In the realm of organizational communications, the line between a manageable issue and a full-blown crisis can be alarmingly thin. Understanding when a crisis is truly a crisis is critical for any organization, as even small issues can spiral into situations that attract media attention and damage reputations. The Lehman Brothers story serves as an example how an issue can escalate to an out-of-control crisis that could ruin any organization.  

The Lehman Brothers story

In 2007, Lehman Brothers faced increasing pressure due to the subprime mortgage crisis. Initially, the issues seemed contained within the mortgage-backed securities market. However, as the housing market continued to deteriorate, Lehman’s exposure to bad assets became more apparent. Their inability to find a buyer or secure a government bailout, led to a loss of confidence in the organization. In September 2008, Lehman Brothers filed for bankruptcy, marking the largest bankruptcy in U.S. history at that time, and triggering a GLOBAL financial crisis, which is still affecting investments today!

The tipping point of a crisis

A crisis is not merely defined by the severity of an issue, but by its potential impact on an organization’s reputation and operations. Small events can escalate rapidly if not managed effectively. Recognizing the escalation signs and implementing proactive communication strategies are crucial in mitigating potential damage and maintaining trust. In today’s fast-paced communication landscape, the ability to manage and contain a crises can make the difference between a temporary setback and a lasting reputation failure.

From an activity to a crisis

Consider a seemingly routine activity like restructuring a small department in your organization to improve efficiency. If not managed and communicated effectively, it can trigger uncertainty and anxiety among employees. Below are the key reasons why a restructuring activity could escalate into a crisis:

1. Lack of Communication: If employees are not adequately informed about the changes, rumors can spread, leading to confusion and distrust.
2. Employee Discontent: Unaddressed concerns and grievances can result in decreased morale, protests, or even strikes.
3. External Leaks: Disgruntled employees may leak information to the media or post negative comments on social media.
4. Media Scrutiny: Once the media gets hold of the story, it can quickly gain traction, especially if the narrative involves potential job losses or ethical concerns.
5. Reputational Damage: Public perception can be severely impacted, leading to loss of customer trust, investor confidence, and overall brand value.

The signs that an issue is escalating into a crisis

• Rapid Spread of Information: News, especially negative, travels fast. If an internal issue starts appearing in public discourse, it is a sign that it’s escalating.
• Heightened Stakeholder Concern: Increased inquiries from employees, customers, investors, and media can indicate growing concern.
• Operational Impact: Disruptions in day-to-day operations, such as reduced productivity or service interruptions, signal that the issue is becoming more severe.
• Social Media Buzz: A spike in social media activity, particularly negative comments or shares, can be an early indicator of a brewing crisis.

How to manage the escalation

To prevent a small issue from turning into a crisis, proactive communication and management strategies are essential. Below are the key actions you should take:

1. Transparent Communication: Keep all stakeholders informed with clear, honest, and timely updates.
2. Monitor Sentiment: Use social listening tools to gauge public and internal sentiment and respond promptly to concerns.
3. Prepare Spokespersons: Ensure that trained spokespersons are ready to handle media inquiries and present a unified message.
4. Crisis Plan: Have a robust crisis management plan in place, detailing steps to take in various scenarios.
5. Engage with Media: Establish positive relationships with media representatives and be prepared to provide accurate information quickly.

Conclusion

Understanding the fine line between a manageable issue and a full-blown crisis is crucial for any organization. The Lehman Brothers collapse (and there are many more examples) serves as a stark reminder of how quickly issues can escalate if not properly managed.