CRISIS MANAGEMENT



Crisis management is a business plan of action that is implemented quickly when a negative situation occurs. The Institute for Crisis Management defines a business crisis as a problem that: 1) disrupts the way an organization conducts business, and 2) attracts significant new media coverage and/or public scrutiny. Typically, these crises have the capacity to visit negative financial, legal, political, or governmental repercussions on the company, especially if they are not dealt with in a prompt and effective manner.

Over the past several years, high-profile public relations disasters (the Firestone tire problems on Ford sport utility vehicles, various product recalls, disturbing product tampering incidents) have thrown an intense spotlight on the issue of crisis management. Indeed, as companies have witnessed the damage that poor crisis management can wreak on business fortunes, a growing percentage of firms have intensified their efforts to put effective crisis management strategies in place.

Hundreds of potential threats exist for every organization. Corporate crises can take the form of plant fires, loss of competitive secrets, workplace violence, product defects, embezzlement and extortion, industrial accidents, sabotage, and natural disasters. Any of these events—as well as numerous others—can cause an immediate and prolonged financial loss to a company, require an intensive communications effort directed to investors, employees, consumers and other entities, and may present a series of regulatory, community relations and competitive challenges.

To assess whether a particular company has a higher exposure than others to categories of crisis, a company may employ a risk or crisis manager who may prepare statistical models, review industry data, or work with consultants to understand how one or more crises could impact the organization. Once this process of risk is completed, many companies then design a Crisis Management Plan (CMP) to determine how negative events can be avoided or reduced in scope. But business consultants and public relations experts counsel all companies to put CMPs in place, no matter how remote such threats seem. Indeed, many businesses are able to secure lower insurance premiums if they have written crisis management procedures in place, which is a sure indication of the importance of such plans.

SUDDEN CRISIS AND SMOLDERING CRISIS

Robert B. Irvine, president of the Institute for Crisis Management, noted in Communication World that the Institute characterizes most business crises as one of two types: sudden crisis or smoldering crisis. "We define a sudden crisis as a disruption in the company's business that occurs without warning and is likely to generate new coverage," he said. Examples of such events include business-related accidents, natural disasters, sudden death or disability of a key person, or workplace violence.

Smoldering crises, meanwhile, are defined by the Institute as "any serious business problem that is not generally known within or without the company, which may generate negative news coverage if or when it goes 'public' and could result in more than U.S. $250,000 in fines, penalties, legal damage awards, unbudgeted expenses, and other costs." Examples of smoldering business crises include indications of significant regulatory action, government investigations, customer allegations, media investigations. "In some instances," Irvine added, "crisis situations may be either sudden or smoldering, depending on the amount of advance notice and the chain of events in the crisis."

According to Irvine, while companies need to make sure that they prepare as best they can for sudden crises, it is often the slow-burning smoldering crisis that causes the most damage to a company's image and bottom line. "You really need to be focused on the less dramatic, more complicated, and ultimately more costly smoldering crises that are likely to be brewing in your business. The problem is that these smoldering crises often are the result of management decisions, or indecisions. They may be caused be shortcuts to win contracts, questionable actions by top producers or someone who has had an unblemished record with your organization and is close to retirement. In short, they often are tough to detect and then to resolve because they directly or indirectly involve management decisions, and management has a tough time admitting errors because it reflects on their egos and abilities."

SMALL BUSINESSES AND CRISIS MANAGEMENT

"A good image is a terrible thing to lose!" noted Bill Patterson in Public Relations Journal. "It has been said that 30 years of hard work can be destroyed in just 30 seconds." This grim truth is especially evident among small businesses that are rocked by crises, since they are less likely to have the deep financial pockets to weather unpleasant public relations developments. After all, business crises often throw multiple financial blows at companies. Diminished sales as a result of unfavorable publicity, boycotts, etc. are the most widely recognized of these blows, but others can have a significant cumulative impact as well. Added expenses often come knocking in the areas of increased insurance premiums, recall/collection programs, reimbursements, attorneys' fees, and the need to retrieve lost customers through additional advertising.

But business consultants and public relations professionals agree that small business enterprises can do a lot to minimize the damage done by sudden flare-ups of bad news, provided they adhere to several fundamental rules of behavior.

PREPARATION BEFORE THE CRISIS Small businesses that are faced with public relations crises are far more likely to escape relatively unscathed if they can bring two weapons to bear: 1) a solid record as a good citizen, and 2) an already established crisis management strategy.

"Before the crisis, it is important to build good will and good relations on a daily basis," said media consultant Virgil Scudder in an interview with Communication World. "The way you are treated in a crisis, by the media and the public, will be determined in part by what they think of you at the beginning of the crisis situation." Writing in Public Relations Journal, Bill Patterson offered a similar assessment of the importance of building a "reservoir of good will" in the community: "The most important rule in defending, preserving, or enhancing a reputation is that you work at it all year long, regardless of whether or not a crisis strikes."

The other vital component of crisis management preparation is the creation of an intelligent and forceful strategy for dealing with various crises if they do occur. "For many executives, a crisis is something that happens to someone else," wrote Patterson. "It is a distant thought that can quickly be relegated to the back of the mind, replaced by concern for profit and productivity." But business owners and managers who choose to put off assembling a CMP do so at significant risk. Indeed, the hours and days immediately following the eruption of a crisis are often the most important in shaping public perception of the event. A company that has a good CMP in hand is far more likely to make good use of this time than one that is forced into a pattern of response by on-the-spot improvisation, or one that offers little response at all in the hopes that the whole mess will just go away.

In an article for Entrepreneur, Kim Gordon outlined several steps small businesses can take to be prepared in the event of a crisis. First, companies should perform an assessment to determine their most likely sources of vulnerability. Second, they should select a company spokesperson in advance. "Pick someone who is cool under pressure, credible, good on camera, and adept at presenting a positive image for your business," Gordon stated. It may be helpful for this person to attend media training in order to practice interview techniques. Third, small businesses should prepare positive messages about their operations that can be disseminated to media contacts in the event of a crisis. These messages may include any points you want the public to keep in mind during the negative publicity, such as an impressive safety or environmental record. Finally, Gordon suggested that companies prepare a list of key people to contact in case of an emergency.

RESPONDING DURING THE CRISIS When a crisis does erupt, prompt and proactive communication should be a cornerstone of any business's crisis containment strategy. As Stephanie Smith and Kim Hunter pointed out in Communication World, "in the throes of a crisis, effective communication is crucial to a favorable public perception. Actions taken by a communicator during the first moments of a crisis can affect perceptions of an individual or company well after the crisis is resolved."

In order to ensure that your company's perspective is heard, it is vital that you do all you can to make sure that your message is accurately presented to any media providing coverage of the crisis. "Perception is truth," wrote Patterson. "And, even though most executives don't like it, the media establishes the perception of your organization. So, in this new public relations discipline of reputation management, dealing with the media in an organized, aggressive, and timely fashion is mandatory." In addition, Scudder suggested that effective interaction with various media—radio, newspaper, television—is often predicated on realizing that representatives of those media outlets are not infallible. "There are two things you should not assume on the part of any journalist," he said. "Knowledge and perspective. Do not assume they know the facts. Tell them the facts. And if they know the facts, do not assume they know what the facts add up to."

Effective communication with media, then, is an essential element of any CMP. But consultants offer other tips as well. Following are a list of other actions that small businesses should take when confronted with a crisis management situation:

  1. Be open and honest with media and customers alike—Such a stance may well garner sympathy with customers and consumers, particularly if the crisis is one over which the company has little control, such as malicious product tampering. "Take the perspective of the people who are out there," said Scudder. "Be candid, be truthful, and give people what they want to know."
  2. React quickly—Scudder noted that a company's actions in the early stages of a crisis "will determine how the coverage of the client and the crisis goes and whether you are perceived as good guys who had an accident or bad guys."
  3. Utilize only one spokesperson—Consultants can cite countless instances in which companies faced with a business crisis compounded their problems by using multiple spokespeople who gave conflicting statements. "Only one story must come from the company, and it must always be consistent," contended Patterson. "When you have several people talking to the media during a crisis, several versions of what happened usually end up in the various media. This confuses the public, often leading them to believe what you are saying is untrue."
  4. Arm yourself with the facts—Companies can hurt themselves terribly when they make public statements based on incomplete knowledge of events.
  5. Stay on message—Engaging in speculation and/or rambling discourses does not help your company's cause. Spokespeople should be candid without being unduly negative.
  6. Do not lie or mislead the media, the public, or investigating agencies—The discovery of one single lie casts every statement that your company makes into doubt.
  7. Establish and maintain contact with other important groups—Depending on the nature of the crisis, communication with employee, industry, and community groups can be a valuable part of a crisis response plan. Is the crisis likely to have an impact on the company's labor union or general work force? If so, arrange a meeting with representatives so that they can be kept informed and ask questions, and so that you can get your message across. Is your company faced with an embarrassing allegation of racial discrimination or harassment? Perhaps a meeting with local religious and/or civil leaders would help (provided, of course, that your company signals a genuine interest in hearing their thoughts, so that they do not view the meeting as a cynical public relations ploy). Are your company's production processes arousing the ire of local civic or environmental groups (and the growing interest of local media)? Arranging a meeting in which they could register their concerns might relieve the situation somewhat (again, provided that your company shows a genuine interest in hearing them out and responding to legitimate concerns).

FURTHER READING:

Barton, Laurence. Crisis In Organizations: Managing and Communicating in the Heat of Chaos. South Western Publishing, 1993.

Bryan, Jerry L. "The Coming Revolution in Issues Management: Elevate and Simplify." Communication World. July 15,1997.

Clark, Susan. "Don't Walk Away …" Super Marketing. June 16, 1995.

Gordon, Kim. "Under Fire: Will a Crisis Take Your Company Down? Here's How Deft Handling Can Turn Public Opinion Around." Entrepreneur. April 2001.

Gorski, Thomas A. "A Blueprint for Crisis Management: Understanding What It Takes to Weather the Inevitable Storm." Association Management. January 1998.

Irvine, Robert B. "What's a Crisis, Anyway?" Communication World. July 15, 1997.

Keating, Lauren. "Proactive Approach Minimizes Damage to Image." Atlanta Business Chronicle. November 10, 2000.

Patterson, Bill. "Crises Impact on Reputation Management." Public Relations Journal. November 1993.

Simms, Jane. "Controlling a Crisis." Marketing. November 9,2000.

Smith, Stephanie, and Kim Hunter. "Virgil Scudder Tackles Crisis Tactics." Communication World. February 1997.

SEE ALSO: Disaster Planning



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