Looking after your good name

Thursday, 01 August 2013

Steve Cropper photo
Steve Cropper

    No one can completely predict a crisis, but as Steve Cropper reports, a responsible board ensures management is prepared and equipped to handle affairs when bad things happen to good companies.

    A board has many responsibilities, with many considerations vying for its attention. One critical responsibility is the organisation’s good name and its readiness to respond and communicate well in a crisis. Public relations (PR) and marketing in good times are relatively straightforward. But crisis communications is a particularly complex and specialised field. The training of a spokesperson and a team to manage a crisis is distinctly different from a conventional communication situation and things are not getting any easier. If anything, they are getting harder.

    News continues to undergo a 360 degree expansion. It is delivered through many conventional and social media channels to more and varied devices. As a result, boards and the companies they govern are more visible and accessible than ever. Similarly, corporate reputation is more vulnerable to attack and is in greater need of protection.

    In these days of social media and instant messaging, it is possible for the media to know before you do that a crisis has occurred or is unfolding in your organisation.

    The situation involving the Qantas Airbus A380, which suffered a serious engine failure on departure from Singapore in November 2010, first came to media attention via passengers’ texts and tweets from the aircraft. Pictures of the damage to the aircraft were available from passengers’ phones before it had landed and one passenger had the presence of mind to record all the captain’s announcements during the emergency. Those announcements and many of the photos were included in Captain Robert de Crespigny’s subsequent best-selling book, QF32.

    The media is extremely nimble in such situations and there is no time for a planning meeting on how you are going to handle it. Doing nothing is not an option. There is a compelling need for speed.

    A key point to make is that an organisation must not wait for the roof to cave in and only then consider if maybe some preparation would be advisable. The smartest thing — the responsible thing — a board can do is to require management to develop a crisis communication capability long before it is needed. Consider and assess all possibilities, however remote, in the planning phase. Crisis communication plans are often companion documents to a broader crisis management plan and as such, must be checked regularly. Even details such as after-hours contact phone numbers and changes in personnel are potential game changers in fast-moving crisis situations.

    Where do these crises come from?

    According to the Institute for Crisis Management’s Annual ICM Crisis Report 2012, half the crises recorded in corporate America were triggered by management – not employees, who only triggered about a third. This may seem counterintuitive at first, but given that management has its hands on the controls of a company, it is predictable that it would cause half the mishaps. Interestingly, 18 per cent of crises befalling companies were triggered by someone else. An example of this might include the BP oil spill in the Gulf of Mexico, which affected many hundreds of companies.

    The same report indicates many crises could have been predicted and steps taken to eliminate or minimise their effect. Only 39 per cent of reported incidents were genuinely unpredictable.

    So boards do well to be particularly vigilant of their management’s capabilities in the crisis communication field.

    Beginner blunders versus winning ways

    In times of crisis, organisations that trip up and suffer reputational damage are those that do not communicate. Instead, they go into the bunker and lock themselves inside. Meanwhile, the outside world, with no information available, tends to assume the worst rather than to automatically suppose the situation is under control. In contrast, those organisations that establish a flow for their own information early and maintain a dialogue (via media and other channels) with their stakeholders have historically performed better.


    The governing policy for effective crisis communication is quite straightforward:

    1. Concern: Say sorry.
    2. Action: Explain how the damage will be fixed — and then fix it!
    3. Perspective: Make sure it won’t happen again — and then explain that.

    Lawyers and insurers hate people saying sorry because of legal and financial implications. However, the protection of reputation and goodwill in a crisis must be assessed alongside the advice of lawyers and insurers.

    Professional communicators and those they advise confront crisis scenarios every day. These can include food poisoning or product tampering requiring a product recall, the imminent collapse of a project, malfeasance or corruption, an oil or chemical spill, violence in a local government area, a whistleblower from inside a company, a strike or any other plausible nightmare, albeit unlikely, that may befall an organisation.

    Events move very quickly, hastened by the lightning speed of the internet and social media. Toss in activists, politicians, disgruntled ex-employees, unions, competitors and shareholders, and you are facing serious commercial and financial implications. Never forget staff members either. They can contribute as ambassadors if equipped with information. They may inadvertently inflict more harm if they are kept out of the loop and say something careless and interesting.

    Here’s a tip. Bring your PR people in from the beginning and listen to their advice. Management mostly defaults to legal and financial counsel. Boards should ensure their management team is protecting the company’s reputation as well. According to Oxford researchers Rory Knight and Deborah Pretty, "the perceived ability of management dominates the impact of crises on shareholder value". That requires communications and in particular, crisis communication skills.

    Could you handle a crisis today?

    Why not discuss this questionnaire at your next board meeting. It might identify gaps in your readiness to respond effectively to a crisis:

    • What kind of management notification system do we have in place if a crisis occurs during non-business hours? For example, how long would it take to reach everyone on the management team if we had a crisis at 
3pm on a Saturday?
    • What is our corporate emergency response plan like?
    • When was it last updated? Has it ever been used or tested to see if it works?
    • How well does it tie in with the response plans of our other sites (if applicable)?
    • What internal problems or other vulnerabilities do we have that could be damaging to our business if they went "public?"
    • What would be the public reaction if one of them was disclosed by a disgruntled employee, or in a shareholder lawsuit, government investigation or news report?
    • How would we respond to the situation and contain the effect on our company?
    • Who would be our spokesperson(s) in a crisis?
    • Who could step in if they were not available or not appropriate?
    • Could they handle tough questions from reporters? Have they been trained?
    • How would disclosures be handled at one of our facilities in a crisis? What government bodies or other regulators would become involved?
    • How much information would we give out if we had a crisis?
    • Who would decide what to say?
    • What would be the approval process? How long would it take?
    • Who do we have advising us?
    • How would we contact our management team and employees so they would hear from us before learning about it from the news media?
    • What about customers, suppliers and other key audiences?
    • How would we do it, and how long would that take?
    • What crises have similar organisations had that went "public?" How well would we have handled those crises?
    • How much management time has it taken? How much has it cost so far in expenses, lost business or other effects?
    • What was the role of the board?
    • What are the prospects for lawsuits, government investigations, etc? What can be learned from their experiences?
    • Have we made any changes in the way we do business as a result of what happened to them?


    Practice makes perfect

    It sounds like a cliché, but it is true. Crisis triggers, once considered, should be used to test the company’s response capability. Large government and private organisations drill often and rigorously.

    If a company’s good name and the value of its brands are considered valuable, if business continuity is important, then it follows that responsible management prepares to handle affairs when bad things happen to good companies.

    Many companies will run drills to test the readiness of processes, logistics and emergency response. But a key ingredient is missing from this approach. The PR function, and other important liaisons, must also be included.

    Human resources, government relations, community relations, customer service and others should also have a role to play in training the organisation to respond effectively in emergencies.

    While no one can completely predict a crisis, appropriate planning makes the difference between maintaining a corporate reputation and the possibility of permanent damage to your good name.


    Company performance in a crisis

    WORST practice

    • "No comment" – allows critics to fill the void.
    • Lets misinformation grow.
    • Poor tonality of message – projects defensiveness and hostility.
    • Low visibility of leadership team – keeps stakeholders "guessing".
    • Refusal to accept any liability. No pre-considered compensation strategy.
    • Reactive stakeholder management approach. Fails to keep regulators and authorities informed.

    BEST practice

    • Fast, proactive, open public communication.
    • Corrects misinformation quickly.
    • Good tonality of message – care, concern and control expressed and demonstrated.
    • High visibility of the leadership team – usually "on location".
    • Compensation policy ready and well communicated.
    • Proactive multi-stakeholder management approach. Remembers to communicate internally and to suppliers and clients.

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