Critical Eye Anatomy Of A Crisis Insights

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Information about Critical Eye Anatomy Of A Crisis Insights

Published on January 5, 2010

Author: ronhepburn



In a media-driven, reputation-sensitive era, successful management of not only
corporate risk, but corporate crises is essential to business survival. This ‘nutshell’
survival kit explored at a Criticaleye Discussion Group offers guidance, and
practical insight on the best way to safeguard corporate existence.

Illustration: Dr Cornelia Junghans Anatomy of a Crisis: How to Keep Your Head By Ronald Hepburn

Inspired by: Criticaleye Discussion Group: Managing Communications in a Crisis In a media-driven, reputation-sensitive era, successful management of not only corporate risk, but corporate crises is essential to business survival. This ‘nutshell’ survival kit explored at a Criticaleye Discussion Group offers guidance, and practical insight on the best way to safeguard corporate existence. Question: How many crisis communicators premises or indeed have anything to do with you have the specialist sector writers does it take to change a light bulb? your business, so make sure that it is your and, if a listed business, the City press on problem before assuming responsibility. side. If you have an expert writer on your Answer: “We are still trying to ascertain the side, it’s difficult for others to criticise.” facts surrounding reports of a bulb failure at In the world of the crisis communicator, The close relationship between Mercedes one of our sites. We can, at this stage, say that crisis preparation is preparing to manage and trade media helped enormously in it is unlikely that the light bulb needs to be the unmanageable. As every business bringing expert opinion onside in the changed, as we carry out a full risk assessment will, at some point in time, find itself in a Mercedes Moose Test Crisis (see Figure 1). every quarter which tests for this eventuality position where its reputation is threatened Organisations that have only had a reactive and in accordance with our carbon neutral by unforeseen events, every organisation stance prior to a crisis will find it hard to policy, we use long-life low energy bulbs, which should have a team and a plan in place move to proactive when the pressure is on. require minimal maintenance. However, we will for this moment. The unforeseen must carry out a full investigation, and if we find therefore be foreseeable. No crisis should Tabitha Aldrich-Smith, Director of that the bulb was indeed one of ours and was be unexpected. In this paradoxical world it Corporate Affairs, UNITE Group plc, faulty, we will report back to you as soon as we follows that there are clear rules of thumb, the leading UK student accommodation are able. We are, as an organisation, mindful but every crisis will be handled differently. provider, has a pre-emptive approach: of the need to plan for the unexpected, and so “UNITE does a quarterly survey of its our bulb replacement team is on standby and five stages of crisis planning: residents’ opinions on student life. If fed to ready to go in, if this becomes necessary.” media and stakeholders then, even if they 1. Build Solid Relations disregarded it, they are at least familiar The answer to the facetious broken bulb A business already engaged with the with UNITE, and know that channels question, although laughable, demonstrates media and stakeholders will reap the of communication are open.” UNITE the response of the skilful crisis manager, harvest of goodwill built up beforehand. is a good example of a business where when confronted with a tricky media enquiry; A company that is understood by the an emotive issue (housing) and a vocal a) acknowledge the question b) be helpful media can save itself considerable time customer base (students) come together c) be informative, but importantly d) make and energy in a crisis situation. to create a pressure point where a crisis sure the problem is yours before you take may fester. If UNITE wants to introduce responsibility for it. If there are twenty- Geraldine Sharpe-Newton, veteran of CBS a rent increase, the students are likely four hours in a news cycle, what you say in News, CNN and ITN, and now running her to complain vociferously. The trick is, for hour one may be repeated across all media own communications practice, and great UNITE, to turn the emotive issue in its favour; until the next news cycle, by which time advocate of establishing relationships, if UNITE cannot compete on price, then the damage to your reputation has been advises, “Build relationships with the there is a PR point to be won by publicising done. It is quite conceivable that, when press and with stakeholders - even local how safe and secure its student housing representatives of the media phone up with councils and MPs. Know your journalists is compared with private landlords. If its what they believe to be a bona fide story and your programmes and be aware that, accommodation really is top quality, then of a broken light bulb from a disgruntled when they don’t approach you, it means it should emphasise its social role and customer, it may not be your bulb or your trouble. On a limited budget, make sure that a safe pair of hands in loco parentis. 2

2. Assess The Risk Risks to be considered include the figure 1. Mercedes Benz diverse and the unlikely. Following the – avoiding the Moose principle of expecting the unexpected, Mike Taylor was the personal adviser a risk assessment should cover a wide to Jurgen Schrempp, the Chairman of range of scenarios including: Daimler Benz (now Daimler Chrysler), • Maintenance risks at the time of the now infamous ‘Moose • Environmental risks Test’ crisis for Mercedes in October 1997. • Service issues The Mercedes management team were at the Tokyo Motor Show when reports came • Fire risks out that their new ‘A’ Class car had flipped • Health and safety issues when undergoing a test simulating a • Security risks large animal stepping into the road. “It • Misuse of equipment or buildings was making the front pages everywhere”, by customers or employees says Mike. The executives’ first reaction • Scandals involving employees, was to let the marketing department deal including staff vetting problems with it, they then went on the offensive • Regulatory or legal risks questioning the validity of the test itself. • Corporate issues, shareholders’ concerns Mike advised to take stock; the adverse • Market risks, such as a contraction media had not cost any orders, and analysts were confident Mercedes It is worth remembering that a crisis for one would sort it out. The corporate team group may be inconsequential for another. decided to admit the problem not only For example, we know that in the hotel in the car, but in the test regime. The story broke on the Thursday, and by business suicides will occasionally happen, the Monday they had taken control: and should be handled with great care, as they recalled the model, fixed it and this carries a risk for a hotel. However, it is reintroduced it five months later. This ‘only a crisis’ for a hotel, if it is deemed to be was costly, but not as catastrophic as the hotel’s fault that the suicide happened, the potential reputational damage had and at that point your crisis plan must be they attempted to deny the car’s faults. ready and waiting. By contrast, the credit Key handling points: card market is a standard example of where • The breathing space they had over the responsibility for a suicide is regularly weekend to decide their response apportioned to a business, and where • Mercedes’ existing relationship banks and lenders are often pilloried by the with its trade press media for allowing individuals to run up • Its outstanding reputation for quality debts across a number of card providers. • A good internal communication policy that maintained workers’ confidence This situation becomes a crisis because, • A chief executive who was a good media however vehemently the banks argue that performer and confident in the crisis the deceased borrower did not disclose the full extent of personal debts, this does not ‘wash’ with the bereaved family, 3. Implement Crisis Systems and the local paper will then publish anyway, Here are practical steps to put with negative effect for the banks’ reputation. risk assessment into practice, once the risks are assessed: A risk is therefore not necessarily a crisis; a risk is something you should anticipate a) Create a risk checklist and crisis manual and deal with, because you For risks rather than crises, keep a checklist have planned for it. or flowchart of everything to be done. Outline the exact steps to follow for every A crisis, however, is one step further, namely risk scenario. This is a comfort mechanism a risk gone live, with the ability to damage that gives confidence in a business. the reputation of your business. b) Create a handbook for crises that includes: • General contingency plans laid out for unexpected circumstances • Vital information including contact details A business already engaged with for all key personnel and the board • A priority list of who to contact first the media and stakeholders will • All relevant safety certificates inside your crisis file, to prove straightaway that you were covered, and facts, figures, reap the harvest of goodwill site plans plus anything else that may prove your company’s diligence built up beforehand • A template briefing pack, incorporating key messages that can be applied to any crisis situation

Crisis preparation is preparing to manage the unmanageable 4. Test Crisis Systems 5. Review Tests and React Accordingly figure 2. allied irish Once you have tested your systems, – Mega fraud a) Practise using the crisis handbook you will see how good they are. Here It is vital to test the crisis handbook. are some rules of thumb that make Mike Lewis was a programme executive Remember, the first thing people do in for good crisis communications. at Allied Irish Bank in charge of major a crisis is forget everything (including fraud when, at 6pm on the Chief the handbook), unless they have used it a) Encourage a culture of openness Executive’s 60th birthday, a call came previously. Make sure that people are trained Crises are more likely to happen in from the USA to say that a fraud had been discovered running into and well rehearsed. Simulations of real-life businesses where openness is not hundreds of millions of dollars. The situations are vital. Bring the crisis handbook encouraged. This allows small problems CEO called the Finance Director and to life, change people’s perspective on it. to grow into major uncontrolled issues. quickly put people on planes to the “Employees should feel empowered to stop USA. The first 24 hours were nasty; b) Build trust internally between things going wrong,” says Mike Lewis, the nobody knew what had happened crisis co-ordinators and board programme executive in charge of Major or how much had gone. Eventually, Involving the executives in crisis simulation Fraud for Allied Irish Bank, when his company amid media clamour and pressure is the only way to ensure they understand was hit by a US$450m fraud (see Figure 2). from the stock market, the Finance the importance of having a plan. It allows “People often lie when things go wrong, Director called the figure at US$710m, an informed guess, and actually more them to see they are well protected and what and this can worsen the crisis or, worst of than the final loss of US$491m. the real risks are to the business – often all, lead you unwittingly into a cover-up”. not the crisis itself but the poor handling “How could we have been so stupid of the crisis. If the board knows that the “Make sure you have systems in place to to be defrauded like this?”, was crisis team is capable, when it comes to the freeze normal operations, especially things the prevailing feeling, but it was a crunch, they will be less likely to interfere. like routine document shredding, fast in a sophisticated fraud going back over This is important, as often in a crisis the crisis”, says Nick Benwell, Partner in charge five years. The bank decided that a full management get bogged down in handling of the Corporate Risk Group at the law firm independent report was the only way they could restore confidence. It was the crisis and take their ‘eye off’ the daily Simmons & Simmons, “so you can be seen to published 30 days later and, although running of the business, which can be as be acting with probity.” When investigations it had been a big risk (highlighting damaging for the organisation as for the start, it can reflect badly on an organisation, several procedural lapses), the media crisis itself. George Hutchinson, Former if it appears evidence was being lost, as story effectively died after publication, Director of External Affairs of Tube Lines a crisis unfolded, even if the papers are even though the crisis had ramifications Ltd, has formalised this arrangement at unconnected with the investigation. over 12-18 months, including arrests Tubelines. “In our crisis room the board was and job losses. The American subsidiary only allowed to enter, if invited, otherwise it b) Get as much information as you can of the bank was eventually sold. should be outside handling the business”. and set up different communications Key points: systems for media and stakeholders • Fast, decisive AIB response Communicating to everyone in the company Keeping the staff informed via the intranet allowed time to think that there is a single team handling crisis is a good way of letting them know you • Allied Irish did not admit to situations is vital. Make everyone aware are in control and thereby stopping panic anything until they knew what was that this team will take control in the spreading. A corporate blog is sometimes going on and were frank about early stages of a potential crisis. Ensure a good idea, or a forum in which concerns this with the press, until they had people on the ground know to contact can be aired and dealt with. However, you hard facts. The FD’s ‘guesstimate’, you, if a situation starts to develop, need a separate system for the external although high, was useful and remember that your own people communications, especially media. • The promise of full disclosure was necessary, as the negative are your best early warning system. stories were so strong c) Identify your media spokespeople • An independent report stopped any Brief the non-executive directors and do not let anyone else talk further damage to reputation and the board frequently, and give Have a spokesperson in each location, • Huge efforts were made to briefing cards to those who may come and stick to a list of facts. Write facts on a reassure customers into contact with the media. board, and only add things once they are 4

Know your journalists and your programmes and be aware that when they don’t approach you, it means trouble absolutely confirmed. Never speculate. Roberts, Former Director of Communications 3. The intensity of a crisis does not in itself Have incidental facts and figures close at of BBC Wales, “you must admit it, and sully the reputation of a company. If hand, so that you can be helpful rather than be seen to do so. But do not admit to you have a good reputation within the obstructive, when people come to you. something until you know what it is you’re industry, with stakeholders and with the admitting to. If you don’t know what’s media, then in times of crisis you are It is a good idea to separate incoming happening yet, be honest about it. A well set to emerge relatively unscathed. and outgoing calls. Above all, keep ‘muck up’ is never as bad as a cover up.” 4. Even unforeseen circumstances can operational communications separate be foreseen, and woe betide the from crisis communications. The daily At the same time, ‘stick to your guns’. If company that does not anticipate running of the business must continue. appropriate, mount a positive PR offensive. the unexpected and plan for it. Take up your right of reply, write a letter to 5. If as an organisation or CEO you are d) Buy yourself time the editor, get a third-party endorsement, expecting a fair and balanced hearing, In whatever way you can, buy yourself time or involve the local MP. If you commission don’t ‘bank’ on it. When the ‘fan gets to think, plan and react, but do not leave an independent report, as Allied Irish hit by the rhyme’, you had better be a communications vacuum. If you do have Banks did, be prepared for the worst. It able to show the media, government, time, keep an eye on the news to gauge is a bold step to take, and you must be employees and shareholders that how the story is running. It might fade prepared to see it through. If it looks you had done everything reasonable away, so do not over-react. If it runs and like it may be very damaging, get your to anticipate, plan for and test the runs, however, then plan regular updates, lawyers to handle the investigation. You stumbling blocks of your business. and try to accommodate the press. If you may be able to invoke legal privilege to have a large door-stepping press corps, stop people seeing evidence before the © Criticaleye 2009 serve them coffee. It is the small things final draft, giving you time to prepare. that show people you’re in control. g) Learn from your mistakes e) Give everyone a role Assess how you cope with a crisis, or even As much as it is vital that only the media- a simulation of a crisis. Analyse what trained individuals talk to the press, make went wrong and learn from it. Mercedes sure everyone else has a clearly defined role. unfortunately did not learn from their If the CEO is a good communicator, then she proficient handling of the earlier ‘moose Ronald Hepburn or he needs to be given a communications test’ crisis, when a few years later they had Managing Partner, Haggie Hepburn LLP role. If not, she or he has to be seen to be a quality control crisis, which they tried to doing something else that is useful and not bury. Their reputation is only just recovering. Ron has spent more than 20 years in public ducking responsibility, eg, if one of the board relations, in consultancy and in-house. He members lives near the epicentre of the crisis, Five Steps To Best Practice has devised campaigns for organisations such as the British Chambers of Commerce and their appearance on the scene will send a 1. Good practice is vital at all times. South African Tourism. In the public sector, good signal. Other people on the ground can If you have a good reputation and he leads sensitive public affairs campaigns liaise with the local council, or other interest good media relations, then these can for NHS professionals, the Special Health groups. If everyone has a role, you will be harvested in times of crisis. Authority and has promoted the government’s have an easier time co-ordinating the crisis 2. You can often spot potential cracks in New Deal and Action for Jobs; and has response. In a big crisis, all non-essential everyday business processes through launched Employment Zones across the UK. staff should be sent home – along with crisis simulations. A business that suffers In the private sector, Ron runs campaigns those who cannot cope with the pressure. a real life crisis has clearly missed a for Qatar’s RasGas, the European Climate crack in its business practices that could Exchange and Tesco Personal Finance. f ) Admit the problem perhaps with forethought have been Contact Ron through ‘My Criticaleye’ “If you make a mistake”, advises Huw prevented, mitigated or planned for.

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