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Target Inc.’s Security Breach Crisis Essay

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Updated: Jun 7th, 2020

Introduction

The leader-follower-situation framework is an organisational model that is used to analyse leadership in order to determine its effectiveness and efficiency especially during crisis situations (Mitroff 2004). According to the theory, leadership is a function of three distinct components namely a leader, followers, and the situation. The three components can be individually used to examine a leadership crisis situation because they overlap in many areas. Leadership is an outcome of interactions between a leader, followers, and the situation that brings them together (Hollander 2012).

The essence of the interactional framework is that the components interact with each other to determine the outcomes of events. Crisis situations are chaotic and dynamic. Therefore, leaders and followers need to change the components in order to achieve favourable results (Hughes, Ginnett & Curphy 2012). The framework can be used by leaders to evaluate their leadership style in order to determine the changes that can be implemented to increase their productivity and efficiency as well as those of their followers (Hollander 2012).

Crisis situation: Target Inc. data breach

In 2004, Target Inc. (an American retail firm) experienced a crisis situation after its management unearthed a security breach in the company’s payment system. The attackers compromised more than 110 million credit and debit cards belonging to customers (Stout 2014). The firm’s leadership did not manage the situation effectively after identifying the breach because of fears that it would tarnish the firm’s reputation and lead to loss of customers.

This situation can be analysed using the leader-follower-situation framework to evaluate the effectiveness of target’s leadership during the crisis. Target’s CEO Gregg Steinhafel displayed exceptional leadership in addressing the crisis that tarnished the firm’s reputation and led to loss of loyal customers. On the other hand, he met the high expectations of both employees and customers in addressing the situation. His embracement of transparency aided his leadership and helped to regain the trust of his employees and some customers.

Situation analysis

Target’s management became aware of the data breach seven days before they announced it to the public (Stout 2014). A thorough evaluation of the firm’s response to the crisis revealed that delays to announce the attack led to more security breaches and financial losses. Target was slow in announcing the security breach and as a result compromised the security of the customer who used their cards after the attack (George 2014). The firm revealed that the situation lasted for approximately three weeks. Effective leaders realize that their response to crisis situations determine the reactions of their followers and the outcome of the situation (Mitroff 2004).

The first step that Target’s CEO Gregg Steinhafel took was to admit the security breach and take responsibility as the leader of the firm (George 2014). This decision was aimed at maintaining the confidence and trust of the customers. As part of taking responsibility for the crisis, Steinhafel announced that his organisation would take liability for all losses incurred by its customers (George 2014). His employees provided accurate and authentic information to customers in their efforts to mitigate the situation. Target’s employees had great expectations from their leader because poor management of the situation would affect their credibility and reputation adversely.

The announcement of the breach was late and resulted in more security breaches. However, Steinhafel ensured that information regarding new developments was given to customers transparently and in a timely manner (George 2014). Initially, the chief executive officer released scant information regarding the situation. Many people were frustrated because the information did not reveal the extent of the breach and the information stolen by the criminals (Stout 2014).

However, further investigations led to the release of comprehensive reports that stipulated the extent of the crisis and the number of customers who were affected. At some point, Steinhafel was criticised by certain stakeholders in the retail industry for releasing information that increased the number of customers affected. Despite widespread criticisms, the CEO did not conceal any information because he was aware of the importance of honesty and transparency in leadership.

According to the leader-follower-situation framework, there are several follower aspects that affect the leadership process. They include followers’ expectations, motivation, competence, and personality traits (Hickman 2009). In addition, follower’s trust and confidence in their leader is important. The employees and customers of target had great trust and confidence in Steinhafel because he was honest and transparent regarding the crisis. He did not conceal any information and he implemented measures that ensured that customers were not liable to any losses incurred (George 2014).

Steinhafel showed great leadership in addressing the crisis because all the decisions made were aimed at improving the welfare of the customers. On the other hand, employees were absolved from any wrongdoing because the crisis originated from the management teams’ failure to act on warnings of potential attacks (Stout 2014). This motivated them to work hard towards solving the crisis by patching the breach and assisting customers. Steinhafel also contacted his employees regarding potential remedies to the problem. Employee involvement led to creation of creative and innovative solutions that facilitated the speedy eradication of security vulnerabilities that caused the attack as well as the education of customers.

Some customers were angered by Target’s decision to delay the announcement and provide inconclusive reports that did not reveal the extent of the breach. Therefore, they filed law suits against the firm. According to the interactional framework, leaders can change followers or the situation in order to have better outcomes (Hughes, Ginnett & Curphy 2012). Target’s CEO changed followers by adopting transparency as the model of dealing with the crisis. For instance, initial reports stated that only 40 million customers were affected. However, reports released after further investigations showed that more than 110 million cards were compromised (George 2014).

The decision to adopt transparency changed the behaviour of the leader as well as that of customers and employees. Employees worked hard to eliminate vulnerabilities in their payment system and assist customers to deal with the problem. Steinhafel could have lied to customers in order to safeguard his firm’s reputation. However, he decided to be honesty and tell the truth. The situation changed as more investigations were conducted. After the breach was announced, the situation appeared to be a minor and simple. However, as the firm released results of further investigations, the situation changed from a simple crisis to one of the worst data breaches in the retail industry. The change in the severity of the situation influenced Steinhafel’s approach to the situation. For example, he offered his customers free credit reporting services and discounted shopping.

In addition, he offered adequate information on the company’s website on how customers could responds to the crisis. Target’s employees stood behind their leader and did all they could to help customers deal with the situation. They provided detailed information and customer services that mitigate the problem. Despite their concerted efforts, many customers were dissatisfied with the company’s mode of information dissemination. Every time the CEO released information, the situation worsened. Customer dissatisfaction was evident in the firm’s decline in sales at various locations (George 2014). The dissatisfaction emanated from ineffective disclosure and inadequate assistance offered to victims.

Steinhafel exhibited good leadership with regard to how he changed the situation and the followers. An important aspect of crisis management is effective communication (Hollander 2012). Effective leaders influence their followers by communicating effectively and providing accurate information (Hickman 2009). Steinhafel maintained open communication with customers by ensuring that information was disseminated as fast as it was received. The problem with fast disclosures is that information given is usually incomplete and usually presents a vague representation of the situation. The disclosures made the customers uneasy because they felt that Steinhafel was not fully honest with them (George 2014). He changed the situation by offering a public apology and customer incentives such as free credit monitoring for a whole year to affected individuals.

His apology and incentives also changed the perspectives of employees and their involvement because they demonstrated his sense of responsibility towards the needs of his customers. This decision proved to Target’s employees that their leader was responsible for the company’s mistakes and did not blame them for the crisis. In addition, his decisions matched the severity of the crisis as it evolved over time. For example, when pressure from the public mounted for the release of a conclusive report, Steinhafel hired a forensic security firm to conduct a thorough system audit and determine the extent of the breach.

Poor leadership was also an aspect of the emergence of the crisis situation that affected Target. Investigations revealed that the company’s computer security staff had raised concerns to the management about security vulnerabilities in the payment card system. Some employees wanted to conduct thorough checks on their payment system but top management ignored the warning. The failure by Steinhafel to act on the warnings issued by the government and employees led to the crisis that caused huge losses. Steinhafel realised his mistake and took ownership of the crisis. He did not blame his workers for the breach but instead created strategies to address the problem. His transparent and holistic approach to the problem encouraged employees to support him in dealing with the situation because it revealed his authenticity and honesty.

Conclusion

Target Incorporation faced a crisis situation that involved one of the worst security breaches in the history of American retail industry. The CEO of the firm, Gregg Steinhafel used his leadership skills and experience to handle the situation. This situation can be analyzed using the leader-follower-situation framework. Steinhafel influenced the customers and his employees by adopting transparency and honesty as his leadership motto. The dissemination of findings from forensic investigations proved to the customers and employees that their leader had taken full responsibility for the crisis and was doing everything in his power to address it. The situation worsened as new information emerged. However, Steinhafel did not change his transparency motto but made different decisions that were appropriate to the new situation. Despite late announcement of the crisis, the company’s chief executive officer handled the situation as best as he could and demonstrated good leadership.

References

George, B 2014, , Web.

Hickman, GR 2009, Leading Organization: Perspectives for a New Era, SAGE, New York.

Hollander, E 2012, Inclusive Leadership: The Essential Leader-Follower Relationship, Routledge, New York.

Hughes, RL, Ginnett, RC, & Curphy, GJ 2012, Leadership: Enhancing the Lessons of Experience, McGraw Hill/Irwin, New York.

Mitroff, I 2004, Crisis Leadership: Planning for the Unthinkable, Wiley, New York.

Stout, H 2014, , Crisis Experts Say, Web.

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