Besides the usual phases of a crisis – preparation, acute phase, stabilization, normalization and recovery – there is often another phase which is not always that obvious.
Especially if a crisis is not managed well in all multi-disciplined aspects, a crisis tends to kick you in the back once you thought it was all over and done with.
Let’s give you an imaginary example – very loosely based on an actual story. Let’s assume that you’re an helicopter operator shuttling crews to offshore installations on their biweekly hitches. You operate a fleet of helicopters of various types and models, among which a type referred to as “Tiger”. Through the years, the “Tiger” appears to have frequent malfunctions in the gearbox due to design flaws and software issues. Throughout the industry, some “Tigers” have actually ditched (made a controlled emergency landing on sea) or crashed as a consequence over the years. The malfunctioning gearboxes have been infamous in the industry and the “Tigers” have acquired a bad name as a result. The manufacturer of the “Tiger” has come up with software updates, investigations, extra maintenance intervals and some technical adaptations to the design. You’ve faithfully adopted the manufacturer’s instructions and were able to keep your fleet of “Tigers” flying without incidents. Until today.
Regardless of your very thorough and compliant maintenance program, one of your “Tigers” crashes, killing all passengers and crew on board. A horrific accident and a true crisis to the company and the entire helicopter industry. Research quickly points out that, again, it was a gearbox malfunction that was the cause of the accident.
After all “Tigers” being grounded for several weeks, the manufacturer comes up with yet another technical upgrade to prevent further accidents. You implement this upgrade throughout your fleet and resume operations.
Regardless of the “Tigers” ill-fated reputation, you kept your fleet flying. In essence, the accident was not your fault. It was a design error that caused the crash. You have stuck to all manufacturers recommendations and are not to blame. It would have cost you dearly to permanently ground your “Tigers” or replace a part of your fleet based on a bad name only. No other accidents have occurred since.
One year later, the contract with one of your major clients expires, and you’re asked to tender for a new contract, together with a few other operators. After last year’s accident, your insurance has paid out to the families of the casualties and you have taken all responsibilities as an operator. You name has been cleared by the investigators, and you think the relation with your customer has been undamaged by the accident. You expect a prolongation of your contract.
Very surprised are you when you hear that the contract has been awarded to a very small and young competitor of yours, flying a fleet of solely “WildCats”, a newer model than your “Tigers”. Regardless of all your experience, established supply base and flawless routine operations, the major client has chosen for a noob in the industry. As a result, you lose a significant part of your operations in that country. The remaining operations you still have there are not sustainable enough to keep the heli base running and you are forced to close down operations in that area altogether and withdraw from the local market. You have to fire dozens of employees.
Now, let’s break this down into small pieces.
- Good relation with client – check.
- Thorough and compliant maintenance program – check.
- Accident was caused by design errors, not your fault – check.
- After accident, name was cleared by investigators – check.
- Technical updates ran according to new requirements – check.
- Insurance paid out, resulting in limited financial consequences – check.
- Accident caused by your supplier, most casualties suffered by your client. You’re stuck in the middle.
You’ve covered it all and have done your homework, yet you have to close down operations a year after the crisis. Why?
It all comes down to reputation.
Even though technically speaking you run your operations perfectly and legally you have a spotless track record, the passengers have lost faith in the “Tiger”, and have refused to fly in the aircraft, forcing their employer to find an operator without “Tigers” in the fleet.
What could you have done differently?
Difficult choice – sell a part of your fleet (all the “Tigers”) at a loss and replace them with fewer new “WildCats” in return, meaning fewer flights and sack a few aircrew and maintenance personnel as a consequence? That does not sound like a very good business case.
Or, with the insurance paid out, you could have bought two Crew Transfer Vessels and start a sea based personnel transfer service. Far-fetched…?
Yet it may have saved your local operations and you may have been awarded the contract extension. Possibly with a smaller fleet, but still…
Of course this example has been based on a lot of assumptions and shortcuts, but I have painted a picture of a smoothly ran operation which has suffered a very sad accident caused by external factors. The only “mistake” made here was to underestimate the long term consequences of the loss of the reputation of the product or company.
Crises often offer a chance to change or add to your reputation. If the response would have been to alter the fleet’s composition and take your losses, in the long term you might have been able to continue operations and – eventually – expand them again to normal levels. Now, reputation management failed with long term consequences.
Once you’ve suffered a crisis and are in the normalization phase, don’t continue the past but take a different look at the future and exploit the momentum the crisis has given you to make changes. The crisis was there for a reason, don’t continue on the same path.