To refresh, Holmes hyped Theranos’ new blood-testing technology, then held back information when it faced scrutiny. Her mismanagement melted the company’s reputation and, as everyone knows by now, federal regulators recently banned Holmes from the lab-testing business for two years.
Similarly, Musk’s multiple mistakes in responding to a Tesla driver’s death have been well documented. Experts refer to his angry, defensive response and use of statistics to suggest the death was not so significant as a “case study” of how not to respond in a crisis.
And Shkreli, who raised the price of an AIDS and cancer drug to $750 a pill to improve profits and was separately charged with defrauding investors, has become the poster boy for how to ruin a reputation, not just because of his actions, but based on his arrogant antics in court and social media.
All three violated the basic principles of crisis management: accept responsibility, say you’re sorry, fix the problem and make systemic change to ensure it never happens again. These are lessons they could learn from recent crises suffered by the CEOs of Whole Foods, Chipotle and Lufthansa. In fact, all savvy CEOs and executives can learn from this refresher course in how to handle a crisis situation.
1. Accept responsibility. Last year, Whole Foods was accused of grossly overcharging customers for certain items—a blow to the reputation of a company some already call “Whole Paycheck.” Overcoming some initial missteps, Co-CEOs Walter Robb and John Mackey delivered a video message to accept responsibility. “Straight up, we made some mistakes. We want to own that and tell you what we’re doing about it,” Robb said.
2. Say you’re sorry. When a Lufthansa pilot purposefully crashed a plane that killed 150 passengers, CEO Carsten Spohr shared a sincere apology in his first appearance after the crash, repeating it time and again. He displayed deep emotion and empathy with the victims, their family and friends, defining the crash as “our worst nightmare.” Beyond the verbal apology, the company’s actions demonstrated remorse: they offered flights to families to get them as near to the scene of the tragedy as possible and created a reception area to help protect them from unwanted media intrusion. These steps further communicated Lufthansa’s care and concern.
3. Fix the problem. When Chipotle experienced a series of food poisoning crises in recent months, they responded quickly, decisively and with an abundance of caution. The company proactively closed 43 restaurants in two states, many more than those linked to the outbreak. They cooperated fully with health agencies and investigators and took specific steps to address the problem: Chipotle sanitized the restaurants, hired food safety experts and instituted more stringent ingredients testing. And they communicated these actions boldly and clearly. “The procedures we’re putting in place today are so above industry norms that we are going to be the safest place to eat,” Co-CEO Steve Ells told The Today Show.
4. Make systemic change. Within three days of the Lufthansa plane crash, the company announced a new policy: two authorized crew members must be in the cockpit at all times. This new procedure reassured passengers that what happened with the pilot of Flight 9525 can never be repeated at Lufthansa. Similarly, Whole Foods demonstrated its long-term commitment to restoring the confidence of its customers. The company instituted training, improved packaging, weighing and labeling processes, launched a third-party auditing system in all stores and provided status updates so customers could follow their progress.
Worst and best practices
While many may cite the basic steps in effective crisis management, leaders and companies regularly fail to follow them. These recent examples demonstrate that instincts and knowledge must be followed by action and ongoing, thoughtful communication.
If your organization faced an unexpected threat to its reputation, how would you respond? A culture that embraces the key steps in crisis management is just as important as the formula. What experiences have you had that others can learn from? Leave your thought in the comments section below.