"Organizations rot from the head down."

Fish and Organizations Rot from the Head Down

"Fish rots from the head down" is a Western proverb, but in corporate and organizational contexts, we use the phrase "Organizations rot from the top down." The "head" refers to the CEO or other top leader. This phrase expresses how a CEO's unreasonable performance demands within the company, or an attitude and statements that excessively pursue goal achievement, can cause the organization (company) to rot. In essence, this phrase emphasizes the critical importance of leadership in crisis management.

Indeed, in our work supporting corporate emergency communications, we often hear comments like "There was strong pressure from above" or "Our company culture makes it hard to speak up..."

Excessive pressure from the top erodes organizational culture, creating a disconnect between societal norms and corporate norms, ultimately leading to misconduct. Any corporate professional who has read news articles has likely sensed this phenomenon to some degree.

Top management must possess strong leadership, and executives and crisis management personnel should strongly recognize that their words and written communications carry far greater influence than they might realize. In recent years, instructions and orders via email or LINE have increased. However, text-based communication tends to be impersonal, often failing to convey nuance and easily perceived as high-pressure directives. This communication method requires renewed consideration.

Many corporate leaders lack practical crisis management experience

A joint survey on corporate crisis management conducted by Dentsu Inc. Public Relations' Corporate Communications Strategy Institute and the University of Tokyo's Graduate School of Information Science and Technology Comprehensive Disaster Prevention Information Research Center examined this 'leadership capability' in detail.

This survey identified "leadership capability" as one of five essential crisis management competencies for companies, defining it as "the communication and execution capabilities of top management, including executives, to enhance organizational crisis management." Essentially, it considers the ability of presidents, CROs (Chief Risk Management Officers), and others to foster a positive organizational culture as "leadership capability" (see Figure 1).

However, when asked if "top management and executives are proactively taking actions and making statements that contribute to improving the organization's crisis management capabilities," the implementation rate was only 43.9% (see Figure 2).
 

This question was ranked second in importance among leadership capabilities by crisis management experts. Does this mean nearly 60% of corporate leaders are indifferent to crisis management? The somewhat disappointing result reveals that actions and statements contributing to crisis management are not being taken.

Furthermore, regarding the relationship with outside directors, who are gaining attention in governance reforms, the question "Do you report or make proposals regarding crisis management to outside directors?" showed an even lower implementation rate of 25.3%. No matter how capable an outside director may be, they cannot make sound management decisions without appropriate input.
Crisis management is a critical management decision. Isn't it essential corporate behavior for the department responsible for crisis management to clearly compile both positive and negative information and communicate it not only to internal directors but also to outside directors?

Management and crisis management personnel should recognize that if executives make decisions based solely on convenient opinions from their inner circle, as was common in the past, they risk facing legal liability for "foreseeability" should major accidents or misconduct occur. Beyond merely operating a whistleblower system properly, the key to preventing organizational leaders from becoming complacent lies in establishing multiple mechanisms tailored to the industry and company's specific realities that effectively gather risk information and ensure it informs management decisions.

Crisis Strengthens Corporate Leadership!

This survey also asked companies about their experience encountering 28 types of crisis events. The chart below compares the "leadership capabilities" of companies that experienced a crisis event in the last two years versus those that did not.

Companies that have experienced crises are more likely to have appointed crisis management officers other than the top executive (+24.1), receive reports predicting risk occurrence (+22.5), and have top executives make statements that contribute to improving crisis management capabilities (+19.9). There are many points other companies should learn from the precedents set by those that have faced crises.

Risk management is the responsibility of top management

In the coming era, we believe the obligation for top management to build systems and foster a corporate culture capable of accurately assessing and managing all potential risk events affecting the company—not limited to incidents, accidents, or natural disasters, but also encompassing investments, exchange rates, technological development, and more—will intensify.

Merely conducting business safely and cautiously risks cementing a reputation as an outdated company, increasing the likelihood of being abandoned by customers, markets, and even employees.

"No growth without crisis management." At the Corporate Public Relations Strategy Institute, we adopt this motto as we advance our research and investigation into crisis management. In our next issue, we will report on the ability to foresee crises, based on actual corporate activities and other factors. Stay tuned!