Why speed off the mark is essential for reputation (and value) protection

December 19, 2016 by Jonathan Hemus

I was fascinated (but not surprised) to read a recent Financial Times article which compared the time taken to respond to a crisis with the impact on share price.

For example:

VW took 476 days from receipt of internal emails questioning emission test results before admitting that there was a problem and endured a share price fall of 45 per cent

Versus:

General Motors took 13 days between the appointment of a new CEO and announcing the recall of thousands of cars on safety grounds and experienced a share price fall of only 6%

And:

Merck took 1,065 days before recalling its Vioxx pain drug and suffered a share price hit of 46%

Versus:

Johnson and Johnson decided to recall Tylenol five days after a poisoning scare and limited the share price damage to 9.5%

Crisis communication

This analysis adds to the weight of evidence which indicates that the speed of action and communication in a crisis is a reliable predictor of the ultimate value impact. So, how can organisations ensure that they are geared up to communicate quickly in the event of a major crisis?

I would highlight the following three areas as being critical:

1. Crisis management planning – your ability to communicate quickly and appropriately will be founded upon crisis management training and planning before the event. Organisations which have taken the time to plan, train and rehearse ahead of time are much more likely to be fleet of foot when the pressure is on.

2. Creating the right culture – you can only respond quickly to a crisis if you have the kind of culture which alerts you to warning signs of an impending crisis. Embedding a crisis resistant culture which allows issues to be flagged and addressed quickly gives you a head start in reputation protection.

3. Leadership – making decisions, taking action and communicating under extraordinary pressure before you know all of the facts takes great courage. It calls for leaders of the highest calibre, with the personal integrity and bravery to do what is right, when others might take the safe option and sit tight a little longer.

Reputation protection

Evidence is piling up that swift and decisive action is the best way of preserving reputation and business value in the event of a crisis. Only organisations which have taken the time to plan for crisis events, build a crisis resistant culture and possess an individual with the qualities to succeed as a crisis management leader will prevail.