Each stage actually focuses on the worst actions/situation that often occurs when companies make extremely poor decisions (i.e. Toyota). I have to say, from my experience, there are plenty of examples where some of Jack’s stages were not realized because the severe crisis was contained as effectively as possible and some of these behaviors were never exhibited. Here’s what Jack had to say:
Stage 1: Denial – The crisis hits. And, it’s really bad. Most senior executives and their subordinates walk around for days (and sometimes weeks) in complete denial. They believe that their company is too fortunate (and good) and are generally thinking, “Bad things just don’t happen to us.” Toyota had been the shining star within the automotive industry for close to a decade. While Jack wasn’t inside the company, he feels that denial was an absolute reality in Toyota and it helped to create bad decision making (or no decision making at all), which led to bigger and bigger problems.
I’ve seen many corporate executives stay in this denial phase far too long and similar results ensued.
Stage 2: Containment – In the worst case scenarios, Jack points out that even the most capable leaders try to make the problem go away by giving it to someone else to solve. Of course, that never works because the ultimate decisions need to be made at the top (for such severe crises.) Also, those subordinates who now own the problem are left to their own devices to create solutions… and that usually doesn’t end in any type of smart (or sometimes legal) solution.
Quite often, by the time Peppercom has been called into a severe crisis situation, we’re already past the initial containment stage. And, as Jack stated, it’s because someone down the ranks made an awfully bad decision about solving the problem. So, now we’re offering advice as to how to communicate the damage and next steps to key stakeholders.
Stage 3: Shame Mongering – Now the problem is out in the open (which could mean that the media and audiences on the Internet are writing/discussing it).So, human nature takes over and there is a shameless dance of self defense where fingers are pointed and the blame game begins. Jack feels that this stage is very problematic because executives are often too engrossed in protecting their own hide to focus entirely on fixing the problem at hand.
On the flip side (to what Jack said), I’ve consulted with a few really well managed companies where this shame mongering stage never took place. I witnessed senior executives stand up and fully accept responsibility for the crisis at hand. That was refreshing to see.
Stage 4: Blood on the floor – Understanding how Jack managed with an iron fist (and a neutron bomb), I knew the word blood would be highlighted in one of his stages. We’re all familiar with this part. Who is going to “take a bullet” or “fall on his/her sword” for being ultimately responsible for this crisis? Many times, this person will wipe out an entire crowd with him/her before accepting failure. Once the company does this, it is basically telling the world that those responsible have been punished, we’re a better company now and let’s move on.
We’ve seen this happen at Merrill Lynch, Bank of America, General Motors and a variety of other companies that went through the worst of crises in the last 18 months. Quite often, when a crisis reaches that magnitude, the CEO is on the chopping block because a new leader will signify a fresh start.
Stage 5: The crisis is fixed – According to Jack, despite prophecies of doom and gloom, almost all companies that survive a severe crisis are actually better off. The old cliché what doesn’t kill you makes you stronger is ultimately true. Those organizations have hopefully fixed the issues that led to the problem. More importantly, because they made it to Hell and back, managers and employees understand so much better how important it is to understand vulnerabilities and not take as many risks. And, they are all better prepared to manage a crisis, should one happen again.
I agree with this last point except in the case of many Wall Street companies who specialize in financing. While in each case the major crisis hits and then things finally come back to normal, the fact is that because this industry’s risk/reward system is completely out of whack (i.e. making money becomes important at almost all costs,) many companies never really learn (or seem to care) about the next crisis until their leadership finds themselves smack in the middle of one again. And then, it’s just too late.