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Q&A

Here are my responses to three questions asked by the book's publisher - they provide an insight into the theme of the book and my overall approach to crisis management.

1. Why do you think most companies fail to plan for or spend the resources on crisis prevention, instead of on crisis management?

 Two main reasons. First, it’s hard to quantify the benefit of crisis prevention up-front. Crises happen, and are dealt with in the manner consistent with the corporate culture. Sometimes crises are ignored and fester until it is too late. Usually crises are dealt with on an ad-hoc basis, lessons are promptly forgotten and the wheel is reinvented the next time a crisis strikes. Spending money on crisis management is seen as a necessity. In a crunch these costs can be quantified and the consequences are clear to everyone – “ if we don’t spend $X to fix Y problem, we are history.” On the other hand, how do you place value on crisis prevention? No two crisis situations are the same. You can’t put managers in some kind of a business simulator and train them for every possible emergency. The combinations and permutations are endless and the solution to your particular crisis is never in the manual. Instead of playing out scenarios that will never happen, my book focuses on “crisis-proofing” the company’s systems, organization, and people skills, on creating a “transparent” work environment where it is impossible to stick your head in the sand and sweep the crises under the rug.

Second, crisis prevention is not seen as a priority. We just don’t think the stakes are high. So what if your company fails? You may have to look for another job. It is not a matter of life and death, so we tolerate corporate incompetence. Do we really care who runs our company as long as we get our paycheck? Any reasonably glib guy in a decent suit will do. On the other hand would you let just anyone perform a brain surgery on you – no way: you will double check the surgeon’s credentials; here you have a vested interest in crisis prevention.

2.       How is an investment in crisis prevention ultimately profitable for a company?

It’s like installing an alarm system at home. If someone attempts to break into your house, you will derive the benefit. But if no one ever does, did you waste your money? If your company is faced with a $10 million loss that can be reduced to a $2 million loss by spending $500,000 on crisis management it sounds like a pretty good deal. But without a crisis prevention system, you will be spending money on firefighting again and again.

The real value is added when you spend another $500,000 for a crisis prevention program to ensure that the $10 million mistakes are never made again. Consequently you can free your best and brightest people to focus on opportunities instead of on problems, and ultimately break the failure/ recovery cycle.  

3. How do you identify the first symptoms of a crisis?

Most often the symptoms of a crisis go undetected until it is too late. The reason is that few companies have a system to tell them when a crisis is about to occur. As a manager you need to do the following:

a)       Define the ranges of acceptable performance. For example, the allowed schedule delay can be between 1 and 10 days. Without a clearly defined benchmark, we will not be able to objectively evaluate out performance. How can we define “late”, if we can’t define “on schedule?”

b)       Define exactly what symptoms signify a crisis. What deviation from the benchmark triggers an alarm? Is 11 days late a crisis symptom, or shall we let it slip to 20 before the alarm goes off?

c)       Get real-time status of all critical performance parameters of your business. Symptoms are only valuable if they are timely, if they identify a crisis at its onset.

For More Information Contact the Author:
Internet: hornjak1@cs.com

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Last modified: 05/11/03