Thursday, July 1, 2010

Does The Board Have A Role In Crisis Planning

Gary Larkin, writing on the Governance Center Blog of The Conference Board website, raised a very important question. What is the role and responsibility of corporate board members when it comes to crisis planning, training and prevention?

I am sorry to admit that all too often I focus my writing on the C-Suite and only rarely comment about “the board.” The last time I had a client that had a board member concerned about crisis planning, it involved a CEO’s refusal to adopt a corporate travel policy. He loved to get his top three or four execs on a big silver bird, and “work” as they flew non-stop across the country, without any phone interruptions.

The board member was rightly worried. It was a publicly traded company and the sudden death of the entire top management team could be devastating. But, I digress.

Corporate executives AND boards should care about their companies’ crisis planning.

A crisis counselor in Australia recently asked me if I had any data indicating how many companies actually had any kind of a crisis plan. Alas, there is no verifiable answer to his question.

It’s hard to know, for sure, how many companies have useful and tested crisis plans. It’s like asking folks if they watch Public Television. Many say “yes.” But when the ratings come in, they don’t show up. Ask a corporate executive if she/he has a crisis plan and they’re likely to say “yes” because they don’t want to admit they don’t.

In Mr. Larkin’s post he referred to a survey of audit committee members and management of public companies conducted by KPMG’s Audit Committee Institute (The Audit Committee Journey: Adapting to Uncertainty, Focusing on Transparency) between January and March. 30% of the respondents said the greatest risk management challenge facing their companies is “understanding the velocity of risk events, and preparing for and responding to the impact. 20% said “understanding the link between strategy and risk,” 9 percent said “tracking and reporting on risks,” 13% said identification of risks,” and 14 % each said “mitigation of risks,” and “assessing risks.”

You may interpret those conclusions one way, but what I see is an attitude that crisis planning is still not high on many corporate agendas.

I recall a meeting a few years ago with a management team at an American pharmaceutical company. I was pitching them on crisis planning and how we could help them do that. A corporate executive stared at me and declared, “Mr. Smith, we don’t have crises. We manage our issues.” I, perhaps, was a little curt in my response. I told her I didn’t have a problem calling it issues instead of crises. Needless to say, we didn’t get hired at the time.

But, when management is not thinking about preventing crises or preparing to manage crises when they cannot be prevented, the Board could be.

Mr. Larkin poses a real challenge to corporate board members.

I would ask, are you content to have your board status on your resume and perhaps receive a nice check now and then, or do you care about the business you signed on to help lead? If your executive team is too busy or too distracted or too indifferent to care about crisis planning and training, are you sure you are associated with the right company? Or are you sure you have the best management?

Every company should have three crisis plans: (1) An operational crisis plan -- what do you do when someone pulls the fire alarm, or the tornado or hurricane is bearing down on your plant; (2) A crisis communication plan -- who says what, when and how do they deliver the message and to whom; and (3) A business recovery plan. In the best of all possible worlds, those three plans should be integrated into one comprehensive plan.

We can help you figure out what kind of plans you need, and help you create the communication plan to go with it.

2 comments:

  1. Good post. However, having a crisis plan is just the first step, not the last. Having trained crisis management teams is much more important in my view (and a poll on my blog revealed that 95% of respondents agree): http://www.jamesjdonnelly.com/2010/05/go-team/

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  2. J.D.,
    You've apparently missed some of my earlier posts and you're correct.

    At the Institute for Crisis Management we believe a crisis plan is useless until the "team" has trained and practiced with it.

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