To Prevent Crisis, Take an Expanded View of Risk

Often it doesn’t take a crystal ball to avert catastrophe, says Patrick MacLeamy, former CEO of global architecture, engineering and planning firm HOK, and chairman of buildingSMART International. But it does take a willingness to actively engage with employees, to ask tough questions, and listen to their responses. “You can’t just sit behind your desk and give instructions,” he says. “You need to get out of your chair and talk to your team every day.” Our discussion with MacLeamy and other management veterans yielded three key practices for detecting and addressing potential threats to your business before they become unmanageable.

Encourage Staff to Speak Up

That constant communication is how good leaders uncover problems when they are still small and find the best ways to fix them. MacLeamy calls this leadership style "running toward trouble."

Leaders who "run toward trouble" recognize that their employees know things about the company they don’t, and they take advantage of that knowledge. Whether it’s a frontline worker who sees a problem in the company's customer service strategy or someone on the manufacturing line who sees a problem with the equipment, these employees have the knowledge and skills to find and fix simmering problems—but they will only do so if they have leadership support.

“When leaders take the time to work with their people—and encourage them to come up with solutions—they gain the confidence to fix problems themselves,” MacLeamy says. It creates a culture of empowerment where everyone is invested in keeping the business on track.

Even when a crisis is unavoidable, like a global pandemic or a catastrophic storm, this open-dialogue approach still has utility. The more people feel empowered to speak frankly and suggest solutions, the more astutely the team can adapt, he says.“You go through the same process: Gather your people together, drill down to what problems you face, then identify what you can do together to address them.”

Seek Diverse Perspectives

Along with empowering employees, business leaders should also take a more holistic approach to risk planning, says Eric McNulty, associate director of Harvard’s Program for Health Care Negotiation and Conflict Resolution, and co-author of You’re It: Crisis, Change and How to Lead When It Matters Most. McNulty notes that most big companies pay attention to the two obvious risks—financial concerns and cybersecurity issues—but they fail to factor other risks into their planning process. “As a result, they are unable to anticipate what crises could happen, or to mitigate their impact,” he says.

COVID-19 is a perfect example. While the timing may have been a surprise, experts have been predicting a pandemic for years. “Conditions are ripe, and we’ve already had a number of near misses with SARS, Ebola and Zika,” he says. The same is true of geopolitical unrest, which has been occurring in countries across the globe, and can easily disrupt supply chains and employee safety.

If you can create an environment where people have honest conversations about difficult issues, crises can be avoided.

—Leo Flanagan, president, The Center for Resilience

Yet businesses rarely factor these kinds of crises into their risk management strategies. “They may offer an assistance program when an event occurs, but it is all reactive. They don’t have intervention strategies in place,” he says. That makes companies more vulnerable to crisis, and less nimble in their response. 

McNulty suggests leaders take a more diverse approach to risk management by involving executives, department heads, managers and frontline workers in these conversations. “They all bring a different view to the process,” he says.

That’s how companies uncover hidden risks that could turn small events into disasters. He points to a fire that occurred at a chemical plant in his community. The company had strict requirements for storing dangerous chemicals, but no rules for managing other materials, including the fertilizer that was used around the plant. It turns out that the fertilizer was flammable, and when the fire spread, it exploded, causing serious damage and injuries.

“No one had thought about the fact that fertilizer is combustible,” he says. But had they involved workers who used the material in risk mitigation discussions, that tragedy could have been averted.

Use a Fact-based Problem-solving Process

Achieving this kind of open communication about risk requires leaders who take emotions out of the conversation and focus on facts, says Flanagan. “The paradox of success is the more senior you get, the less often you make fact-based decisions,” he says. Instead, leaders assume they know the best way forward and jump immediately to the solution.

Instead, when a problem arises, Flanagan teaches leaders to gather key personnel and follow a fact-based process:

1. Determine what you know and what you don’t about the problem.
2. Identify and discuss the risks and obstacles that the issue presents.
3. Generate 10 possible responses, then vote on the top three, rank them, and execute the best one.

By ranking the top three crisis responses, companies don’t get trapped in an endless cycle of “what-ifs.” If the first idea doesn’t work, they can quickly pivot to the next one. “It’s a contingency plan for your contingency plan,” Flanagan says. It helps take emotion out of decision-making, to prevent the sunk cost mentality that causes leaders to cling to the wrong decision.

“You will never have all of the information to make the perfect decision,” he says. “But if you can create an environment where people have honest conversations about difficult issues, crises can be avoided.”

“The most important thing is to not let fear make you helpless,” adds MacLeamy. “Just work through the problem, and if you make a mistake be flexible enough to adapt and move on.”

Photo: Getty Images