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Putting Out Corporate Fires

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fires


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Psychologists have observed that companies are subject to certain mental errors that can lead them to: cling to the familiar 2 Deloitte University Press | 4 approaches to automating work using cognitive technologies | resist change @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Even when change can save them from disaster 3 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Behavioral psychologists explain why we are prone to making such mistakes Unfortunately, it comes down to how humans are wired 4 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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However, by understanding common emotional pitfalls hindering crisis management, business leaders can be better equipped to avoid these traps and extinguish corporate fires 5 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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A preference for the status quo may cause companies to cling to “business as usual” and may lead them to underestimate current threats CRISIS POINT: The Eastman Kodak Company, once king of the film photography business, discounted the threat of digital technology, failed to ride that wave, and filed for bankruptcy in 2012. 6 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Group dynamics can amplify mental errors when group members stifle their own views in favor of the majority’s, right or wrong CRISIS POINT: Collective denial was at work when President Kennedy’s advisors voted unanimously to invade Cuba at the Bay of Pigs to overthrow Fidel Castro. Many had private doubts but suppressed them for fear of appearing weak. The consequences were disastrous. 7 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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As companies become more fragmented, warning signals may be difficult to detect when departments aren’t communicating properly with one another CRISIS POINT: While a legal department of a company may see a rise in lawsuits claiming harmful product defects, that department may neglect to surface the information to the manufacturing units. The company then misses an opportunity to examine potential manufacturing shortcomings and head off a larger crisis in the making. 8 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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How can organizations overcome these impediments to recognize danger more quickly, analyze the scenario accurately, and put into action a sound crisis response plan? 9 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Looking in from outside When stuck in decision paralysis, ask what an outsider would conclude. When loss aversion or other biases raise uncertainty about a decision, size up the situation from an outsider’s perspective for a less biased analysis. 10 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Giving permission To spot trouble sooner, give workers permission to surface any and all concerns. By trusting employees to sound even half-articulated concerns, companies may be able to catch and head off crises earlier. 11 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Searching for anomalies Even after failing at first to detect warning signals, by searching for anomalies, it is possible to catch a mistake later by reassessing whether what seemed a routine situation is improving under a “routine” response. 12 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Speaking softly (without the big stick) Refrain from stating management’s views at the outset. Repeat statements that don’t get attention and ask clarifying questions about them. Use devil’s advocacy to give dissenting positions more weight. 13 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Amid the chaos of crisis, even seasoned leaders 14 Deloitte University Press | 4 approaches to automating work using cognitive technologies | may be at a loss for the right response @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Finding that right crisis response, however, could mean the difference between failure and golden success 15 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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But this transformation can occur only if corporate leaders and workers: overcome denial place longer-term reforms based on core values 16 Deloitte University Press | 4 approaches to automating work using cognitive technologies | proactively take responsibility fix immediate problems @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Read more in the latest Deloitte Review article Explore how behavioral science can help leaders manage corporate crises Download Subscribe Share your thoughts with the hashtag #DeloitteReview Follow @DU_Press on Twitter 17 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Meet the authors MARLO KARP partner, Deloitte & Touche LLP in the Governance, Risk & Regulatory practice RHODA WOO managing director, Deloitte & Touche LLP’s Crisis Management Solutions. 18 Deloitte University Press | 4 approaches to automating work using cognitive technologies | @DU_Press #DeloitteReview Copyright © 2015 Deloitte Development LLC. All rights reserved.


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Sign up for Deloitte University Press updates at http://www.dupress.com @DU_Press About Deloitte University Press Deloitte University Press publishes original articles, reports and periodicals that provide insights for businesses, the public sector and NGOs. Our goal is to draw upon research and experience from throughout our professional services organization, and that of coauthors in academia and business, to advance the conversation on a broad spectrum of topics of interest to executives and government leaders. Deloitte University Press is an imprint of Deloitte Development LLC. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or its and their affiliates are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. None of Deloitte Touche Tohmatsu Limited, its member firms, or its and their respective affiliates shall be responsible for any loss whatsoever sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2015 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited


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