Another integrity crisis blows up!

It’s hard to imagine a worse integrity problem for an engine maker than having its engine blow up mid air on a passenger aircraft. Yet that’s exactly the situation Rolls Royce is now in after its engine on a Qantas Airbus blew up out of Singapore last week. Of course, it’s not just the engine maker’s problem now but the airline and manufacturer as well.
So what should they do?

There are three key steps the trio should make together:
1. Identify the problem as quickly as possible
2. Release those findings publicly and in real time
3. Ensure the solution is public, understandable to all, and credible beyond any doubt.

So far, Qantas has been handling the crisis well. Its engineers are working closely with Rolls Royce and Airbus to identify the problem. Meanwhile, the CEO of Qantas has grounded its A380 fleet until it is sure there is no safety issue. One analyst estimated that the cost of that decision could amount to $15 million to $20 million in lost revenue a week. Yet Qantas knows its business depends on its safety record. Flying long distances across the Pacific to and from Australia without even one plane crash is not a trivial accomplishment. It has been the result of many people working diligently over decades to achieve such a stellar safety record. It’s another reminder; integrity really is a company’s most valuable asset and worth protecting even if it costs in the short term.

A quick checklist for an integrity crisis

Here’s a ten point checklist to keep in your bottom drawer in case of a crisis. It incorporates the DNA of integrity and helps build trust with stakeholders.

1. Be honest and open
2. Determine the truth
3. Prevent death or illness regardless of the cost
4. Go see for yourself
5. Reach outside the company for help—ask the leading experts in the field to help find solutions to the problem.
6. Report developments in real time
7. Be generous to those who have been affected. This is not a time to pinch pennies
8. Don’t rest until the problem is fixed
9. Execute organizational changes
10. If someone is at fault, hold them accountable.

Replicating the DNA of integrity to come out ahead of a crisis

The media focus and coverage resulting from an integrity crisis is a harsh and unforgiving trial. But the really exciting news is that with the right approach it’s possible not just to regain one’s reputation but even to enhance it. When everybody is looking, it’s a great time to impress them.

To do that, you need to appreciate the process that creates trust. Knowledge of the “DNA” of integrity—Disclosure, Norms and Accountability—is the key. Honoring those three concepts allows a company to make smart investments in its relationships with customers and stakeholders.

Start with the single most important one: disclosure. When a crisis hits the last thing anyone feels like doing is admit a problem or mistake and deal with it publicly. Hunkering down, being cautious about what is said to the media or even to staff and following the advice of lawyers is all too common a response. Building trust is not about playing a defensive game. It’s about taking risks and reaching out to people. In times of crisis it’s worth remembering there’s no problem that can’t be fixed so long as there’s not an attempt to hide it. That doesn’t mean disclosure is easy. Facts, details and explanations can be difficult to marshal in the midst of a fast moving crisis. For the manager there’s no better approach than to go and see for yourself. And as you communicate in real time, updates can correct mistakes or erroneous data in an honest and open way.

Next address norms. Crucially, you need to make things right with people who have been hurt. Secondarily, you need to change your product, or process, or staffing in a way that credibly removes the public’s concern. The change should be clear, capable of simple explanation and effectively communicated.

Finally demonstrate accountability. If nobody is at fault, say so. But if there was a lapse, hold him or her accountable. And what if it’s your own lapse? Good luck trying to hide it. A far better approach is to address things in an honest and forthright way.

Is 2010 the year of the corporate integrity crisis?

Remember Toyota, Goldman Sachs, BP, Apple, Hewlett Packard and J&J? Just to name a few of the big name corporate crises we’ve seen this year. Instead of learning from the mistakes of others, companies seem to react in the same way each time a crisis breaks: by being defensive and denying any fault. In the midst of a corporate integrity crisis, companies tend to limp from one mistake to another. Bruised by an ‘unfair’ media, misunderstood by the public and unappreciated by the market, corporate leaders tend to hold their breath until the crisis is over and hope that the damage isn’t too great.

But it doesn’t have to be like that. Recognizing that integrity is an investment with a financial payoff can be empowering. Smart companies can learn how to build enormous integrity during a crisis and actually come out ahead. And they can do it without calling in the emergency troops, legions of PR and consulting experts waiting to make money from corporate missteps.

So here’s the single most important point for any manager to remember when a crisis hits: you are no longer in the [fill in the blank] business. You are in the trust business. And your job description is now all about building trust.

While there are plenty of examples of how not to handle an integrity crisis there are only a handful of positive role models. And here’s the reason why: how many managers consciously think about how to build trust and really know how to do it systematically?

Podcast for HR execs

Here's a podcast I did for anyone interested in Human Resources.

Three ideas for good HR

Integrity has huge applications throughout a firm but it is particularly critical for anyone working in the field of human resources. After all, the whole essence of managing human resources boils down to relationships between people. If those relationships are strong and trusting you create a very valuable asset. Here are three simple ideas based on the DNA of integrity—disclosure, norms and accountability—to help HR execs create value in their organization.
1. Absolute honesty
There’s no such thing as secrets within an organization anymore. If you try and keep secrets you’ll look untrustworthy. It’s a tough message for managers to hear but it’s essential to take on board.
2. Simplify norms
Companies do pretty well on norms. In fact, maybe a little too well! Most companies have plenty of established rules and procedures that are integrated throughout the organization. But to build relationships of trust you need people to internalize simple rules that make sense.
3. Hold everyone accountable to the same standards
The recent case at HP where the board dismissed the CEO for bad behavior is a great point in case. But this is by far the exception rather than the rule. It’s not uncommon to give senior management far more leeway with the rules than everyone else. Yet that doesn’t inspire trust in the organization.

Watch Out for Sticky Relationships

Some of the largest companies around today actively build sticky relationships with their customers. That means companies try to ‘lock in’ customers in relationships for certain periods and penalize them if they try to ‘get out’. Cell phones and banking come to mind here. It’s a particular type of mentality that wants to lock in short term business but isn’t thinking about building long term value. Quite often, companies ask customers to make a significant investment in the business relationship but do they care whether the customer is having a good experience or not? For any business it comes down to this: are you treating your relationship with customers as an asset that you are actively trying to increase? Or are you feeding off your customer base and essentially dissipating your asset? A kind of churn and burn strategy where you focus on numbers not relationships. If customers have a good experience with your business, why would you need to lock them in? They will keep coming back, again and again and again!