CHICAGO—The HR staff has to be part of the development of an organization’s emergency protocols, an expert on corporate crisis planning told a June 22 audience at SHRM’s 60th Annual Conference and Exposition.
While a business will recover quicker from a disaster or crisis if it has a plan outlining steps to take during and after a crisis, there is reluctance or resistance among businesses to invest time and money to prepare a business continuity plan (BCP), said Kathryn McKee, co-author of the book Leading People Through Disasters (Berrett-Koehler Publishers, 2006). “Psychologists suggest this is denial of an inevitable situation,” she said. However, to overcome that obstacle, HR needs to make the business case for disaster planning, she added.
An organization becomes prepared for a disaster and recovering from it by developing a BCP, and to make the case for developing a BCP, HR can review some questions and present the answers to senior management, McKee said. The questions are:
- What is the difference to the company for resuming operations three days later when compared to the cost of developing a plan that might help restore the business operations three days sooner?
- What would happen to the company if products cannot be delivered to customers?
- If a company is a sole supplier/provider to any of its customers, how long will customers likely remain with the company if goods cannot be delivered?
- Would a company that cannot resume operations quickly have an impact on the surrounding community?
- How long can employees wait for the company to resume operations before they have to seek work elsewhere?
In addition, HR can use several formulas to calculate the impact a disruption in operations because of a disaster or emergency, McKee said. A leading formula looks at “lost revenue,” and starts by taking the company’s “gross yearly revenue” and dividing it by the “total sales hours” logged by the sales force, she says. The next step is to take the percentage of revenue generating employees who have to be in a non-operational status and multiple that figure by the number calculated by dividing gross yearly revenue by total sales hours, she said. That produces the “number of hours of outage,” or the number of profitable hours that have the potential for being lost, she said.
In addition to the direct loss of profitable hours a potential crisis could have on a business, there is also a potential threat to a company’s reputation that might result, McKee said. If a company does not bounce back within a relatively short period, customers might be forced to turn to a competitor to supply necessary goods, she said. Once those customers are lost, they are difficult to get back, she said.
To mitigate damage caused by lost sales, a company has to keep customers, and the firm has to be prepared to incur “restoration costs” related to returning to an operational status, she said. However, those costs can be managed by a BCP, which requires an organization establishing a core team to oversee development and implementation of the BCP, she added.
While a company’s core team should include an organization’s senior leaders, it should not include the company’s CEO, McKee said. Rather the CEO should appoint a core planning team of senior leaders responsible for the critical aspects of the business, she added. The senior leaders can then determine which of them should specifically work on developing the policies and strategies of the BCP, she said. In addition, the authority of the core team needs to be established, and that is where the CEO can play a direct role by delegating decision-making powers to the core team. In return, the core team should advise the CEO of decisions that have been made or make recommendations that may need board approval.
The core team should also create and issue a plan mission statement, she said. The statement should be succinct and to the point, and it should provide organization and direction for how an emergency situation at a company will be handled. The information covered by the plan mission statement includes:
- The organization’s commitment to emergency management.
- Defines the purpose of the plan.
- Indicates it will involve the entire organization.
- Defines the authority and structure for the planning group.
There are also critical questions a company’s planning teams need to address, McKee said. The questions are:
- Does the organization’s preparedness policy include a definition of crisis?
- Have the persons responsible for critical systems and business processes been identified?
- Has a BCP team been appointed and does it include senior business function leaders?
- Has the BCP been communicated throughout the organization?
- Has a person been assigned with the responsibility to update the BCP?
As part of the BCP process, the CEO should appoint the executive who will be the incident commander should an emergency or disaster occur, McKee said. What needs to be made clear is that the CEO delegates complete authority for incident management to the incident commander, she said. HR plays a key role in selecting the incident commander, and ideal candidates are those who understand the intricacies of a company’s operations. In addition, more than one incident commander will be necessary if a company has more than one location, and if for different types of emergency situations, she said. What is important to emphasize is the incident commander runs the incident, the CEO does not, she added.J.J. Smith is editor/manager for SHRM Online.