topic in this context. In our own crisis as a family business, we had a crisis response team consisting of 3 people. It was incredibly helpful to split the management of the crisis from the management of the company. At times it was less helpful, so there are some cons to the crisis team. In the end, it comes down to how well the team and the day-to-day management cooperate and communicate.

Purpose

Let us take a deeper look at crisis management teams. What is the purpose of a crisis management team? A crisis management team prepares an organization to respond to crisis and leads the response in case of a crisis. This means that the team does not only exist in times of crisis, but also in times where things are going well. Most family firms are unaware of this, while some bigger corporations do have these teams in place.

You may ask yourself what the difference between risk management and crisis management is. To start off we need to look into the meaning of risk management. Risk management identifies, assesses, and controls threats to an organization. Risk essentially is “the possibility that something bad or dangerous will happen” – English dictionary.

There are a couple of differences, when we look at the meanings of risk management and crisis management. First of all, risk has to do with possibilities. To define a risk, we need to know the possibility of an event. In crisis management you also deal with uncertainties, which means we do not know the probability of some events, but we still prepare for them. So called black swan events will also be considered in preparatory planning. Secondly, risk management only focuses on the avoidance of risk, or rather pricing risk into decisions and terms. Risk managers do not manage a crisis.

Should you scrap your risk management in favor of a crisis management team then? Definitely not, they have different purposes. You should have both teams and they should work closely together. Risk management can help greatly in identifying and assessing crisis scenarios and crisis management can prepare strategies and action plans in order to prevent these scenarios and how to deal with them if they should occur.

As shown in the diagram above, crisis management never stops; it is a continuous cycle. Looking at the whole cycle of any crisis shows that a crisis management team has an extensive list of responsibilities. They prepare, review and respond to crisis, whatever that may be. Let’s have a look at some typical tasks that a crisis management team will do in each of the three stages of the cycle. Be aware the following list is not an extensive list only an exemplary, as this depends on company structure, company size and industry.

Preparation:

Analyse potential risks. This includes anything from mega trends, scenario planning, market research etc. As discussed, this is where the crisis management team works closely with the risk management team.
Search for company vulnerabilities. Where is the company especially vulnerable?
Conduct regular interviews with stakeholders about their concerns and needs. This includes keeping check on suppliers and customers and their financial situation.
Resource analysis for crisis response. Are the right resources available?
Develop crisis management plans for certain crisis scenarios.
Train employees for crisis scenarios.

Response:

Detect early signs of a crisis.
Define the severity of the crisis. Is it an emergency or more? What will the impact be?
Activate the crisis management system and response plans.
Take over communication with stakeholders and the public. Or instruct the PR and marketing team on what to do.
Arrange any additional resources and services that are needed. For example, do some employees need mental health assistance? Many companies would have done well to have therapists in place for the pandemic to counter depression in the work force.
Coordinate with operational management, financial management and senior management.

Review:

Analyse the crisis. Why did it happen? Did we plan for it? How did we do? Etc.
Revise scenarios and plans accordingly.
Take stock of resources and refill them if possible and needed.
Communicate with stakeholders. Share the analysis and revised plans.
Plan new drills and training programs to communicate the changes to the organization.

The 4 Sub-Systems of Family Businesses

Before we head into the details of the crisis management team and discuss the structure, composition, and team members, we will do a tangent into family businesses. Having managed the crisis for our family business, there are a few learnings specific for family businesses in this. Some of these may also apply to corporate organizations, but the effects and consequences are in my opinion reinforced in a family business due to the emotional nature.

The diagram above shows that a business family consists of essentially 4 systems that are interlocked with each other in the environment. This shows that families are complex and self-organizing systems. We have each individual (family member) as their own system, then the family itself as a system, the business as a system and then the community around the family business as a system.

You can also see this as 5 circles, which start with the individual and goes into the family, then the business and then the community and then society. Just to make sure we are on the same page, with community I mean the community, which is dependent on the business and the family. This varies greatly depending on the philanthropic efforts of the family, the region of the business and the impact the business has. The community can include the spouses and families of the employees, contractors who greatly depend on the business, local inhabitants who depend on the local economics, local politics etc.

By looking at the two diagrams in question, there are a few things to take note of. First of all, a crisis can start/take place in each of the systems. You can have a crisis in one of the 4 interlinked systems of a family business and the environment. In both diagrams you also need to imagine that they are part of the world itself. As we have seen with Covid-19, a crisis also can have its roots in the environment, namely the world we are part of.

Secondly, each of the 4 interlinked systems has different requirements for crisis management and depending on where your crisis takes place your team will have a different composition. Take the individual as example. You can set up a team to help an individual through a crisis. This can be done by putting a team consisting of therapists, coaches, mentors etc. together.

Thirdly, a crisis can spread from each of the systems into the other, thus you will want to try and contain a crisis in the system it starts. You should have a crisis management plan in place for each system and the different kind of crises that can come about in each. In my own experience most family businesses focus solely on managing crisis within the business and overlook the other 3 systems, especially the individual and the family itself. Many individuals with their personal crisis have thrown the family and the business into a crisis through their dysfunctional behavior and vice versa. In the crisis we had in our family the individuals and the family caused more trouble than the business crisis. In essence, please remember to keep watch over all the systems - plan and act accordingly.

Composition and Structure

There is a lot of literature out there when it comes to the composition and the structure of a crisis management team. And as with everything opinions on this differ. In some literature you will find that the crisis team leader is suggested to be the CEO and in others that it should be an independent leader. I personally prefer the independent leader, as the CEO oversees the whole organisation and thus will lack the focus for purely focusing on the crisis. Different opinions like this example go all the way through all positions on the team. In the following lines we will go through a structure and composition that I suggest to be used in a family business context. The structure will leave a certain flexibility and is very generalized as I believe that crisis is a unique scenario depending on each business and the family. The complexity and dynamic of a crisis calls for a high degree of flexibility in the composition and structure of the team.

A typical structure of a family business and where the crisis management team is situated in the organizational chart

In the diagram above you can see a typical structure of a family business and where the crisis management team is situated in the organizational chart. It should be an autonomous unit that can move around freely within the structure depending on where it is needed or sees the need to act. Each member should be a full-time crisis management team member (if your organization has the capacities of course). At least during the crisis response phase, you do not want people to wear multiple hats and have multiple responsibilities within the organization. A crisis usually is a do or die scenario. People actively working on solving it need to be a 100% focused on it. Divided attention can mean game over. Autonomy and focus will mean that the response is faster and that working together becomes simpler, effective and efficient.

You might have noticed the crisis committee above the crisis management team. The committee is there to make big decisions. This will have the CEO, some family members and board members on there, maybe even someone from the union etc., dependent on what your business deems as essential decision makers for your survival. Depending on the size of your family business, you might not need the committee. A crisis team leader needs a certain amount of leeway to make important decisions to maintain speed, but certain decisions will be too large for the leader to make on their own. Also, as speed is of the essence, people on the committee need to be readily available. This is not always the case for family members and board members.

Dependent on the size of your organization and structure, you might need work-groups. Maybe you are a small firm, or you are a big conglomerate of several business units. Thus, a crisis management team might consist of several work groups that work on specific singular topics. How you label these work-groups is again specific to your problem and organisation. It might be a mirror to your departments (legal, finance, engineering etc.), or you have identified several different crisis at once, then for each crisis you can have a work-group. Or maybe you go by systems, or as a conglomerate you go by business units. It is up to you and your specific needs. Ideally you will have pre-planned this in your crisis management plan, and it is executed and put in place accordingly.

Now that we have the structure down, we can think about who to have on the team. This again is quite specific for your crisis and the business you run. We will list some exemplary roles further down, but before we get onto this, we should discuss the roles that you will definitely need.

First of all, you will need a crisis team leader, who will lead the team. This person is essential and needs several traits to thrive in a crisis scenario. The leader needs to be a good decisions maker in uncertain situations and the person needs to be well respected by the family, the business and the stakeholders. He or she will have to deal with all of them depending on the crisis and will need a lot of trust from everyone to get his work done. When the trust is not sufficient, then the leader will cause more problems in the systems. In our case when I took over the management, I did not have the respect and trust from all the important parties, which made many things more difficult and caused other disputes. Also due to the nature of my appointment, there was a lack of support. The team leader needs to be discussed with all the decision makers in the family business (family, CEO, board). Choosing the right team leader is half the job of implementing a crisis management team. Responsibilities are:

Choosing a crisis management team.
Developing crisis management plans.
Constantly monitor and mitigate potential crisis.
Declare a crisis and activate the response.
Discern between emergencies and crisis.
Take command of the response.
Lead through problem identification, problem definition and solving.

A crisis will always need a financial specialist and a legal specialist on the team. They are very important to make sure that the solutions and the plan are legally and financially viable. Another must-have is a PR/marketing/communication specialist. We lacked this in our small team and when it came to the management of the news outlets we failed. Due to the lacking expertise, we went for a strategy of ignoring the media, which was a big mistake. The team should also have at least a family representative, this may be a next gen member or anyone willing to work on this. The other roles will depend on the nature of your business.

Examples of additional areas:

Security
Human Resources
Operations
Production
Information
Health and Safety
Engineering
Sales
Logistics

Choosing Your Team Members

We already covered a few points you want to keep in mind when selecting your crisis team leader. The most important part when selecting the leader, which also applies to all crisis team members, is that they need to be good at dealing with uncertainty. In a crisis there usually is no certainty. Some humans can deal better than others with uncertainty. Selecting for this trait is rather difficult, because it is only revealed in uncertain times. You might have had situations or heard of situations where top performers, to everyone’s bafflement break down and fail. There are many top performers who have honed skills and can perform extremely well in certain scenarios. But as soon as things go sideways, they are lost for what to do. Look for people who have managed uncertain times well in their past. This is the best way to select for this.

Of course, you will want the team leader to be a good leader and have all the traits you look for in any leadership position. Especially his decision-making skills need to be superb. Overall, he must have confidence to decide upon his hunches and gut feelings. Often there is not enough data to support a decision and you must go with what “feels” right. You do not want anyone, who fears making mistakes and tends to look for faults in others. The leader needs to be courageous enough to stomach failure and to correct mistakes fast and change direction quickly if need be. Crisis needs rapid iteration, and those traits are a perquisite for it.

Most of the traits you look for in a team leader you will also look for in any of the other team members. A great tolerance for uncertainty is a must for all of them. They need to be good collaborators as a crisis requires collaboration across the whole organization, family and across multiple departments or business units. To collaborate effectively the members, need to be good communicators. Be careful though to not have a team full of extroverts. Good communication does not mean that a person likes to talk a lot. A good balance of extroverted and introverted members will increase success, as well as a good gender balance. You will also want team members who are prepared to go the extra mile in a crisis response scenario, but at the same time know their limits and boundaries well, so they do not work themselves into burn-out. Knowing your boundaries is important for withholding the huge pressure during a crisis. To solve a crisis a good balance of people who like to get things done, who have a strategic mindset and who are extremely creative in solution generation is needed.

Ok, all of this sounds like a fairy tale. Where are the people who can do all this? As mentioned earlier, try to balance the team well. Often people who like to implement solutions are not the most creative or strategic. Do not look for the unicorn amidst your workforce, the team requires several members of different attributes and personalities and skills, so make sure its well balanced and packs a punch.

I suggest focusing on a few things:

Introverted vs extroverted – ask one question to find out: After an appointment with many people do you need time to recover or are you energized?
Proclivity: Check out the GC-Index as a tool to measure for this
Attributes: How well do people deal with uncertain times. A great resource is “The Attributes” by Rich Diviney
Be careful when assessing for skills. Many skills will not help much in a crisis. Be sure to check for crisis specific skills, such as design-thinking, scenario planning, negotiating,

Team Culture

The team culture is a key to optimal performance in a crisis. Due to the crisis management team needing to perform well under extreme situations, the culture is ever so important. The members are under a lot of pressure, due to resources and time being scarce. On top of that the stakes are usually high in a crisis. Of course, in the crisis preparation and crisis review phases this is not so much the case, but the team needs to withstand the crisis response phase just as well.

It’s important to use the quieter phases to build a great culture and coherence in the team. Make sure you have an open culture in the team and a high degree of psychological safety. Use team building exercises in the quieter times to get the team to bond. In crisis management you need to allow for mistakes and the openness to call out each other’s mistakes and to give fast and honest feedback. At the same time team members need to have a good openness to accept the feedback. This will allow for rapid iteration in the crisis response phase. An open culture will make the crisis preparation work easier. You want the team to be in a mindset of finding problems and planning for them and solving them. I touch on how to use Pareto, psychological safety and Parkinson’s law effectively in my earlier article.

As a last remark, you really should take the time to think about how you want to set up a crisis management team in your family business. Who should be on it and how much autonomy you want to give them? If your business is small you will probably not be able to have a full-time crisis management team. But at least select members from your workforce and have them do regular workshops to have some preparation and to train in case of emergency.

GC-IndexCrisis Management Team4 Sub-Systems of Family Businesses

Octavian Pilati