No Crisis of Confidence for Those Prepared for the Worst

When bad things happen to good companies, reputations can fall in an instant.

Surprisingly, most companies don’t plan ahead for crises, even predictable ones such as product tampering, false rumors or in-house embezzlement. Worse, their top brass often ignore the mounting problems leading to crises, hoping they’ll go away.

According to the Institute for Crisis Management in Louisville, Ky., which analyzed business crisis news stories from 1990 through 1999, about 86% of the crises studied had been visible to corporate management before they snowballed. More than 75% were due to management’s inaction or inappropriate action.

Crises, when handled well and planned for, can be important learning opportunities. Companies can uncover problems that contributed to the crisis and do things differently in the future.

After the catastrophic gas leak in 1984 at Union Carbide’s plant in Bhopal, India, which killed more than 3,000 people and injured at least 50,000, it was found that, before the disaster, the facility had training difficulties, low worker morale and unsatisfactory coordination plans with community services.

“By reacting properly during a crisis, an organization can even gain credibility,” said Bill Lampton, founder of Championship Communication in Gainesville, Ga.

This was the case for Advantica Restaurant Group, the parent company of Denny’s restaurants, which in May 1994 was walloped by a new crisis just as one was being resolved.

A day before it was to announce a $54-million settlement of two racial discrimination lawsuits, one of its Indianapolis restaurants was taken over by two gunmen, said Karen Randall, Advantica’s vice president of corporate communications in Spartanburg, S.C. During the ensuing six-hour hostage crisis, one customer was killed and five people were wounded.

Advantica’s upper management acted immediately. The chief executive flew to Indianapolis to express condolences, visit shooting victims at the hospital and serve as the company’s spokesperson. The company retained David Shank, president of Indianapolis-based Shank Public Relations, to help handle media and public queries “since he knew the local lay of the land,” Randall said.

Advantica, which already had an in-house crisis team, also set up a survivors fund, donating $25,000. It brought in crisis counselors for victims and employees, Randall said. It closed the restaurant, awaiting public input about whether it should be demolished, and offered other jobs to displaced workers.

“But we started getting letters from local government officials, customers and people in the community saying, ‘Don’t close the restaurant. We miss it,’ ” Randall said. “They asked us to reopen.”

Three months later, after a remodeling, the Denny’s reopened. A private reception was held for rescue workers. Customers returned. During the next year, business at the restaurant increased by 32% from the previous year, Randall said.

Experts recommend that companies have an in-house crisis team. It should be a multidisciplinary group that will be ready to act if a worst-case scenario occurs. Include individuals from human resources, public relations and information technology.

Select a spokesperson and provide media training. Typically, in catastrophic situations, the chief executive gets the job.

“Most notably, if dealing with human misery, as when someone is hurt or killed, the top person has to become directly involved, to express their concern for the victims,” Shank said. “Or else the company will lose the credibility it had in the past.”

However, when handling minor crises, or if the chief executive lacks strong communication skills, someone else should be chosen.

This was the hasty decision made by a Southwest industrial firm after it learned an employee had dumped 3,000 gallons of jet fuel into a lake, jeopardizing the lake’s duck population.

David Margulies, the crisis consultant who helped the firm during the situation, recalled that when the firm’s chief executive was briefed about the crisis, “He said, ‘I’m a hunter. I kill ducks every day. So what if the ducks are killed?’ ”

The firm quickly tapped another spokesperson to handle media inquiries, said Margulies, president of Margulies Communications Group in Dallas.

Your team should include at least one outside crisis manager, who can objectively appraise your firm’s situation and help you orchestrate a response. In the heat of a crisis, you may find insiders’ perspectives are skewed, experts said.

“I have seen companies put out press releases, customer letters and employee letters that make the situation seem worse than it was,” said Mike Sitrick, one of the nation’s top crisis management experts and the chief executive of Sitrick & Co. in Los Angeles.

While your crisis team is occupied, appoint other personnel to oversee operations.

“One of the biggest mistakes people make is that they let the rest of their business slide while handling the crisis,” Margulies said.

When a crisis hits, keep cool. Don’t go into hiding or issue impassioned denials before collecting the facts. Otherwise, you’ll fan suspicions about your firm’s guilt.

“When you’re under stress, pressured and have time deadlines, a lot of people lose their common sense,” said Greg Smith, a principal at Bustin & Co., a Dallas-based business development firm.

The public’s first impressions of how your company handles misfortunes will be long-lasting, said Michael Kempner, chief executive of the MWW Group, a New Jersey-based crisis communications and public relations firm.

As you learn and verify information, have your spokesperson disseminate it quickly. You’re battling rumors that spread with lightning speed on the Internet, and you’re up against 24-hour news cable channels.

Respond straightforwardly and factually. As the public relations adage goes, “Tell the truth, tell it all, tell it fast.” The public perceives technobabble, legalese and euphemistic spins for what they are: avoidance strategies.

“Their reaction will be, ‘Do they think I’m stupid?’ When you try to sweep it under the rug, that’s when you’ll get nailed,” said Pierce Reid, senior vice president of Schwartz Communications in Waltham, Mass.

Make no estimates of dollar damages, injuries or loss of life, Lampton said. “Lawyers, insurance companies and others will make you wish you hadn’t.”

If an investigation seems imminent, your company should consider commissioning an independent third-party to do the digging, said John Hellerman, senior media specialist for Levick Strategic Communications in Washington.

Preemptive strikes, such as when a company releases potentially damaging information about itself before the media does, can diminish negative impact.

Whenever appropriate, express contrition and explain what corrective actions the company takes. The public is forgiving of companies that act with integrity, experts said. That’s why it’s important to keep any promises you make.

“You have to demonstrate that you made the changes and that they were systematic, not just symptomatic,” said Ken Ferber, staff vice president of corporate communications for WellPoint and former head of media relations for the Los Angeles Police Commission.

Through the duration of the crisis, keep employees informed of developments and address their concerns.

“They’re going to be your front line,” Hellerman said.

Read memos at meetings. Don’t send e-mails or interoffice memos, which can be leaked. Instruct all personnel who deal with the public to refer queries to your spokesperson or public relations department.

Also, be sure to address the concerns of your other constituents: customers, vendors, creditors, shareholders, community members and government officials. Consider setting up an 800 number so interested parties can leave messages, receive updates and take care of minor matters.

Monitor public and media opinions of your company by scanning newspapers, broadcasts, Internet chat rooms and message boards. Consider hiring online and offline clipping services to help you, said Peter Shankman, chief executive of the Geek Factory in New York.

But don’t respond to rumors and negative comments posted online, he added. Instead, utilize available media channels such as video news conferences, press conferences, business wire services and the company Web site to get your view across professionally.

Preparing for crises isn’t a one-time endeavor. It first requires a detailed analysis by crisis management experts of your company’s vulnerabilities, threats, existing plans, goals and objectives, said Roger Rains, chief operating officer of Crisis Management Worldwide in Wilmington, N.C.

Then it calls for extensive preparation and simulation. Rains advocates that firms’ crisis management teams perform desktop exercises every six months and full-scale enactments of potential crises once a year.

Reward employees for reporting signs of impending crises, such as rising customer complaints, safety problems, labor unrest or distressing rumors.

Be proactive in handling imminent crises such as layoffs by announcing the events in advance. This will prepare those who will be affected, said Tim Dimoff, president of SACS Consulting in Akron, Ohio.

Last year, Advantica demonstrated it understood one of the most essential laws of crisis management: After admitting a problem, keep your promises to remedy it.

Six years after its racial discrimination settlement, Advantica was ranked No. 1 by Fortune Magazine in its survey of “America’s 50 Best Companies for Minorities.”

“When all this was going on [in 1994], I was like, ‘What else? What else can happen?’ ” said Advantica’s Randall. “But sometimes a crisis can be a catalyst for change.

“Obviously, you want to minimize damage and learn as you go along. It’s an opportunity to take a good look at your organization and see what can be improved.”

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Crisis Management, Internet Style

Internet rumors spread with startling speed. Here are some tips from Peter Shankman, chief executive of Geek Factory, about how to handle crises “on Internet time.”

* Call your key managers and tell them to shut up. Establish a company policy and designate a spokesperson to handle media inquiries.

* Don’t lie. If you don’t know the answer, say “I’ll get back to you on that.” Keep your promise.

* Have a news release ready, but don’t send it out. Then, if the crisis is quickly remedied, you can simply file it away.

* Draft an internal e-mail about the crisis to read to your employees. If you send out this e-mail, it will be leaked.

* Make sure your voicemail offers alternate ways for the media to reach you. You must be 100% accessible.

* Peruse chat rooms and message boards. What is the public saying about your company? What are the market Web sites saying? Use the information to craft a response to the media. But don’t answer any messages or chat requests.

* Remember, there is no such thing as “off the record.”

* Remain professional, work the problem, find the solution.