Ten Lessons in Trust to Apply Before a Crisis

Daniel Diermeier

This week I heard an expert on reputation, IBM Distinguished Professor Daniel Diermeier from Kellogg School of Management at Northwestern University, speak to a few dozen fellow Kellogg alums in Houston. The orchestra industry can learn from his years of research in crisis management for major corporations. Excepting my added comments about orchestras, the words below summarize Professor Diermeier’s talk.

1.Trust in institutions has eroded dramatically, yet it remains higher for NGOs.

Polling over time by Harris shows low numbers of consumer trust for most industries and companies. Many industries have single-digit measures of consumer confidence. Nonprofit organizations are held in much higher esteem. We’ve all seen how the loss of this prized asset for any orchestra typically threatens its existence.

2. Reputation is less and less a function of direct experience.

Do you have direct experience dealing with Goldman Sachs? Probably not. Do you have an opinion of Goldman Sachs? Almost certainly. In an age of instant news and ubiquitous social media, parties external to the organization-to-customer relationship define reputation more and more. Orchestras must be attuned to the public beyond our traditional stakeholders of audiences, donors and musicians.

3. In a crisis we must respond with all four elements of “The Trust Radar:” Empathy, Transparency, Expertise and Commitment.

4. Organizations in crisis tend to focus too much on expertise.

Under psychological stress corporations narrow their activity into this comfort zone by instinct. Working against that instinct, orchestras need to be conscious of this tendency and present in the moment.

For example, CEOs often delegate decisions on responses or language to lawyers, with their expertise in liability. Yet potential liability is often dwarfed by the value of an organization’s reputation.

5. Empathy is the hardest element of the Trust Radar for senior executives.

Trust, not fault, is the real issue. We profit when we lead with an apology when there is a perceived wrong. We never gain from trying to prove as BP tried that we’re the actual victim.

6. Demonstrate commitment through senior management involvement, follow-through and accountability.

Professor Diermeier cited the example of Southwest Airlines, faced with the first crash and fatality in their history at Midway Airport. The CEO flew to Chicago, went first to the hospital, then announced that 45 safety experts were on their way to investigate the accident. They weren’t merely waiting for the regulatory agency’s conclusions. The CEO, a non-pilot, even took flying lessons at Midway to understand the icy conditions in which the crash occurred.

7. Organizations inherit risk from suppliers, clients and competitors.

Thomas the Tank Engine and Mattel were damaged by lead paint used by non-compliant suppliers. TransOcean was damaged by BP–and vice versa. The whole oil industry was damaged by BP.

Orchestras can be held accountable for actions by management, staff, musicians, conductors, guest artists, audience members, board members, ushers, contracted teleservices agents, hall management…the list is long but not endless.

8. Managerial control of a crisis is highest before it happens, then decreases afterward.

Many crises result from intelligence failures, much like 9-11. Managerial capabilities that lessen the likelihood of crises include an organization’s mindset, processes and culture.

40% of the news stories about an incident occur within eight hours. These managerial capabilities must be in place before a crisis to be effective.

9. Conversely, the impact of a crisis on an organization is low before the crisis, greater at the time of the crisis, then greatest afterward.

BP has lost more shareholder value, $90 billion, than the value of Proctor & Gamble. Southwest Airline’s crash, in comparison, had no discernible impact on its market capitalization.

10. Institute a Reputation Management System now to manage future issues.

Today’s masters of crisis management have dealt with a succession of challenges over many years. Diermeier cites Procter & Gamble, Walmart and McDonald’s. Their Reputation Management Systems include two conceptual parts: a Decision System to ensure broad participation in key decisions that affect the possibility of issues arising, and an anticipatory Intelligence System to identify risks.

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