In the wake of misconduct, we can blame it on the CEO, but the Crisis Management Team has lots to consider

When the proverbial hits the fan at an organisation, the reputational fall out can be massive. The media, stakeholders, and regulators circle like a shark with the taste of blood, while the organisation must respond and fast. It is likely that the reputational damage is already done, and the trust of stakeholders is lost, but could a well-trained, match fit crisis team with well-defined processes steer them back to investor confidence? In 2016 Brian L. Connelly, David J. Kethchen Jr, K. Ashley Gangloff and Christopher L. Shook, found that following an integrity failure, investors perceive external and interim successors positively, but internal successors negatively. Whereas after a competence failure, investors perceive external successors positively but are uncertain towards interim and internal successors. This suggests that when an organisation fails through an act of misconduct the choice of replacement at the top plays a significant role in restoring investor confidence (Connelly, B.L et al. 2016)

One of the most common steps in the past when restoring confidence in the wake of misconduct, was removing the person at the top, the CEO. The restorative journey has a wide audience of key stakeholders – investors, employees, and the wider community – which brings with it pressure to act quickly and decisively to restore confidence in an organisation. Research states that organisations must first consider if the failings are one of integrity or one of competence before deciding the path of replacement. If the answer is competence, then sometimes forgiveness is the best approach since investors are less supportive of an internal replacement or the costs associated with an external move. However, if the situation is integrity related or even ethical then an outside change is best for a fresh start.  While we at Business Olympian do not advocate the removal of the CEO, it does prompt consideration on the impact of decisions in response to misconduct.

When we consider the Crisis Management Team (CMT) and their approach when misconduct is discovered, how would their actions align to these findings? Would clearly articulated plans and tasks help manage the response?

All good crisis management efforts go through three phases: Pre-Crisis (preparedness and prevention), Crisis Response (managing the crisis), and Post Crisis (Recovery and Post incident review). Therefore, a well-trained, tested, and structured CMT, with the support of well documented plans and processes is crucial in mitigating the impact of any business disruption or resilience event. Simply put, a CMT with awareness of the impact of misconduct, and a willingness to be ready in advance, will perform better than a CMT who believes unlikely scenarios will not happen to them. We understand that budget constraints often see Crisis response and business resilience under supported., but crisis management efforts can be the difference between restoring confidence and survival in the wake of misconduct, or any other business disruption.

At the Business Olympian Group, I have found myself saying two phrases more than any other:

  1. The difference between good and great is performing consistently under pressure; and
  2. Common Practice not Common Sense.

Bad news will always grab our attention in the public, so it is safe to assume organisational misconduct will become a reputation management response as it leaks outside the organisation. What we have learnt is that organisations are more aware of their challenges and are developing a proactive mindset, with broader playbooks and training teams more frequently. But business resilience is not just a crisis team catchphrase, it is a whole of organisation commitment for it to be successful.

We developed our online Battleground suite of tools for exactly this purpose – arming an organisation with the information they need, anywhere, anytime. With this, responses can be managed quickly, efficiently, and proportionately. For organisation misconduct, a well-trained CMT, with easy access to well documented plans and tools to activate them, track actions and enable tight communication is essential. With this there is a heightened chance that we could:

  • Avoid the reputational damage, handling the disruption with minimal publicity.
  • See reduced pressure for replacements from the top or,
  • Maybe even gain key stakeholder, community, and investor confidence after proving organisational resilience and the ability to respond during any situation.

Our Battleground suite of resiliency tools have been specifically designed to support your crisis preparedness.

At Business Olympian Group we can help

Craig Goldberg – Director craig@businessolympian.com.au

Gavin Freeman – Director gavin@businessolympian.com.au

References

B L. Connelly, D J. Kethchen Jr, K. A Gangloff and C L. Shook (2016) ‘INVESTOR PERCEPTIONS OF CEO SUCCESSOR SELECTION IN THE WAKE OF INTEGRITY AND COMPETENCE FAILURES: A POLICY CAPTURING STUDY’, Strategic Management Journal, Strat. Mgmt. J., 37: 2135–2151, DOI: 10.1002/smj.2430