2 stories and 6 tips on crisis decision making

 In Business decisions, Decision-making, Insights, Realizer Blog

Crisis Decision Making

The pressure is dialled up. The risks are heightened. Time is short. Emotions are high.

The biggest test of any leader is when there’s a crisis. Is there anything you can do to prepare yourself for crisis decision making?

Let’s look at two stories which reveal the do’s and don’ts of making decisions under pressure. They reveal that pressure tends to amplify the difference between good and bad decision-making.

The Hoover free flights disaster

This is a well-documented case study which I have written about in detail elsewhere. In summary, Hoover ran a promotion to get 2 free flights from the UK to the US (value GBP300+) if you bought a vacuum cleaner (for a minimum of GBP100). They miscalculated the redemption rate and average purchase price and ended up losing millions. It turned into a huge crisis for the leadership of Hoover, as it generated enormous negative PR as well as eventually forcing them to sell the company for a fraction of its previous value.

There is one moment in the story which is worth zooming in to look at. After the initial shock of the promotion going too well, they increased production of stock to cope, and hired call centre staff to handle redemptions. What did they next was ruinous. They secretly instructed call centre staff to make it very difficult for people to redeem their flights – for example by saying their preferred dates weren’t available.

Unfortunately for them, the BBC sent in an undercover reporter who filmed these instructions being given and then broadcast a whole show about the “Free Flights Fiasco” in prime time.

Underpinning the Hoover story is poor, tactical and reactive decision-making. They appeared to make decisions on the fly, trying to extricate themselves from today’s disastrous turn, instead of thinking of the long term brand reputation of their company. Moreover, the number 1 problem here is that they didn’t stay true to their values. They decided to be dishonest. And they got caught.

The Tylenol murders & blackmail

In 1982, four residents of Chicago died suddenly from cyanide poisoning which the police quickly linked to tampered bottles of the painkiller Tylenol, made by Johnson & Johnson (J&J).

J&J immediately got on the front foot and within days had executed a full recall of all Tylenol products nationwide, some $100m of product. This was far in excess of their mandatory obligations. They also co-operated with the police and FBI to trace the problem, advertise the recall to the public and communicate it to pharmacists.

During the first few days, a blackmail note for $1m to stop the murders was received, and although police were never able to charge the blackmailer with the actual murders, he was jailed for 20 years for his attempt.

Johnson & Johnson won widespread praise for its handling of the crisis, for example the Washington Post commented, “[this is] is how a major business ought to handle a disaster.”

After the dust had settled, J&J’s corporate reputation took a small dive but then bounced back to exceed its pre-crisis levels. People now knew that they could trust J&J.

The key to their success was a values-based decision-making process, centred on the J&J credo which puts the people they serve first when it comes to the big decisions.

The impacts are lasting

The major difference between these two case studies is that in the J&J example they made long-term, values-based decisions while Hoover made short-term, tactical decisions.

The ultimate impact was an increase brand trust for J&J, but in the Hoover example, most of the leadership team lost their jobs, the company went through  an exhaustive legal suit, and ended up being sold off at a rock bottom rate.

What you can do

Many companies have their values written down. But very few actually use them in big decisions. They often get printed on pretty posters, but then ignored when the chips are down. This doesn’t happen at J&J where the credo is actively used in the big decisions.

The implication for leaders is the need to get the organisation used to using its values in the big decisions. While it may be tempting to avoid the potentially increased costs of doing things the right way, it does make it easier to unite people around the decision. And it means your decision will be more publicly defensible should things go downhill. What’s more, it will build internal engagement and possibly, as in J&J’s case, it will increase the trust your customers have in you.

For a counter example of this, you could just look for example at the way the Commonwealth Bank of Australia has handled its financial planning scandal this year. It doesn’t shine a positive light on the bank’s values.

6 extra tips to handle a crisis

In addition to taking a long-term, values based approach to decisions, here are some specific techniques which will help you quickly reach the best possible decision.

  1. Map the risks.

Humans are often not very good at fully understanding risk. One way of managing risk is to explicitly list out all the risks of each option, and assign a probability estimate to each.

  1. Plan to fail.

Complete a pre-mortem to work through the worst case scenario under each option. This technique gets you to imagine it’s a year’s time and the choice you took turned out to be the wrong one. Then fill in the gaps in the story to imagine why it might have gone wrong.

  1. Call someone who’s solved it before

Often times we know, or know of, someone who has faced a somewhat similar problem before. Call them. Few problems are totally new.

  1. Ask, “what would your ideal self do?”

A great shortcut to using your values is just to ask, “what would my ideal self do in this position?” We all have a deep understanding of our best version of us. We know sometimes we deviate from this, so asking this question explicitly is a brilliant way of bringing your best self to any situation.

  1. Listen to others – and get them to create more options.

Leverage the people around you to create multiple options. We often rush to choose between 2 immediately obvious options without seeing beyond them. Specific questions to ask include, “what would we do if neither of these options were on the table?” and “is there a way we can actually have both of these options – are they really mutually exclusive?”

  1. Calm your mind

Research shows that we can make better decisions with a calm mind. Practically speaking this can include as little as 5 minutes of deep breathing. Or going for a walk or to the gym.

In summary

Developing your own, and your organisations, decision-making capabilities makes sense when times are good.

And it will make even more sense when the going gets tough.

Written by Rob Pyne.