When Professor John Oliver contacted me about his book “Corporate Trauma”, my interest was piqued. I have always been interested in the psychological side of crisis management and crisis communication. After all, reputational crises are usually caused by people and behaviours.
Also, Professor Oliver’s book was seeking to shed light on an area of crisis not much emphasis is given to, namely recovery. How do organisations best move on from a crisis and is “getting back to normal” a good idea when it was normal that caused the crisis in the first place?
The book “Corporate Trauma”, according to Professor Oliver, explores a phenomenon where organisations experience long-term negative effects due to a significant crisis. It argues that such crises can create lasting cultural, financial, and leadership challenges that hinder recovery and lead to chronic underperformance, even after multiple turnaround attempts and often multiple changes of leadership at the top.
The book “Corporate Trauma”, according to Professor Oliver, explores a phenomenon where organisations experience long-term negative effects due to a significant crisis.
He seeks to do this by drawing parallels with the biological concept of epigenetics, where environmental factors are said to leave lasting effects across generations. Essentially, altering how an organisation’s cultural DNA operates. The central tenet of the book is that corporate crises can embed dysfunctional attitudes and behaviours into an organization’s culture, which are then inherited by successive leadership teams.
An organisation said to be suffering from “corporate trauma” in the wake of a crisis as outlined in the book will exhibit:
- Dysfunctional behaviours and attitudes: Employees and leaders may develop a deep-seated risk aversion, becoming reluctant to innovate or adapt to new market conditions.
- Resistance to change: The organisation may become stuck in a state of hyper-vigilance, where every new idea or venture is seen as a potential threat.
- A legacy of fear: Over time, these effects can be inherited by new generations of leadership, creating a cycle of chronic underperformance that’s difficult to break.
The book argues that the usual corporate turnaround strategy for companies following a major crisis – cost-cutting, restructuring, sale of non-core assets – is not enough. Instead, a much more holistic approach is needed that addresses the ingrained cultural issues that contributed to the crisis in the first place and the cultural scars left behind afterwards. Thought provoking indeed and perhaps one way to understand how organisations that have suffered a crisis can take years to return to any form of stability. Intuitively, it makes sense that employees will be fearful of history repeating itself making innovation and a return to any kind of risk-taking and innovation difficult.
Evidence for the corporate trauma theory is sought by Professor Oliver from real-world examples of companies like AIG, Barclays, BlackBerry, BP, Wells Fargo, and Volkswagen, analyzing how crises like fraud, scandals, and environmental disasters led to long-term underperformance and repeated failed turnarounds.
Professor Oliver examines the actual financial performance of these companies following their respective crises and their attitudes to innovation and risk-taking largely through content analysis of annual reports. A lot of evidence is presented but it must be said all organisations are involved in a complex interplay with the environment within which they operate so a definitive link between crises and long-term performance is difficult to establish beyond doubt.
One aspect of the theory particularly of interest to PR professionals is the clear opportunity for strategic PR to be given a much more central role in the recovery phase.
One aspect of the theory particularly of interest to PR professionals is the clear opportunity for strategic PR to be given a much more central role in the recovery phase. A real strategic renewal requires the organisation to rethink its purpose, vision and mission. There is then a communication challenge to embed the new corporate DNA and a cultural identity supportive of the new strategy. Trust must be rebuilt with stakeholders with actions, and a new compelling narrative needs to be developed that can be easily understood by all.
It may be that not much of this is news to crisis communicators but what is interesting is the level of resistance any organisation that has suffered crisis may need to deal with to bring about the required change. A root and branch understanding of what went wrong cannot be rushed and should be in-depth. I am almost beginning to feel sorry for CEO’s brought in to clear up afterwards and deliver real results to a tight financial timetable. A book like this should help them see what they are up against.
John Oliver, is an academic consultant, keynote speaker, and an Advisor to the Parliamentary Office of Science & Technology, UK. His book “Corporate Trauma: The toxic legacy of a crisis” is available on Amazon.
Author: Chris Tucker, Co-Chair, Crisis Communications Network
Image: AI generated
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