HOW A COMPANY RESPONDS
TO CRISIS SHOULD BE PART OF ITS BUSINESS EXCELLENCE APPROACH
This article compiles experiences from a number of crisis-response teams. These are also aligned with business peers in different industries. The article conveys the following main messages:
Firstly, the mere existence of a crisis-response team is perceived as a threat by the regular organization. This needs to be taken into account when sponsoring and leading such teams. Stakeholder management is a vital part of crisis management.
Secondly, because crises happen "ad hoc" they are often managed in an ad-hoc manner. This increases their likelihood of failure. Following a disciplined methodology, such as 8D or DMAIC sets them on a more secure path.
Thirdly, besides setting up proactive improvement programs to avoid crises, companies should establish a consistent approach for facing them. Crisis management is an integral part of a company's striving for Business Excellence.
RESPONSE TO CRISIS
"Sorry, I need to hang up – I have to dial into another task force". Some organizations cherish a fire fighting mode and its action-oriented heroes. They may call "task force", "focus team" or "core team" their team-based response to crisis. No doubt, crises should rather be avoided in the first place. Imponderability in business, however, makes it that the next crisis WILL HAPPEN. Like cities or countries preparing for major accidents or epidemics, also companies can prepare for their moments of crisis.
Following Donald Rumsfeld's distinction between "known unknowns" and "unknown unknowns", companies need to be prepared for both. They can elaborate and have ready to execute plans for what to do if, say, their China plant burns down, their supply chain is disrupted by a terrorist attack or "Murphy" strikes in another way possible to anticipate.
To react to the "unknown unknowns", when "Murphy" strikes in a way nobody could imagine or just considered too unlikely to elaborate reaction plans for, companies have nothing else to fall back on than an established approach and people trained to apply it. The scope of this article is how to prepare an organization for the "unknown unknown" type of crisis.
To understand what crisis-response (really) is, firstly, one can compare it to its siblings which are projects and continuous improvement activities. Projects undergo a rigorous milestone-planning. The less complex ones are often executed in a "just do it" manner with less planning and execution control. Continuous improvement can be driven through Lean and Six Sigma projects or Kaizen events. These are also executed along well-defined phases. The nature of the solution and the urgency to implement it tell all these activities apart:
Secondly, one needs to understand that crisis-response teams address an urgent task, born out of a mishap the regular organization is unable to handle. Notice there is nothing bad about that: the regular organization runs the daily business. By its very nature, crisis is NOT daily business and facing it needs a different setup. Therefore, a crisis-team complements this lack of capability or capacity. Even so, crisis response teams are most often perceived as inherent criticism of the regular organization.
For example, over consecutive months, a manufacturing plant had a high rate of customer complaints. The headquarter sent in an expert to drive to a fast closure open cases and to avoid new ones from happening. Where the shop floor had a warm welcome for this support, local management did all its possible to let this expert fail. In their perception, allowing her to be successful would have been recognition of a supposed own incapability to solve local problems.
Under such pressure and when not managed carefully, crisis-response teams can fall into one out of two pitfalls:
Firstly, a team may not come up with the problem's original root cause(s) and implement someone's favored but inadequate solution. This can happen when the team overly values consensus with process owners or champions. The attempt to fix through new software a crisis generated by broken processes is a common example.
Secondly, over time, management can also dissociate itself from the crisis-response team and eventually implement a rivaling activity thought to be more under its own control. For instance, a semiconductor company had launched a new product generation affected with a series of quality issues. A team was set up to address these. The problem being more complex than originally thought, they split into five sub-teams to address different problem causes. With a focus on technical aspects, stakeholders were not managed carefully, however.
The head of operations felt too many of her team tied up in tasks out of her direct control. Together with the head of quality, she set up an initiative to "frame" the sub-teams together with other key activities. This sidelined the original core team which was still left in place, however. The resulting competency struggles made the sub-teams understand that fast closure was the order of the day. In consequence, burning changes in product and process design were implemented only in the subsequent product generation. In the meantime, customers were protected through expensive screening and rework.
Crisis-response leaders need to be aware that overcoming a crisis and removing chances of recurrence often spells dramatic and fast change for an organization. Unmistakably, this generates resistance to change. To succeed, a crisis-response team needs:
- Root cause and problem solving capabilities beyond those of the regular organization
- Good Change Management, Stake holder Management and communication skills
- To continuously secure sponsorship and empowerment by business leaders
- To build up and maintain strong links to the regular organization
SETTING UP A CRISIS RESPONSE TEAM
When facing a crisis, it is of highest importance to dispose of a clear and universally shared problem description. Therefore, the team leader will also need to go and see where the problem is. Reports or pictures made available to him or her are not enough. Pre-established check-lists for problem description are crucial to succeed in times of crisis.
What: two customers complain about mal-function supposedly related to electrical opens on our electronic assemblies (EAs). Their complaints are exclusively pronounced for the new EAs. Five of these failures are already confirmed by our internal Failure Analysis department.
When: We always had a level of a few such complaints per million EAs shipped. Complaints have grown since two weeks, which coincides with the production ramp and shipment of the new product generation.
Where: We are able to trace the IDs of these complaints to our two European assembly plants but not to the one in Shanghai which also manufactures the new EA generation.
How much: Customer A complains about 7 such failures out of 1251 EAs tested (5600 dppm). Customer B reports 3 failures out of 983 tested parts (3050 dppm). The combined observed failure rate of 4500 dpm is significantly above the long-term average of 8 dppm for this type of failure.
How do we know this is a problem: The industry standard is an overall failure rate of <300 dppm in the customers' post-mounting application testing. Failure due to electrical opens is known to be associated with a high escape-rate in these tests, can easily slip through to the end-customer and is deemed in-acceptable.
Example of a crisis problem description.
Certainly, it does take time and it does ask discipline from teams to put together data and facts for a problem description such as given above. But how much better are the decisions taken in meetings, when such descriptions are available! Just imagine a meeting opening like that: "We all know why we are here today. I want to hear your suggestions what to do".
The crisis-response team also needs special decision making power, priority access to resources, data, IT-support, confidential information and to management. Pre-defined meeting schedules, ground-rules and the ability to work in flexible hours further allow being consistent, transparent and fast. Crisis response also requires cross-functional and multi-skilled teams. At the same time they need to remain harmonious and flexible. As a rule of thumb, these conflicting requirements of diversity and unanimity can be reconciled with 5-10 senior and experienced team players with different personal styles.
Figure 1: Team size versus team flexibility, capability to agree and diversity.
Like for other improvement activities, failing to:
- Define and scope the problem correctly
- Win the right people for the team
- Gain a visible management commitment and to
- Pronounce a clear claim for leadership
Sets a crisis-response team on a journey towards failure. A carefully prepared kick-off with active management participation is both indispensable and serves to validate that these key success factors are secured.
DRIVING A CRISIS RESPONSE TEAM TOWARDS SUCCESS
Crisis-response shares with Lean and Six Sigma projects the fact that the solution is unknown. It also shares with "just do it" projects and Kaizen events the speed the solution, or at least the problem containment, is implemented with (see Table 1).
Once a crisis is apparent to all in the organization, the urgency to find and implement a solution or containment attracts all kinds of real or self-declared "specialists". Like on the occasion of accidents in the public space, handling these people skillfully is an important duty in leading crisis-response. Another is to continuously monitor stakeholders, their expectations and attitudes towards the crisis-response team and to manage them well. Especially when it comes to designing "the world after the crisis", their expectations may often be mutually excluding or involve power-conflicts between departments. The team leader also needs to secure the team members' acceptance within the organization. In one occasion, a task force team member needed to hand over parts of his daily business tasks to colleagues, who were already strained by their own workload. The task force leader failed to spot this conflict and, to release peer pressure, the team member silently gave higher priority to his duties in daily business. As a result, important work packages were delivered critically late and all parties involved were left frustrated. By design, facing crisis cannibalizes the daily business. Team members need to be protected from the consequences.
In the execution of crisis-response, using a methodology is always better than employing no methodology. Thereby, it does not matter much whether an 8D, DMAIC or other systematic approach is chosen. Make sure, however, that "containment" is an explicit part of the approach. If your company uses DMAIC, use "DMcAIC", the "Scottish flavor" of DMAIC, to face crisis (where "c" included in "M" stands for "containment"). Maintaining a disciplined and transparent working mode is also key to keeping a link to the regular organization.
The more the crisis-response team is able to "outsource" tasks to the regular organization which are either not urgent or where the solution is known, the more the team will be perceived as a temporary but necessary complement rather than as a critique of the regular organization. In all instances, a crisis-response team should aim for coming as fast as possible to a project working mode with well-defined and timely planned work-packages and clear resource-commitments.
CLOSING A CRISIS RESPONSE TEAM
The closure of a crisis-response team pursues multiple goals:
- To demonstrate that the crisis is overcome and prevented from recurring
- To bring operations back to "daily business", though most likely in a different setup
- To celebrate this success
- To summarize key lessons learnt for future crisis-response to build upon
A closure event commensurate to the accomplished task is important (remember "Congratulate Your Team" in the 8D approach to problem solving) but often neglected or even fully overlooked. For future teams to build on the experience, the closing event should cover the following three areas:
Technical: clear description of problem, root cause, containment and solution.
Team: root cause and solution finding methodologies and how the solution was implemented.
Team within the organization: crisis-response team, regular organization and their interaction.
Notice that the nature and the success of this closing event set a strong signal for facing future crises.
"CRISIS RESPONSE CULTURE" IN AN ORGANIZATION
If one thing is sure, it is that the next crisis will happen. Using FMEA or any other method to manage risk can anticipate and avoid or mitigate some of the "known unknowns". But as discussed, an organization can also be prepared for the case "Murphy" strikes from a non-anticipated direction. These plans base on people trained to apply established methodologies to face crisis and the rest of the organization trusting both people and methodologies. This is another way for saying that a company can integrate the way to respond to crisis into its general way of striving for Business Excellence.
Different from project or continuous improvement management, however, there is far less specialized training available to prepare crisis-response leaders and team members for their job.
Kaizen, Lean and Six Sigma or project management experience, education in virtually any disciplined approach for work, will help lead crisis response. Because "change" is an undeniable part of facing a crisis, training and experience in Change Management is another, if not the most important, requirement for crisis team leaders.
With leaders of future crisis response teams trained in these matters and a critical mass of employees made aware of the company's approach to crisis management, the handling of crises can become far more consistent. Repeatability, including in facing the unforeseen, significantly increases a company's chances of continued success.
About the Author
Dr. Michael Ohler is a certified Master Black Belt and master consultant with BMGI, a firm helping customers drive lasting top and bottom line improvements through the deployment of Lean Six Sigma, Innovation and Change Management. Dr. Ohler has served as Lean Six Sigma deployment leader, has ten years of experience in project and quality management, as cost controller, black belt and master black belt. Dr. Ohler holds a doctor's degree in physics and has been teaching graduate and post-graduate university classes in France, Brazil and Italy. He can be reached at email@example.com