The E&C Pulse - July 10, 2019

July 25, 2019 LRN Corporation
Ben DiPietro interviews crisis management expert Daniel Laufer about when to use a chief executive as the main spokesman in a crisis
 

JULY 10, 2019

The Risk/Reward of Using the CEO as Crisis Spokesman 

Daniel Laufer is a crisis management expert and an associate professor of marketing at Victoria University in Wellington, New Zealand. Laufer, who writes a monthly column on crisis management for the New Zealand Herald, talks about when to use a chief executive as the main spokesman in a crisis, and what the risks are to doing so.

There is so much pressure on chief executives and other high-profile executives to take stands on controversial issues--how should an organization approach this? What are the risks and benefits of being on one side of an issue or another? Is the bigger risk trying to straddle the middle?

 

It is important for both organizations and CEOs to realize when a CEO takes a stance on a controversial issue, it has implications for the organization. The CEO is linked to the organization, and mentioning that the views expressed by the CEO are his/her own private views, and are not shared by the company, won’t necessarily resolve the crisis.

 

I would caution companies who take the perspective that, since their current target market overwhelming supports a controversial issue, they should do so, as well. Your target market in the future may be very different than your target market today.

 

What can an organization gain by having its CEO out in front on a divisive issue? What are the risks?

 

The CEO is viewed as the leader of the organization, and by expressing views on a controversial issue, puts the company in the spotlight. Alienating consumers is usually not a smart move.

 

However, if a company believes its target market both now and in the future strongly supports the company’s position on the issue, it might benefit the company. The company’s position on the issue could be a key differentiating factor that causes consumers in the target market to be more supportive of the company. This could translate into an increase in sales and profitability.

 

However, there is a risk to this strategy. Your employees may not support the company’s position, and the company’s target market in the future could be different.

 

Are there some places when having a CEO as spokesman works better than others?

 

If the company is experiencing a major crisis, the public expects to see the CEO as a spokesperson. If the CEO is a very effective communicator, the company should consider using him as a spokesman more frequently. On the other hand, if the crisis is not severe, or if the CEO is a poor communicator, it might be better to consider another person from the organization.

 

What role should the board play in determining when and how a CEO should address hot-button issues?

 

The board should make clear the public views the CEO as speaking on behalf of the company, so she should be very careful in expressing views on controversial issues. At a minimum she should always emphasize the views are her private views only, and don’t represent the company’s views.

 

What are the main differences in how a companies in one region handle a crisis, compared to companies in other parts of the world?

 

Cultural differences in crisis management is a very important topic, which is unfortunately under-researched. An important factor to consider is how stakeholders in various countries differ in their reactions to crises.

 

For example, in my research we found China, which is a more hierarchical society than other countries, is more positively influenced by the use of the CEO as a spokesperson during a crisis than consumers in other countries that are less hierarchical, such as New Zealand.

 

As a result, multinational corporations should take this into consideration when operating in multiple countries. The CEO’s time is very valuable, and prioritizing his or her time based on these cultural differences could help a company during a crisis.

 

What can organizations do to create cultures that encourage and reward people for acting ethically? 

 

Recruiting is an important aspect that is often times overlooked. Is HR doing a good job in screening employees? Acting swiftly to address ethical lapses--even if the employee is a top performer--sends a powerful signal to other employees at the organization. Finally, recognition for employees that act ethically can also be beneficial.

 

What is the biggest mistake companies make when handling a crisis?

 

Not preventing the crisis from happening in the first place. With proper risk assessment, a lot of crises can be avoided. When I teach my crisis management seminars to mayors, board members and major corporations, I always emphasize the importance of crisis prevention.

 

 

                                                                                                          BEN DIPIETRO
@BENDIPIETRO1
BEN.DIPIETRO@LRN.COM

 

 

MIND NUMBERS

85%

Barker Gilmore's 2019 in-house counsel compensation report found women in-house counsel on average earn 85% of what their male counterparts earn in total compensation. That amounts to $313,782 for women, $368,000 for men.

 

THE ELEVEN

 

Agents from the FBI and the Immigration and Customs enforcement are scanning photos of millions of people from state driver's license databases without their knowledge or consent, Washington Post reports.

 

Google is planning to build a smart neighborhood in Toronto, but some people are concerned by the surveillance aspects of the concept, CNN reports.

 

More than 200 corporations submitted a legal brief to the U.S. Supreme Court last week asking for protections for LGBTQ workers under existing federal civil rights laws, Associated Press reports.

 

The speed with which the Wayfair worker walkout took hold shows the power of employee activism, and is the latest example of employees confronting their employers when they disagree with how business is being conducted, Boston Globe reports.

 

The U.K.'s Financial Reporting Council says 75% of audits of large companies conducted last year were good, a higher percentage than in 2017 but well below the 90% target, WSJ's CFO Journal reports.

 

Businesses worldwide have an obligation to stop workplace harassment and violence, BSR's Aditi Mohapatra writes.

 

A former official of the Royal Canadian Mounted Police says more and more, organized crime syndicates are taking part in sophisticated financial frauds, Global News reports.

 

Securities and Exchange Commission Chairman Jay Clayton last week issued a policy announcement that indicated the agency would go easier on companies that commit securities fraud, Radial Compliance reports.

 

Ana Dutra, writing in Forbes, scoops up the three flavors of trust in the workplace.

 

Every science student should be mandated to take an ethics course, Harpal Kumar tells Wired.

 

California last week became the first state to ban discrimination because of natural hair, Axios reports.

 

 

 

THE QUOTE

"Don’t be intimidated by what you don’t know. That can be your greatest strength, and ensure that you do things differently from everyone else.”

– Sara Blakely, businesswoman

 

 

WORLD OF LRN

LRN’s Marsha Ershaghi Hames recently joined Doug Freeman, chief executive of Virtcom Consulting, to talk about diversity and inclusion at the RMG iLeadership Summit. Read Ben DiPietro's recap of the panel discussion, which focused on frameworks to grow and nurture inclusive leadership in organizations.

 

2 minute read

 

THE NUDGE

I have a friend in Eugene, Ore., who works as a parking lot attendant, and he was telling stories about how people, desperate for a parking space, would offer him bribes--sometimes more than $20--for a chance to park. He always turns them down, he said, because it's not the right thing to do, even though he could use the extra cash that would come his way. Just another example that ethics and integrity are found in all levels of the work world.

 

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