Norm Augustine and Managing/Preventing Crises

I was inspired by this article today:

“Almost every crisis contains within itself the seeds of success as well as the roots of failure. “

“Why do corporations often encounter crises? Because many of them are the size of major cities.

“When preparing for crises, it is instructive to recall that Noah started building the ark before it began to rain.

Asking the people responsible for preventing a problem if there is a problem is like delivering lettuce by rabbit.

—Norm Augustine

Phases of a Crisis

Stage 1: Avoiding the crisis — it’s not about prevention. It’s about skipping it from ever happening. It’s often about the business’ culture that can enable true crisis prevention at the highest level.

Stage 2: Preparing to manage the crisis — when you can’t avoid it, but you’re too preoccupied with today’s challenges, remember that “Noah started to build the ark before it began to rain.” And all experts indicate that you should have relations AHEAD of hoping that the Red Cross or 911 or police is going to come and help you. Augustine recommends to “search for subtleties — the second-order effects.”

“For example, in the aftermath of Hurricane Andrew in 1992, the telephone companies discovered that one of the principal shortages in southern Florida was not poles, wires, or switches but day care centers. Many of the phone companies’ field-operations employees had children and relied on day care. When the centers were destroyed by the hurricane, someone had to stay home to take care of the children—thereby reducing the workforce at the moment when it was needed the most. The problem eventually was solved by soliciting retirees to tend ad hoc day care centers, thereby freeing working parents to assist in restoring the telephone network.”

Stage 3: Recognizing the crisis — it’s easy to refuse to notice it. Augustine quotes in jest a chemistry student saying, “When you smell an odorless gas, it’s probably carbon monoxide.” He points out that companies often categorize the problem incorrectly — engineers will think it’s a technical problem, for instance. We’ll see it the way we see problems. His point is that you can’t see the problem if you’re on the inside of it all.

“In the recognition stage, independent investigators, as well as insiders, are needed to assist in understanding the situation. Asking the people who were responsible for preventing a problem whether or not there is a problem is like delivering lettuce by rabbit. There are, of course, costs associated with using independent experts, but, as the old adage goes, if you think an expert is expensive, try hiring an amateur.”

Stage 4: Contain the crisis — stop the bleeding somehow. Decisions need to get made, fast. Augustine goes on to quote Warren Buffet: “First, state clearly that you do not know all the facts. Then promptly state the facts you do know. One’s objective should be to get it right, get it quick, get it out, and get it over. You see, your problem won’t improve with age.” He suggests that it’s good to dispatch the senior leader in charge to the actual problem scene “to send two important messages: I care, and I am accountable.” He also notes that you need to appoint a team to manage the crisis as their specific job, and that a single individual be appointed as the speaker, to inform their constituencies clearly, and to have a devil’s advocate involved who can retain an outsider view.

“Organizations that have thought through what they stand for well in advance of a crisis are those that manage crises best. When all seems to be crashing down around them, they have principles to fall back on.”

Norm Augustine

Stage 5: Resolving the crisis — speed, speed, speed matters. He says that the crisis is not going to let you rest, so you need to take it down FAST.

Stage 6: Profiting from the crisis — make lemon out of lemonade. He quotes Oscar Wilde, “Experience is the name everyone gives to their mistakes.” I like what he goes on to say when quoting former CEO of JNJ Jim Burke and the Tylenol crisis: “If you run a public company, you cannot ignore the public. Institutional trust is a lot more important than most people realize. The operative word is trust…and whether people will take one’s word when one badly needs them to do so will depend on how much confidence has been built in the organization over the years before the crisis occurs.”

Augustine’s Laws

And I went on to learn about Augustine’s Laws that include:

5. “One-tenth of the participants produce over one-third of the output. Increasing the number of participants merely reduces the average output.

10. “Bulls do not win bullfights; people do. People do not win people fights; lawyers do.

15. “The last 10 percent of performance generates one-third of the cost and two-thirds of the problems.

17. “Software is like entropy. It is difficult to grasp, weighs nothing, and obeys the Second Law of Thermodynamics; i.e., it always increases.

22. “If stock market experts were so expert, they would be buying stock, not selling advice.

29. “Executives who do not produce successful results hold on to their jobs only about five years. Those who produce effective results hang on about half a decade.”

His thinking is so good that I’ve bought all his books. —JM