Episode #4: Crisis Management and the Pivot (Amanda Halter)

Joel Simon: She also heads Pillsbury’s COVID-19 task force, so in addition to being swamped helping clients manage financial and reputational risk, Amanda, you are now front and center co-leading Pillsbury strategy and response on all things related to the pandemic. It’s great to have you with us today.

Amanda Halter: Hi, Joel. It’s great to be with you, be it many miles away.

Simon: You must be putting out fires all day long these days. I’ve heard you say many times that you can’t manage a crisis unless you understand the psychology of the crisis. Can you explain what that means and why it’s so important?

Halter: Just as people in crisis respond differently than they do under normal circumstances, so, too, do companies facing crisis. We all know that when we are shocked, traumatized or fearful, the way we react is different. It’s more emotional. It’s less formed. It’s less strategic. We may react disproportionately, too much or too little, too delayed. Myopically or from a place of denial. Maybe we aren’t able to perceive how bad things really are. That’s why it is typically unwise to make personal decisions in such circumstances, if you can avoid it. Of course, we all understand that general principle. Companies are just like individuals in this respect because they’re nothing more an amalgam of people, and an organization, just like an individual in crisis, can suffer from a prevailing sense of shock, grief, anger, anxiety and denial that impairs the organization’s ability to really assess circumstances clearly and objectively and to make decisions that will serve the company well over the long term. Now, in normal times—in peace time some like to say—well managed companies tend to use pretty sophisticated decision making, consensus building and project management approaches to achieve their business goals. To make goal-oriented, principled but unemotional, decisions. In a crisis, those processes easily get upended. They’re upended by unpredictable and abnormal demands that stem from the crisis. It’s why you will see sophisticated organizations make pretty gross errors in the early days of managing a crisis. It’s not the complexity, the challenges, the leaders—most corporate leaders successfully manage layers of complexity all the time—it’s the psychological assault that befalls the company facing a crisis, that impairs that ability to respond. One of the concrete ways I often see this manifest is a tendency to accept the initial facts reported from folks on the ground or folks at the scene or folks closely associated with the event at issue as true. To accept those things as true, or mostly the truth. Yet, they rarely are. And the mistaking that the facts are likely to take a turn for the worse.

Simon: That’s a really great point, Amanda. I guess we’ve seen governments do that over and over again throughout the current crisis that we’re in.

Halter: Yes, we’re seeing it play out on a global scale like we are all one, collective, global humanity here trying to grapple with a crisis that none of us have experienced before in our lifetime. And I’ll give you an old but a good example of this in a corporate context. In 2013 in Bangladesh that factory that manufactured clothing collapsed. It was an unbelievable and horrific event in which something like 380 people died during the collapse. Clothing retailers quickly worked to distance themselves from the factory. They didn’t want to be associated with it, and among them was Benetton, a prestigious Italian clothing company. Benetton issued a statement saying they had not used the factory for manufacturing their clothes. And then, fast forward a day or so, and the newspapers publish an absolutely damning picture of factory rubble from this collapse overlaying with a beautiful collared shirt with Benetton’s iconic green tag there for all to see. And the company then had to backtrack. I wasn’t involved in this crisis, so I don’t have particular knowledge here, but my hypothesis from often having a front row seat to these kinds of scenarios is that management heard about the factory collapse, tried to quickly assess their very complex supply chain, got information to suggest there was no affiliation with the factory that had collapsed and whew, what a relief! Certainly, no one wanted to believe the brand would be subject to such a tragedy and denied any connection, but it turned out they were wrong—as I said, the facts at the beginning are often wrong—and the fallout of that was a break in the public trust. It was quite costly to the company for many years to come, and there are many versions of this psychological bias at play in crisis scenarios. You’ll see the light touch on the internal investigation, only to have unfortunate pictures surface on social media a week later. Or an oil spill that is underestimated.

In my experience, most people are really not meaning to deceive themselves or others, but when you’re on the front lines, the human tendency toward denial is simply real. It’s just there and if you’re managing a corporate crisis, you have to realize that it’s happening and account for it in how you’re moving through it. It’s one of the values that we, as outside counsel, bring in a crisis. Our position helps us have a little objectivity and distance, and there is some benchmarking on other’s experiences on these kinds of rollercoasters. In the immediate shadow of a crisis, during crisis, the company has to take particular care to recognize the facts are filtered, but they change on a dime, and that things could actually get worse before they get better. You’ve seen the consequences of that in this context play out quiet largely. Organizations that had the ability to get real about the implications of the coronavirus on their operation, to fully evaluate things earlier, are navigating a better situation that is really hard for us all. 

Simon: Once a company understands the crisis, which I guess is the first step, then I would imagine you’d devise a strategy to deal with it and that approach can either be proactive or reactive leading to wildly different consequences. What can you tell us about the two approaches in your experience?

Halter: When crisis hits, the initial imperative is response. You are literally reacting to what is immediately happening, putting out the fire. People describe it as drinking from a fire hose. That’s a fair analogy. There’s just so much incoming that it can be really hard to keep your balance. However, the sooner a company can transition from that reactive posture to a proactive posture—grab onto the fire hose and aim it—the stronger the likelihood they’ll survive and thrive amidst that crisis. A proactive posture is a goal-oriented approach—you’ve [invested enough] analytical process over how things may play out that you can begin to see the other side of it. You have some visibility into what your new normal may look like, you have a sense of the direction you’re heading, and you’re actually moving that way instead of responding to things as they come. Just in terms of practical advice, good response plans prepared beforehand truly do shorten the time it takes to go from being reactive to proactive and it’s been really informative to observe how some organizations have been able to pivot so quickly during this coronavirus crisis. They’re still in it like all of us, but at the same time, they’re actively working toward their new normal, they’re finding new opportunities, they’re lapping peer organizations in their own industry whose entire bandwidth is simply consumed by the here and now.

Simon: That’s really interesting, Amanda, and we definitely see that in our finance practice where borrowers are often faced with a proactive/reactive decision tree when deciding to approach their lenders for a waiver in advance of an anticipated breach or to wait until after the breach occurs. Making the wrong decision can result in a loss of trust or ill will, and sometimes plain old embarrassment. Once the crisis hits and the impact is registered, what’s your recommendation for cleaning up the mess?

Halter: Oh my. There are a lot of layers to that question but let me give a very concrete suggestion and you don’t hear it often from lawyers—don’t underestimate the power of an apology done well. Apologies can really de-escalate a situation and preserve good will for the company, even when various mistakes have been made. Running from bad facts usually just gives them longer legs; it doesn’t make them any less bad. This is not to say that it is easy to do a good apology or that otherwise taking ownership of mistakes is easy to do well. There’s a lot goes into an effective apology and on these points, I usually recommend a very thoughtful approach. Recognize that the right word said in the wrong venue can land with a thud. I’ll give you an example: I’ve seen a company rush out to give a public statement on advice from their PR consultant or some kind of apology and they’ve forgotten to speak with the aggrieved person or persons. The aggrieved ends up feeling bypassed and therefore further aggrieved. Sometimes even the decision to issue a public statement at all [is a misstep] when a lighter touch, a phone call, an in-person visit, would have dramatically improved the reception. Within the legal perspective, there’s a lot to consider, as well—what are the implications for the company’s liability positions, for the company’s insurance coverage positions—but in general if you can work through the complexities, a well done corporate apology can really help turn the page in a corporate crisis.

Simon: Thank you, Amanda, for a really insightful and informative discussion.