Guest Column: A Risk Management Nightmare: What You Should Learn from Penn State

Guest Column: A Risk Management Nightmare: What You Should Learn from Penn State

A Risk Management Nightmare: What You Should Learn from Penn State

By Dan Weedin

The nightmare in Happy Valley last week involving the sexual abuse scandal at Penn State cost legendary football coach Joe Paterno and the University president their jobs. It has severely tarnished reputations; incited riots on campus; will cost others their jobs; initiate civil lawsuits; and most likely hurt the university in recruiting students (both academic and athletic) to its campus. The collateral damage may be devastating to that institution and take years to overcome.

Don’t think for a minute, however, that this case study is limited to a major college football program. There is culpability that has a 360-degree scope, including the board of trustees, administration, students, and coaches. Heinous behavior can occur anywhere and in a myriad of forms. The tragedy is with the victims. The biggest crimes here were in the failure to properly report and respond. Basically, the ability to respond to crisis and poor risk management procedures doomed this institution. How prepared are you to respond to crisis?

Let’s take a look at two scenarios involving both for-profit and not-for-profit organizations.

Your business.  If you spend any time reading the newspapers, you know that bad behavior exists in the workplace. Discrimination, harassment, abuse, workplace romances gone awry, and employee theft all have the potential to blow up and cause at best a distraction or at worst a lawsuit and loss of reputation. Small business owners are often caught unaware of percolating issues because the pressures of business keep them focused away from these matters and squarely on staying alive. Unfortunately, not being aware of potential dangers leaves you vulnerable to crisis.

Larger businesses may have a board of directors. This adds a higher level of accountability. The bad news is that many times the board doesn’t find out about problems until they are full-scale wildfires burning out of control. I don’t know for sure, but my guess is that this may be what the board of trustees at Penn State faced.

Non-profit boards. Most business leaders at some point find themselves serving on a non-profit board of directors. This normally starts as an altruistic act, yet in most cases board members don’t have the needed expertise, or the proper training to deal with challenges that face the organization they serve. When the board is the ultimate decision-maker, this can be a recipe for disaster. As a school board member myself, I know it’s taken me two years to get to a point that I think I know what I’m doing! Consider the boards you serve on and the responsibility you have. What risks are floating out there that you don’t know about?

Solutions – Be visionary. If you have people in the role of administration or employee, you have tremendous risk for bad behavior and libelous actions. Reputation damage can be more harmful to your business than the actual occurrence; just ask BP. Regardless of whether you’re the boss, the CEO, or the board, you must be vigilant in crisis leadership strategies. Here are 5 strategies you can implement right now…

• Get training. If you really want to get fit, you hire a trainer because they will maximize your performance and get you stronger faster. No matter how savvy you think you are, you will never reach the same level of execution and preparedness as a group because there just isn’t the same knowledge level.
• Ask questions. To often, the lack of asking questions due to apathy or ignorance come back to bite you in the derriere.
• Be prepared to have fierce conversations. Be collegial; but also be demanding. There is too much at stake.
• If you’re a board member, make sure you carry Directors & Officer insurance. If you’re a business owner, carry Employment Practices Liability. These are risk transfer techniques that may save your bacon.
• Have a crisis plan. This one may be most important. In the face of chaos and turmoil, it’s better to be in crisis management than crisis mode. Decisions made in real-time often stink and have long-term ramifications because the shrapnel from the explosions just keeps hitting people. Develop a plan on how you respond to any crisis and you and your organization will be better off than about 95% of your peers.

The world often gives us warnings through the misfortunes of others. The Penn State tragedy is a nightmare for the victims and the university. Many innocent people have been hit by that shrapnel and it was all avoidable. Take responsibility of your business or organization and build your response to crisis before you find it burning all around you. You, your organization, and its people will be thankful you did.

© 2011 Dan Weedin. All Rights Reserved

Dan Weedin is a Seattle-based crisis leadership consultant, speaker, and mentor. He helps executives and organizations turn their business risk into rewards by helping them prepare to respond to crisis. He is also one of Alan’s Master Mentors and a member of the Mentor Hall of Fame. You can reach Dan at 360-697-1058; e-mail at [email protected] or visit his web site at www.DanWeedin.com.