Crisis control Featured

8:00pm EDT August 26, 2007

In 1982, seven people died from Extra-Strength Tylenol capsules that had been tampered with and laced with cyanide.

The way Johnson & Johnson, owner of the Tylenol brand, reacted to the crisis became a precedent for the right way to handle a crisis. Company executives made quick decisions that were based in part on company values that had been written in 1943. The company recalled 31 million bottles at a cost of more than $100 million. It ceased all production of capsules and replaced them with tamper-resistant caplets.

In the short term, Tylenol lost 27 percent of its market share, but through its customer-focused actions and quick thinking, it regained all the market share it had lost.

While this is an extreme example, it goes to show you that you have to be ready for the unexpected. At the time, there was no way for Johnson & Johnson to even imagine that someone would use its products as a way to poison people.

Johnson & Johnson executives invested the time and money needed to deal with the crisis and make the brand as strong as or stronger than it was before.

If you’ve been in business long enough, you know that the unexpected is always around the corner. A crisis is not a matter of if; it’s a matter of when.

Could anyone have predicted the tragedy of Sept. 11 or its far-reaching economic consequences? Anyone doing business in the southeastern United States probably knows firsthand what kind of economic effect a major hurricane can have on the bottom line.

Your next crisis might not even be so far-reaching. It might be a key employee who falls ill or quits that leaves you scrambling to fill in the gaps. Or maybe postage costs rise 20 percent, like they recently did, and cut into your cash flow.

Regardless of the scale of the challenge, you have to be ready for it. One of the best ways to be prepared is to have a reserve of resources — both in cash and time. Set aside money each month, so that you have funds to draw on in an emergency.

Just about any crisis will require cash. If you’ve got funds to draw on, you can either get the people or supplies you need to address it, or at the very least, keep your cash flow going in the short term until you figure out a long-term solution.

The other investment to make is in time. Put time on your schedule each week to deal with the little details. This kind of investment can often let you extinguish a small fire before it becomes a raging inferno. When a big crisis hits, you can clear your schedule, but a little investment upfront can help you avoid some of the internal challenges that can get out of control.

This is also where your advisers earn their money. If you’ve assembled the right team of people, when something unforeseen occurs, you can gather them together and, as a team, plot your next move. They’ll help you avoid blind spots and resolve things quicker than you could do alone.

Regardless of whether your crisis started internally or externally, you have to lead by example. Be resilient in your pursuit of the resolution. Exhibit confidence so that others can rely on you to get the job done.

It won’t be easy — things in business rarely are. But if you have taken the time to build a rainy day fund and assembled a solid team, you are well on your way to handling the next crisis and moving your company back up the mountain again.

FRED KOURY is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or fkoury@sbnonline.com.