Issue link: https://industrialengineer.epubxp.com/i/826827
22 ISE Magazine | www.iise.org/ISEmagazine B management When disaster strikes By Paul Engle By the time that you read this, two recent events may be a distant memory – or not. In the first, a U.S.-based global bank- ing company confessed that management allowed employees to commit fraud. This large institution set unrealistic sales goals and encouraged aggressive approaches to open new customer accounts. Despite many red flags, the executives responsible received millions in bonuses and stock compensation. Once the practice went public, the board of directors sponsored an independent forensic investigation that blamed management. Execu- tives were forced to leave, bonuses were clawed back and customers were reimbursed. The message to the public pro- claimed that the problem's root cause, namely unrealistic sales targets and faulty compensation systems, has been changed. The company and its brand may survive thanks to the efforts of new management to regain the public's trust. The second disaster involved a 69-year- old airline passenger forcibly removed from a commercial flight to make room for staff members. As police departments know too well, every public act can and will be recorded and reported on social media. Characteristically, management first attempted to justify the actions, even blaming the victim. After several failed attempts to quell negative public reac- tion, the CEO apologized and, of course, blamed the security officers and local management. Interestingly, this airline suffers from low industry customer satisfaction ratings year after year. First, as every marketing executive well knows, customer perception is real- ity. Data may indicate that 99.99 percent of transactions are successful, yet one or two disasters broadcast on social media will change customers' perceptions for the worse – damage that can take many years to repair. When such disaster strikes, companies should show humility, admit the mistake and take immediate corrective action. A good example involved an enter- tainment company's reaction after an alli- gator attacked and killed one of its young guests. While a terrible tragedy, and one that may have been preventable, the company took immediate responsibility, publicly apologized and supported the grieving family. The result? An expen- sive mistake, but little permanent damage to the company and the brand. Second, companies should focus on all stakeholders, not just shareholders. While investors clamor for growth and profits, our two examples showed insensitivity to staff and customers. Management experts published the balanced scorecard decades ago to pro- vide organizations alternate metrics for effective governance. Every study sug- gests that respected companies with strong brands owe their growth and prof- itability to satisfied customers and atten- tive, committed staff – all are related in the long term. Third, executive management and the board of directors should listen for clues to potential problems. In our first exam- ple, many managers noticed that the number of accounts with small ini- tial deposits grew much faster than the total population, despite up to 40 percent turnover in the bank's staff. Neither metric caused executives nor the board of directors to pause. A third-party legal action and pub- lic relations disaster finally provided sufficient evidence. Our airline example likely will force the company and the industry to imple- ment new standards and procedures for overbooking and removing paying cus- tomers involuntarily. The bank will closely monitor new accounts and staff turnover. Unfortunately, shareholders, customers and staff suffered unnecessarily due to management's inability to identify problems early and address them effec- tively. Paul E gle is a ma ageme t co sulta t with a BA i a ce. He has more tha 0 years of experie ce i a ageme t, operatio s, product developme t, sales a d marketi g, strategic pl i g d busi ess process improveme t. You may co tact him at paulfe gle@outlook.com. Companies should focus on all stakeholders, not just shareholders.