An HR Perspective To Crisis Management

Rising from the ashes is a characteristic of the Phoenix. The flame is its glory. Similarly, if a company can’t rise to the challenge, it burns and turns to dust like an ordinary bird. This article aims to focus on the diverse ways crisis can befall enterprises and the strength of their defences which would define their existence.

When a smooth sail of a company in the sea of time would be its dream, currents of crises are bound to follow. And in these most trying times, Human Resources could save the ship, jump ship or urge it swifter towards its end. John F Kennedy once beautifully pointed out, that the word “crisis” when written in Chinese, is written with two brush strokes, and consists of two characters – one which indicated danger (危= danger), the other, stood for an opportunity. (机=opportunity)

And now, more than ever, this statement would ring in the minds of countless business communities as they encounter crisis upon crisis. From destructive natural calamities like hurricanes, tsunamis, earthquakes, floods, El Nino; to wars and acts of terrorism, violence at workplace, a tarnish to reputation, a financial meltdown, cyber-crimes, fire accidents, thefts, strikes, etc. that  would test their resilience and would define their every penny, their pride and their progress.

While Crisis Management was traditionally not an HR domain, its role has become increasingly profound and undeniably necessary with the ever-changing environment to reiterate the “human factor” in the face of calamity. The strategic role played by HR leaders now spans emergency response, disaster recovery, risk management, crisis communication, as well as formulating Business Continuity Plans in the event of the “worst case scenario”. Being agents of change, they shoulder the responsibility of forecasting possible crises situations and set an agenda to tackle it.

HEROISM, THE TAJ WAY:

Heroes can be found in the most unlikely places…and maybe this was what the terrorists of 26/11 had overseen.  This event, that imprinted the image of the burning domes of the majestic Taj Mahal Palace Hotel in the minds of Indians, would also remind them of the brave hearts employed by the Taj Mumbai.

It began at 9.30 pm, when a dinner was being hosted by the then CEO of Unilever, that Malika Jagad, the manager of the event, heard the first gunshots. Unflinchingly, irrespective of the fact that she was the youngest in the room, she had the lights switched off, the doors locked and the guests crouched quietly under the tables. She had the women and children separated from men to reduce the risk towards their family. The guests stayed there all night, while the staff were calm and offered every refreshment and comfort at their disposal until the next morning, when fire forced the decision to try to escape from the windows. With aid from the fire crew, no casualties resulted.

Similarly, Thomas Varghese, a senior waiter at Wasabi, a Japanese restaurant in the hotel, asked his guests to crouch under the tables and the staff formed a human chain around them. Four hours later, he evacuated his guests using a spiral staircase, followed by the staff. He was determined to be the last one to leave, but heartbreakingly, he was gunned down at the staircase.

Karambir Singh Kang, the Taj Mumbai’s General Manager rushed back from an inspection at another property and  brought co-ordination among the chaos of evacuation and firefighters, only to be too late to save his own wife and children who lived in his suite (as was the tradition) on the fourth floor, which was completely ablaze. Regardless of this huge blow, he led the last rescue effort and never deserted his post.

31 people died, but the Taj’s reputation only grew. The employee’s overwhelming sense of customer centricity, the desire to protect guests disregarding their own personal safety, and their spontaneity was a huge contributor to that fact. Touching tales of valour emerged about restaurant staff rushing people to safe locations such as kitchens and basements, telephone operators staying at their posts and alerting guests to stay indoors, kitchen staff forming human shields to protect guests during evacuation attempts. 11 employees laid down their lives while helping about 1,300 guests escape.

The secret to this extraordinary valour was found to be in the hiring and retention strategies:

  • Fresh recruits were hired, not from big metros, but from small towns and semi urban areas, as the Indian value system of hospitality, selflessness, respect to elders and consideration for others is most prominent in those areas.
  • This was done by including the Principal in the selection process and selecting candidates who were cheerful, respectful to teachers, would be the breadwinners of their families, or whose need for the job was the most.
  • Candidates were selected from high schools, and second-tier business schools, as the focus was integrity and dedication, not talent and intellect.
  • A training program of 18 months, instead of the traditional 12

A two-hour weekly session is conducted with every trainee before whom are posed two questions: What did you learn this week? What did you see this week?

The attitude that employees must act as the customer’s, not the company’s ambassadors.

The Special Thanks and Recognition System (STARS) which rewarded employees based on customer delight and their reviews. Employees were assigned points in three categories: compliments from guests, compliments from colleagues, and their own suggestions and at the end of the year they were rewarded accordingly.

A NAME TAINTED, A NAME MERGED:

India’s own version of the Dot com bubble, the Satyam Computers Scandal of 2009 was shocking in its own right. A corporate scandal involving the manipulation of company accounts by the Chairman Ramalinga Raju himself, to the tune of Rs. 70 billion which, following his arrest led to its banker, Citibank to freeze its accounts. The company was then removed from the Sensex and Nifty. The NSE excluded F&O contracts on expiry of the January contract, and PricewaterhouseCoopers, the company’s independent auditors also bore the brunt of their role in the scandal. It came to an end when CFO Srinivas Vadlamani confessed that they had inflated the number of employees by 10,000 to cover up the 20 crores per month that they had been “earning” from fictitious but related salary accounts.

Following this, Tech Mahindra purchased a 46% stake of Satyam Computers and renamed it as Mahindra Satyam. This was bound to be a difficult transition for employees as they had to adapt to the new work culture amidst the turmoil. While Tech Mahindra had 25,429 employees initially, after the merger, the workforce swelled to 85,167 employees. While managing a workforce of that size was a challenge enough, bringing brand loyalty to the new born “Mahindra Satyam” was important too.

These challenges were met with the following strategies that had a lot to do with the staff psychology:

  • The employees lived with the constant fear of losing their job, so to ease that they were officially informed that the company’s condition is good and they are not going to take drastic action against the existing workforce.
  • As is commonplace for any company of the IT sector, the attrition rate (employees who leave that have not been fired, but have not been replaced) was high considering the fact that it was during the recession of 2008-2011. This was taken care of by focusing on campus hiring. The buddy referral program was initiated to create awareness of the culture among prospective employees.
  • Through the Shadow Board and Global Leadership Cadre (GLC), the company had also proposed career and succession plans for its employees. Nine people were to be identified by the shadow board. The idea was to create a workforce that could lead the company in the future. The organisation believed that they already had employees with leadership potential. So instead of hiring from outside, 95% of leadership roles were to be filled from within the organisation.
  • Specialist roles and career paths were planned for employees. Based on their dreams and aspirations, employees started planning their own careers, and an employee only needed experience of two years to be eligible for these roles.
  • A harmonised HR policy was created even as Mahindra Satyam was maintained as two separate organisations.
  • Another strategy to boost growth was the reappointing of former employees who were talented, knew the working of the company, but left due to lack of opportunities.

ORDER AMIDST THE RUBBLE:

When calamity strikes, Human Resources play a vital role in getting workers the information they need at the right time, i.e. Crisis Communication. It is not necessarily the first unit that comes to mind to take charge of a crisis, but what happened in the earthquake that devastated Japan in 2011 proves that it should.

The 2011 earthquake that struck the coast of Japan and caused a tsunami, ravaged the city of Tohoku. Microsoft Corp.’s 3,500 employees there were left without any direction regarding if, or when, they should return to work. They didn’t have clarity about safe travel routes or whom to contact about the situation. To resolve these concerns, HR and the company’s incident management team coordinated and established communications to locate and deliver updates to the employees and the senior management. Each worker received the most relevant information according to his or her respective situation.

While the scale of the emergency was unnaturally large, natural disasters threaten thousands of businesses each year. When Hurricane Sandy struck in 2012, it affected 23,000 businesses in the New York area alone, and added up to 245,000 employees. Naturally, the companies that had better disaster response plans coped better than others.

The Society for Human Resource Management (SHRM) suggests that companies have disaster plans created and that companies regularly update contact lists. In the event of losing telephone service, employers could use their website as a way to effectively communicate with employees during an emergency. Expected hours of operation, reopening of facilities or the location of a temporary work site could be communicated through a company’s website. It makes it imperative for employers of today to have an understanding of laws like the Family and Medical Leave Act because “employees who are physically or emotionally injured as the result of a natural disaster also may be entitled to FMLA leave.” It is important for businesses to understand which employees are to be paid if inclement weather causes work sites to close. Employers are required to pay exempt employees’ full salary if a work site is closed or unable to open for less than a full workweek.

CRISIS COMMUNICATION:

Words are powerful enough to be the difference between trouble evaded and trouble invited amidst a crisis situation. Employee trust is undeniably linked to communication in the face of crisis, and would reflect their attitude, continuity and cooperation. The following are the golden rules of crisis communication:

Lean on leaders

The CEO alone shouldn’t be the harbinger of bad news. Other senior executives of the firm can show their unity in the face of the crisis by participating in the employee communication process.

A classic example regarding crisis management is that of Johnson & Johnson during the Tylenol crisis in the early 1980s. The combination of strong leadership & corporate values combined with clear communication made all the difference. Today, Tylenol is one of the top-selling over-the-counter drugs in the United States. While a video recorded message is also an option, employees get a better chance to pose questions and believe in the candour of the executives this way.

Say it fast

The best example of timeliness during the crisis would be how Pepsi handled the scare of syringes being found in some of their drinks in 1993. The company kept its employees updated every day and opened its factories to the media to prove the impossibility of the claim. The result-the Federal court sided with Pepsi and its reputation was intact.

Compare this with the incident at Starbucks in New York, 2011, when a Starbucks employee wrote an offensive word on a customer’s cup instead of her name. The annoyed customer called a news station and the segment on The Huffington Post was shared more than 3500 times on social media. Starbucks did not respond to a request for comments about the incident, but ironically, the coffee company encourages employees to express themselves in the social media world.

The above two incidents make it clear what the time factor can do during an episodic event. Transparency and advance notice, even mere minutes before making the news public would be preferable to employees than hearing the news from outside.

Let the employees do the talking:  

Gone are the days when employees used to discuss trouble at office water coolers. They now go online to discuss the happenings at the firm. One forum where people often talk publicly about their employers is Glassdoor, the employee feedback website. At Glassdoor, employees post anonymous reviews of their companies as well as the organisation’s CEO. To retain their employees on their side amidst the scandal, it is important to admit any problems and then lay out a plan to clean the mess. From the BP gulf oil spill in 2010 to the Bhopal Gas tragedy, there has been no shortage of crisis a company has had to face. They had to then not only worry about the media’s reaction, but also the employees’ reaction.

Have a plan in place

The lack of a plan is a surety of trouble during testing times. A crisis is not the time to build a communications infrastructure because deciding the content to be communicated is enough of a task. Communicating regularly with the workforce through a company portal is an option. Organisations that do this might not have a last minute scramble to set up communications channels.

MISMANAGEMENT:

The Titanic sank as a result of a collision with an iceberg. But the collision itself was a result of poor decisions to travel that fast considering the weather conditions, the faulty hull design etc. Thus human error was the root cause of the catastrophe.

The mechanical failure in Toyota automobiles in 2009-11 that led to the quality conscious company to recall 9 million cars worldwide caused the brand reputation and the sales to crash to alarmingly low levels. It was found that the Toyota leaders knew about the defects long before it came to light, but instead, action was taken to hide the facts and distort the scope of the problem. The faulty rewards, training and hiring programs ultimately cost the company billions.

But Volkswagen took it to a whole new level which makes it worse than GM’s ignition switches, Toyota’s runaway cars and faulty airbags or Ford-Firestone’s exploding tires. The intentional unethical nature of the act cannot be denied as it came to be known that there were meetings where executives decided to go ahead and lie while they had consciously programmed the turbocharged direct injection (TDI) diesel engines in such a manner that they would get activated only during laboratory testing. This pollution cheating programming caused the vehicles’ nitrogen oxide (NOx) output to meet US standards during regulatory testing, but emit up to 40 times more NOx in real-world driving.

Enron and Bear Stearns, on the other hand, had reward systems that incentivised dangerous behaviour and easily overshadowed the effect of control systems that were to prevent fraud and ethical breaches. The mass killings at Fort Hood could have been prevented if the Army had a better linkage between performance management and critical incident reporting systems.

The Toshiba scam of 2015 in which the profits had been inflated by 1.2 billion dollars for 7 years, with the fabricated figures amounting to 30% of the company’s “profits” since 2008 after which CEO Hisao Tanaka and 5 other executives resigned. The 15-second apologetic bow would have made more sense if the corporate culture, in which employees were afraid to speak out against their boss’s pushes for unattainable earnings targets, were addressed.

It is thus the law of nature for a crisis to befall any concern. The inevitability of it all segregates the best from the rest, or gives birth to heroes. And the world remembers only the heroes.

“Because it is only when you are tested that you truly discover who you are. And it’s only when you’re tested that you discover who you can be. The place you want to attain does exist”.

Bibliography:

Riddhi Kalra

Tends to be obstinate about pondering on the other side of things- the "what ifs", that have the potential to change the end of a story. Likes to appreciate the brilliance in mediocrity and the beauty in humility. Enjoys reading novels and is an amateur guitar player. Currently pursuing the Post Graduate Programme (Class of 2019) at IIM Trichy, she is a member of the External Relations Committee, Persona (the HR&OB Club) and the Student Team of InsideIIM 3.1

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