‘Gradualism’ usually the wrong course in crisis


Human nature inclines us to use minimal fixes to problems and hope they go away.

In crisis management, this is called gradualism and it’s often a really bad idea.

Let’s say your roof leaks during a rain storm. You just bought a new dryer, the kids need clothes for school and the car’s coming up on 100,000 miles. You’d like to get a whole new roof, but that costs $25,000 you don’t have. So you and your best friend not afraid of heights get up on the roof, tear off a few tiles, swab a lot of tar around and hope for the best.

This is gradualism. And as Louis Capozzi writes in PRWeek, it was a poor choice of strategy for Wells Fargo in recent weeks.

When the Wells Fargo board clawed back $41 million from former CEO John Stumpf’s compensation, they took an approach some observers call “gradualism” – taking as little action as possible until there’s pressure for more.

But the response proved ineffective, and after a couple of painful weeks, he “stepped down.”

Image result for Wells Fargo Stumpf Warren

Stumpf and Wells Fargo went up against Sen. Elizabeth Warren and the Senate Banking Committee and came away bloodied and bruised. Little Stumpf said that day, and subsequently to a House subcommittee, “patched the roof.” The dining room still got soaked and the pressure remained, until Stumpf finally quit in humiliation.

This is why it’s often a good strategy in a crisis to take all your hits at once, sincerely apologize for bad behavior and, if necessary, resign, or fire the people who screwed up. In Wells Fargo’s case, it tried to do the least possible, by firing 5,000 mid- to low-level employees. That wasn’t going to satisfy those hunted for heads at the top.

As Capozzi writes:

When responding to a crisis, companies need to satisfy a wide range of audiences – regulators, legislators, shareholders, customers, employees, even the general public. It’s a tough job, but research shows that companies that do it well minimize the impact of the crisis on the organization’s reputation, its stock price, and the bottom line.

The basic rules of crisis response are simple: say you’re sorry, fix it, and don’t do it again. To fix it, and ensure no recurrence, corporate boards often face the ultimate question: should they fire the CEO? Many have faced the axe. United’s Jeff Smisek and Priceline’s Darren Huston are recent examples.

If you try to fake it, come across as doing the minimum, scapegoating people who didn’t have a hand in the decisions that caused the crisis, you’re going to pay. Stumpf paid with his job. Wells Fargo paid with its reputation.

The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs and Crisis and Reputation Management at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with eight offices in the East. Learn more about EMA at mowerpr.com/crisisready. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.

Advertisements

About steveoncrisis

The content is about crisis management and mismanagement in a digital age. It comes from Steve Bell, who spent 30 years as a journalist for the Associated Press and as managing editor and editorial page editor at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower and Associates, one of the nation's largest independent advertising, integrated marketing and public relations agency with six offices in the Northeast and Southeast.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s