January/February 1992
Preparing for emergencies is a management tool that no company can afford to overlook. Here's some guidance on how to establish a crisis management program at your firm.
By Tom Knippel
Tom Knippel is manager of public affairs for Sadoff & Rudoy Industries (Fond du Lac, Wis.).
Your shredder has just exploded, killing three employees and blowing out a 100,000-gallon waste oil holding tank, which sends the oil rushing into a nearby protected wetlands. The Environmental Protection Agency is holding on line one and two television stations have camera crews in your lobby waiting for a statement. What do you do?
If your company doesn't have a crisis management plan, you might find yourself packing for Rio.
While this scenario verges on the absurd, it underscores the importance of being prepared for emergencies in today's volatile business environment.
Fortunately, establishing a crisis management program is not just something every business should do, it's something every company can do. In fact, virtually all U.S. scrap firms already practice some form of crisis management in their day-to-day business operations: insurance to cover potential liabilities that could bankrupt the company, on-site fire extinguishers in case of a blaze in the office or plant, or backup alarms on heavy mobile machinery to warn unsuspecting employees working nearby.
Such government-mandated protection measures and insurance policies are only part of the crisis management solution, however. This is a notion that Sadoff & Rudoy Industries, which encompasses five Wisconsin scrap processing facilities, recognized years ago when it began developing an ongoing crisis management plan. The resulting program is a management tool like any other company-administration strategy and is designed to help the firm not only to respond to emergencies, but also to prevent or limit losses and exposure by averting potential crises.
Step One: Avoiding Crisis
The first element of Sadoff & Rudoy's crisis management program is avoidance: Prevent crises from happening and you'll have no problems. For example, uncontrolled storm water runoff from a motor block pile could result in environmental agency litigation, fines, and cleanup cost requirements, as well as soft dollar losses in the form of a tarnished reputation in the community. But the installation of a sump-containment facility under the pile alleviates the potential of such a crisis occurring.
While many potential catastrophes can be handled at this level, without a good crystal ball, it takes some strategic analysis to prevent what might otherwise become the inevitable. Knowing when and how to act on possible problems is the key to successful avoidance, and can be accomplished through crisis forecasting.
In its crisis management program, Sadoff & Rudoy projects not only the probability of an event occurring, but also the effects that it could have on the company. By assigning values to both probability and effect, the firm calculates a rating for each potential crisis, a figure that helps determine which warrant special attention and which are too low on the scale to be worth allocating resources to.
The probability of a crisis is estimated primarily through common sense and an awareness of the types of problems that tend to arise in certain business situations. To appraise the value of effect, possible outcomes are examined in best case/worst case scenarios, based on a variety of questions, such as the following:
- What would the crisis cost in hard dollars?
- What scrutiny would the company come under?
- How would it harm the company's image?
- Would it interfere with daily business operations?
While the probability of a shredder exploding and taking out a 100,000-gallon fuel tank is obviously low, this potential crisis ranks high on an effects scale, since damage would be extensive and costly. Thus, implementing effective strategies for avoiding a shredder explosion would be considered a worthwhile investment.
Because the probability of more common scrap plant accidents is high, and the potential effects—such as losses of hard dollars and employee time—can be overwhelming, the crisis forecasting rating for such events is even greater. Thus, preventing accidents through measures such as a safety-award program ranks high on Sadoff & Rudoy's crisis management priorities. By rewarding employees for maintaining safe working levels over quarterly periods, the firm has been able to significantly reduce both the number of claims and total lost time. Additionally, an employee safety-suggestion program uses workers' insight to spot potential crises that have eluded the eyes of management.
Communication and dialogue can be crucial to any company's efforts to avert problems. Also important to avoiding crises is a sound knowledge of the regulations and issues that face your business; ignorance is not an alternative to compliance. What we don't know can hurt us.
Step Two: Planning for a Crisis
If all problems could be prevented through avoidance strategies, a crisis management program could stop at this point. Unfortunately, even with the best-prepared avoidance plan, life insists on keeping excitement in the business place. This does not mean, however, that such situations have to get the best of us. Through effective planning, the potential consequences of a crisis can be reduced and losses can be minimized.
At this level of a crisis management program, a firm must continually formulate what operational procedures the company and its employees should follow in a variety of potential crises. What should people do in case of a fire or a death on the premises? What if radioactive scrap is detected in an incoming load? How should the company proceed in case of an equipment breakdown or loss of production capabilities? What steps should be taken in case someone tries to sell the company stolen property as scrap? The list could go on indefinitely. The critical issue is that when the potential for an emergency is significant and the possible repercussions are substantial, planning facilitates problem resolution. And even if you can't plan for all potential emergencies, you can at least be prepared for most.
It's also important to remember that preparing for potential crises in advance offers much more time and a less pressured environment in which to make basic decisions than trying to resolve a crisis in action. In other words, when the house is on fire, it's too late to practice fire drills.
At Sadoff & Rudoy, the company's procedures for a multitude of possible emergency situations are compiled in crisis manuals tailored to each employee based on his or her position. By spelling out specific situations and consequences of action in advance, problems are, in essence, handled before they occur. This does not prevent situations from occurring, but has allowed for swift action and resolutions of crises in effect, without the fear of subsequent reprisals.
A crisis manual in its simplest form may include phone numbers for emergency services such as fire, police, or towing, as well as the home and mobile phone numbers, addresses, and out-of-town contact information of managers so that they can be located in case of an emergency.
Even a modest crisis manual should also include guidelines on identifying the employee or employees responsible for handling particular situations. For example, if a problem arises and the press has called for information, who should talk to the reporter? Unless employees are aware that someone on staff has been designated to respond to press inquiries, the call could end up with a disgruntled employee or one who is not versed in either the problem or dealing with reporters.
Planning for emergencies can also extend to simple strategies such as stationing a wrench with the receptionist to be used to turn off the gas flow in case of fire or explosion, or providing the fleet manager with a paging device so that he or she can be quickly contacted in case of an accident on the road.
Step Three: Responding to a Crisis
Of course, not all crises can be completely avoided or curtailed through planning. In these situations, it is imperative to respond in an appropriate manner to the crisis once it begins, in an effort to minimize both the duration of the problem and subsequent repercussions and losses.
First and foremost to the response level of crisis management is identification of the problem: What is the real issue and who is it affecting? The answer to this question, which is crucial to proper allocation of personnel and strategies to respond to the crisis, is not always obvious.
For example, when Sadoff & Rudoy discovered in early 1990 that a small amount of oil had entered a municipal storm water system from a standing motor block pile at one of its facilities, the Wisconsin Department of Natural Resources promptly responded and the press began generating negative stories about the company. Although it might have appeared that the crisis was the runoff, the real problem was a lack of awareness by the press and the general public that preventive measures had already been planned, and permits and contracts for construction of containment facilities had been secured.
Once the problem is identified, it should be promptly isolated to minimize cumulative negative effects and effective management should quickly follow. In many instances, this may require more than simply reacting to the problem. Taking control of a situation and acting on a problem in a creative manner can allow a company to have a greater effect on the outcome of the crisis and increase its likelihood of success.
In the case of the storm water runoff at a Sadoff facility, for instance, company officials decided to manage the public relations crisis by taking an active approach to the problem: Facts surrounding the situation were compiled in a press release sent to the media. Included in the release was information on how the firm had resolved the problem and would prevent future runoffs, detailing costs, time frame, and subsequent projects related to similar public concerns.
The result was that the local newspapers published more stories on the incident. This time, however, they were written in a positive light and included a front-page article and an editorial titled "Problem Handled Responsibly."
Here, responding to the crisis at a crucial point not only ended the negative press, but also transformed the situation into a positive reflection on the company's efforts to operate professionally and responsibly. It's not always possible to attain such positive results, but by identifying potential opportunities that may arise from a crisis situation and swiftly taking control of those factors, you should effectively reduce the duration of the crisis, even if it doesn't produce additional benefits.
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In today's business environment of ever-increasing legislation and mandates for change it is more crucial than ever to adequately address your business's need for an ongoing crisis management program. No company is too large or too small to neglect the inevitable impact of outside forces on day-to-day operations. Through effective avoidance, planning, and response, crises can be managed, helping to protect your livelihood today and in the future.•
Preparing for emergencies is a management tool that no company can afford to overlook. Here's some guidance on how to establish a crisis management program at your firm.