Governance/Accountability Crisis Management: It’s Not All Relative, It’s Not About More Media Experts, and It’s Not a Zero Sum Game
I believe in context. Organizations should situate themselves, whether in the external financial environment, governance/accountability best practices, or senior executive compensation benchmarking. Except when an organization faces a governance/accountability challenge. Then, whatever the context, all eyes belong on the organization.
I also believe in expert communication. Except when an organization faces a governance/accountability challenge. Then, however necessary and outstanding the media expertise for a current challenge may be, all eyes belong on the organization’s first in class, previously-implemented governance/accountability policies and practices.
The following suggestions reflect my experience and research in governance/accountability crises and link these context and foundation issues. One organization I worked with faced a crisis when a finance team member was able to defraud through a sloppy check-writing practice. Another faced questions of the propriety of fund-raising techniques. Another had a prominent board executive committee member engaged in financial transactions with the organization without a proper open bidding process or conflicts of interest management. Regardless of the stories, which go on and on, the following all hold true.
- Take responsibility. Take full responsibility for any errors. Explain how, when, why, and by whom they happened. Clarify the boundaries of expected negative fall-out and clarify the positive (i.e., what will the specific drama not affect). An example of the latter is the recent press coverage questioning the appropriateness of a major gift to the London School of Economics some years ago from a Libyan donor with suspected ties to the Gadaffi regime.[i] Whatever the LSE’s decisions regarding leadership (particularly the distinguished Howard Davies’ resignation) or future governance/accountability improvements, the extraordinary institution remains untouched in terms of academic excellence and scholarly and practical contributions internally and externally. Also, it is essential to clarify different elements of the issue: again the LSE teams rightly address the alleged plagiarism in a PhD thesis of an affiliate of the donor separately from the propriety of the gift. If others (even the media) try to blame or point out similar errors by other prestigious institutions on your behalf, resist the temptation to accept this false assistance. (See below.)
- Explain. Explain in detail what will be done both (i) to remedy the situation and (ii) to improve processes and policies to prevent future recurrence. Again, explain how, what, when, by whom, at what cost, and with what expected results.
- Communicate. Communication should be quick, complete, and clear. Then end. No “dripping of details”. No lingering on yesterday’s news. As appropriate, subsequent quick, complete, and clear (“dripless”) updates should be issued to maintain transparency regarding any on-going or unanticipated negative fall-out and progress in the implementation of the “remedy” and the improvements for the future. Ensure communication reaches all stakeholders, which in many cases will include the general public.
- 20/20 Foresight and the Media. Following a crisis, organizations often run to the nearest media expert. Some even try to recruit media experts to the board. While clearly expert communication is essential, it is entirely meaningless without the underlying foundation of first in class governance/accountability policies and practices. Without such a foundation, even the most expertly crafted communications strategy only has one side of the story to tell: the problem. Almost every public scandal (whether the Red Cross Liberty Fund in the US following 9/11 involving redirecting gifts solicited for 9/11 victims to future needs or the Societe Generale trader fraud) is much better weathered if the organization can demonstrate a first in class slate of governance/accountability policies and practices already in place as a matter or ordinary course. The on-going 20/20 foresight theme of this blog requires implementation of solid mechanisms now in order to be able to point to these first in class practices when an issue occurs. Finally, notice I say “when” and not “if”. Human nature and the current level or organizational complexity is such that no institution irrespective of governance is protected from intentional wrong-doing or even well-meaning errors in judgement (that often appear even less well-meaning over time). Donors, the public, and other stakeholders forgive the unavoidable…but only if the avoidable is indeed avoided.
- Don’t Point and Don’t Play Zero Sum Games. Notice that there is no item above for “point out others who have made similar errors” (i.e., claim “it’s all relative”) or “find excuses”. Pointing to others (for example, institutions other than the US Red Cross that raised funds for one specified purpose but inappropriately allocated them for future need) will accomplish two illaudable goals. First, it will make you look like you are excusing your behaviour on the basis of others’ bad behaviour. We tell three-year olds that it isn’t ok to hit just because another child hits… Be the organization that asks “how can we all improve together?” not the organization that hides behind some misplaced notion of relativity (i.e., “we weren’t the only ones”). Second, it will make enemies of the other organization and, more generally, destroy your reputation as a supportive force in the non-profit sector. When I was a young lawyer at Sullivan & Cromwell, a senior partner offered wonderful advice: “never point out publicly the error of another lawyer in the room because some day it will be you – not to mention that it contributes nothing to the productive resolution of the issue.” Non-profit and organizations in all sectors and size categories need to be able to count on each other to maintain the reputation of the sector. Improving governance/accountability is not a zero sum game. If you play it as such, you will lose…the current challenge match and the longer-term reputational game.
As always, comments, questions, and applications for pro bono clients are welcome.
Copyright 2011 Susan Liautaud. All rights reserved
[i] I have the extraordinary privilege of receiving a PhD in Social Policy from the LSE.