Many businesses gained significant benefits from the development of Year 2000 contingency and event management plans. During the years leading up to January 1, 2000, contingency planning evolved from a largely theoretical exercise to a problem solving and training tool that could help organizations respond promptly to operational failures and natural disasters. Companies developed more detailed contingency plans by analyzing the effect of potential system failures on core business processes; determining the minimum acceptable level of output and services for each core business process; testing the contingency plans; and validating the results through independent parties. They also recognized the need to review and plan for contingencies related to all aspects of the company's operating environment, including IT systems and non-IT systems.
Since the primary perceived weakness - the lack of century coding on computers - was technological, the focus of Year 2000 contingency planning was on "systems." This systems orientation to contingency planning enabled the financial markets to quickly return to normal after the attacks of September 11. Many companies managed to avoid even bigger catastrophes because of the increased focus on contingency and disaster plans leading up to Year 2000.
However, the challenges on and after September 11 highlighted the importance of another aspect of contingency planning - the human element. Contingency planning is not just about buildings and computers and papers; it is also about people and information and knowledge.
Contingency planning professionals acknowledge that protecting the health and safety of people is the first priority during an emergency. Accordingly, evacuation planning, evacuation routing, assembly and shelter, and evacuation training should be and generally are included in every contingency plan. Equally important, but more difficult to acknowledge, is planning for events when people do not survive. In the past, human resources rarely made the list of high priority management concerns when a business was planning for a disaster. Acknowledging that a significant number of staff might be lost is difficult to face. However, the terrorist attacks of September 11 changed forever the definition of disaster and the ways in which businesses will be expected to respond. Businesses now have to prepare for that which may be unpreparable.
Safeguarding records and equipment is easy compared to the task of replacing human capital. To ensure the continuity of the business, so-called battlefield promotions are necessary, but are painful for the company and the individuals involved. Consider the emotional impact of the promotions of New York Fire Department personnel so soon after September 11. Hiring after a disaster is likewise difficult because people are dealing with grief and anxiety in addition to business concerns. However, businesses must still fill critical openings to minimize further financial loss, without seeming disrespectful to those who died. Well considered management succession plans, not just for the CEO and senior executives but also for line officials and managers, provide the foundation for sound professional development programs as well as seamless transitions from disasters.
Managing surviving staff provides as many challenges as replacing staff who are lost. Immediate, effective, and accurate communication with staff and their families is critical, not just in the moments after the disaster but for weeks and months thereafter. The January 2002 issue of the Harvard Business Review contained an excellent article on the importance of strong leadership in times of trauma.1 The article, which is based on three years of research conducted jointly by the University of Michigan Business School and the University of British Columbia, discusses how a leader's ability to enable a compassionate response throughout a company directly affects the organization's ability to maintain high performance in difficult times. This characteristic - called organizational compassion - helps people heal and continue with their work when times are bad. Organizational compassion is necessary not only in times of widespread disaster but also in times of personal crisis.
The article describes four indicators of an organization's capacity for compassion - the scope of compassionate response, the scale of the response, the speed of the response, and the specialization of the response. The scope of the response refers to the breadth of resources provided to people in need. This might include money and other benefits; flexibility in work schedules; providing for physical needs, such as shelter; and providing for emotional needs, ranging from an open ear to formal trauma counseling. The scale of the response refers to the volume of resources, time, and attention made available to those who are suffering. The speed of the response refers to how quickly and how continuously the resources are directed to the need. The specialization of the response refers to the degree to which the response is customized to the situation. Each individual is unique, and their needs in a crisis will likewise be unique. As with managing staff on a day-to-day basis, compassion is not a "one size fits all" process.
I have frequently said that perhaps the single most valuable asset of a financial institution is the trust of its customers. I would like to clarify that. While the trust of your customers is your most valuable intangible asset, your staff is your most valuable tangible asset. You should never lose sight of their worth, whether in day-to-day operations or in planning for a disaster.
I encourage you to carefully consider the human aspects of contingency planning as you revise your plans over the coming weeks and months. Much will be written about the experiences of companies with operations and staff in the World Trade Centers, and I encourage you to adopt the best practices of these organizations to better prepare your organization and your staff for challenges that might lay ahead.
The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.