CORPORATE COMMUNICATION

[SLIDE 1 – Crisis management]

Lecture 6Crisis management and the role of communications

[SLIDE 2 – Key ideas]

Key ideas

A crisis can severely affect the productivity and profitability of an organisation. Crises happen quickly and unexpectedly, and must be contained as soon as possible

The key to managing a crisis is to be prepared

Good communication can make the difference between a well managed or a badly managed crisis

[SLIDE 3 – What is a crisis?]

Introduction

A crisis is any incident that may seriously threaten the personal safety, the reputation, the assets, the goodwill, the market share or the revenue earning capacity of an individual, organisation or business.

And because it is a crisis - we can be sure it will be ill-defined, confusing and unpredictable.

One dictionary definition is:

‘Crisis: crucial stage, turning point, time of acute trouble or danger.’

In other words, a crisis is not something that individuals or companies welcome, but rather something that they try to avoid! But if well handled, companies can find the opportunity to grow and improve at the end of it.

[SLIDE 4 – Characteristics]

Characteristics of a crisis

1. Crises have a habit of unfolding quickly and unexpectedly - so speed is a characteristic.

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2. Frequently they can happen so quickly that the company loses control of events, and has difficulty regaining the initiative.

3. Crises involve many stakeholders - depending on what kind of crisis they are. Crises are likely to always involve staff, usually investors (if share-price tumbles), the media, customers and many other people in the community.

4. The loss of control leads to confusion, with everyone trying to find out what has happened, where the crisis is going and who has been affected. One danger is that decisions and statements may be made based on incomplete information.

5. Frequently, if a company is singled out in a crisis, senior management feel under attack and become defensive. They develop what is known as a “siege mentality”. Some senior managers have been known to shut themselves away in their offices, with their heads down, hoping it will all go away.

6. This creates stress and panic for everyone else, as they look for leadership and answers.

7. It also creates a good deal of uncertainty. No-one can predict what will happen in a crisis, and what the outcomes are.

8. A crisis is likely to cost the company a lot of money - either to put something right, or to rebuild, or to pay in fines or insurance. Whatever the crisis is, it is a disruption to normal procedures and will disturb the flow of income, the morale of staff, and the reputation of the company to some extent.

[SLIDE 5 – Escalation]

Escalation

As we noted last week, issues that are not well managed can often escalate into a crisis. The tipping point could well be an incident or event which propels the crisis. For example, a toy for children made with unsafe, breakable parts presents an issue that the company should address but it becomes a crisis when a child swallows a broken piece and dies. That incident turns the issue into a crisis.

In China recently, milk from some producers was found to have excessive levels of melamine- a substance harmful to humans – in it. That was a major issue, but then several children died, thousands of others fell ill, and the tainted milk products were found in many other countries.

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Suddenly, this became a significant international crisis which was reported around the world and involved many manufacturers, export companies, retailers and of course, the children and adults who drank the milk products.

[SLIDE 6 – Types of crisis]

Types of crises

Crises can be divided into three main types:

They can be issues driven. These are crises which can be avoided if only the individual or company had been better prepared

Then there are external or environmental ones like bad weather, storms or floods.We have very little control over these.

Then there are human or operational ones.These can be caused by angry or crazy people or simply by people making the wrong judgement about something: for example, a ship’s captain sailing into an iceberg, like the Titanic or an aircraft crashing into a mountain.

As an interesting aside, it is estimated that up to a quarter (25%) of all crises are caused by staff - either through sabotage, leaking of plans, whistle blowing (telling authorities of improprieties e.g. Enron) theft or error. This shows that it pays to look after your staff so this won’t happen!

[SLIDE 7 – Examples]

I am sure you will be able to add quite a number of crises to this long list of well-known examples:

Contamination - the well known Tylenol case

Extortion - a blackmailer tried to extract money from Panadol, who make headache pills, by threatening to poison their pills

Product fault - Mattel, the world’s largest toymaker, who makes Barbie dolls and many others, had a worldwide recall of faulty toys

Issues - Nike, the sportswear company came under fire for using child labour to make their products in under-developed countries.

Catastrophic events - like the Exxon Valdez oil spill, which we will talk about soon

Natural disaster - tsunamis and earthquakes

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Fatalities - a contractor being killed on a building site

Terrorism – there are many terrorist activities, including hijackings and bombings.

Infrastructure failure - power failure (electricity failure), and finally

Getting caught / lying - any number of politicians, including former US president Bill Clinton, who was caught out in a lie which threatened his career as well as his marriage.

[SLIDE 8 – Lerbinger’s eight categories]

Lerbinger’s eight categories

In Tench & Yeomans, Lerbinger theorises that there are 8 categories of crisis:

1. Natural (tsunami)

2. Technological (car faults, computer virus)

3. Confrontation (consumer boycotts)

4. Malevolence (product tampering)

5. Skewed management values (Barings)

6. Deception (Ribena – GSK)

7. Management misconduct (Enron)

8. Business and economic (sharemarket crash)

(Tench & Yeoman p.398)

[SLIDE 9 – One of the best…]

One of the best examples of crisis management- Johnson & Johnson

You will all remember the excellent example set by Johnson and Johnson when their best-selling product, Tylenol, was laced with cyanide by an unknown person. The company acted in a way still considered the ‘gold standard’ for crisis communication.

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They immediately recalled every single bottle throughout America, said that their priority was their customer’s health and well-being, and then created a bottle which could not be tampered with.

In other words, they not only saved their reputation from a potentially disastrous incident but they also earned the increased admiration and respect of everyone, especially their customers and the media. To this day Johnson and Johnson, one of the world’s largest pharmaceutical and health producers, is listed as one of the world’s most reputable companies.

[SLIDE 10 – One of the worst…]

One of the worst examples of crisis management - the Exxon Valdez

In complete contrast, an example of bad handling occurred when the Exxon Valdez, an oil tanker, entered Prince William Sound in Alaska in 1989 and hit a reef, spilling over 240,000 barrels of oil into the sea. Unlike Johnson & Johnson, the Exxon management was very slow to respond to this huge ecological and environmental crisis. Neither their Chief executive nor their chairman wanted to speak to the media, and it was days before any senior manager even went to visit the disaster.

Eventually the chairman went on television but was woefully unprepared and could not tell the public much about their plans for a clean-up. He said it was not the chairman’s job to read such reports and placed the blame for the crisis at the feet of the world’s media. People watching thought he showed no regret and were angry at his perceived arrogance and shifting blame.

[SLIDE 11 – Bird picture]

Millions of birds died, as well as fish and plants, and the local community’s livelihood was threatened. This was the kind of image that flashed around the world in newspapers and on television when the media heard what had happened. But what made it worse was the company’s refusal to be open and discuss any aspect of their clean-up plans with the local community, with activist environmental groups who were quick to become media opinion-leaders, and with the media itself. They made enemies of the very target publics they needed on their side.

[SLIDE 12 – Consequences]

Consequences

Eventually, the company was forced to admit fault, and contributed a large amount of staff and money to the massive clean-up required. However, it was too little, too late.

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The spill cost them around $7 billion US dollars - $2 billion for the clean-up, and $5 billion in court fines. This was the largest fine ever handed out to a company for corporate irresponsibility.

However, they lost more than just money - their reputation suffered severe damage, their share price and market value slipped, and they dropped from being the largest oil company in the world to being the 3rd largest.

It is now over 20 years since that disaster happened, but the Exxon Valdez is still considered one of the worst PR disasters to face any modern company and has entered the language as a synonym for corporate arrogance and social irresponsibility.

[SLIDE 13 – Lessons]

Lessons to be learned

The lessons to be learned from the Exxon Valdez disaster are that:

● There’s less public anger if the company is seen to be doing the best they can

● Communication is vital to let people know

- What has happened- What the company is doing about it, and- How the company feels about it.

It's often thought to be a sign of weakness to say 'sorry' or to show regret whereas in fact this is often exactly what the public wants to hear and it makes them more willing to forgive.

[SLIDE 14 – Before the crisis]

Before the crisis

Every company, whether small or big, should have a crisis plan. This is a natural extension of the issues management plan that they have already done. The trick is to make sure it is not very long and detailed because no-one has time to read a lot of information in the middle of a crisis.

A crisis plan is written by a team or group of people who are likely to be most intimately involved. This often includes:

a senior representative from the management team an engineer a communications specialist (PR)

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a health and safety person a lawyer etc.

The size of the team varies depending on the size of the company but there should be a team to go through all the ‘What if’ scenarios.

They prioritise issues and draw up the crisis plan, which should be updated regularly. Staff should all know what to do if there is a malfunction in their area or in the building. They should also know who to turn to immediately in case of the unexpected. They will be expecting leadership.

Before the crisis, it’s wise to have a full stakeholder database, a copy of which is saved somewhere outside the building. When the World Trade towers collapsed in New York, not only were thousands killed, but many companies lost all their business records, employees’ addresses, customers’ details and accounts.

And finally, before a crisis is the time to develop good relations with the media, local opinion leaders and other key publics. This is called building up a ‘trust bank’ of goodwill, so that when disaster strikes, key publics will be much more likely to think well of you and support you.

[SLIDE 15 –When the crisis happens]

When the crisis happens

These are the steps to follow:

• Call the crisis management team

• Action the plan

• Gather and understand the facts

• Act decisively – control the scene

• Prepare a media statement (It may be short but get accurate information out there)

• Select a spokesperson and brief them

• Use the website, media conferences and communications room

• Brief your employees who are your best ambassadors

• Be flexible

• COMMUNICATE

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[SLIDE 16 – Handling the media]

Handling the media - visual images

One of the characteristics of journalists is that they love conflict - and a crisis is nothing but conflict. If it is a big company, or even a small company with a big crisis, the media is likely to turn up in huge numbers and demand answers immediately.

[SLIDE 17 – Managing the media]

Managing the media

The way a company communicates with the media is all-important. It can set the tone for the way in which the crisis is reported and perceived.

Recognise that they have a job to do. They want information to tell the public. Use the media as an important messenger to get your side of the story across before rumour and inaccuracies fill the void.

You can say 'I don't know' but always follow it up with 'but I will contact you the moment we have details'. Be sure to do so.

Never say 'no comment' as that will immediately sound as though you have something to hide.

Make sure your priorities are right. The safety of people should always come first, followed by safety of the environment, of property, then of money.

And finally, make sure you tell the truth, the whole truth and nothing but the truth! You will always be found out eventually, and the media and the public will never trust you again.

[SLIDE 18 – The 5 Cs model]

The 5 Cs model of effective communication

These points can be summed up in the concept of the 5 Cs model of communication:

1. Concern Show simple human emotion

2. Clarity Give clear messages

3. Control Take charge

4. Confidence Do not be complacent or aggressive

5. Competence Do the job well, with proper resources

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(Tench & Yeoman; figure 20.1 p.403 in text book).)

[SLIDE 19 – What not to do]

What not to do

Don't assume

Don't evade

Don't cover up

Don't blame

Don't promise too much

Don't speculate

Don't make things up

[SLIDE 20 – Tutorial preparation]

Reading for tutorial:

Chapter 20 in text book

Material in resources folder

Behind the Scenes with American Airlines' Top PR Exec .PR News; Potomac; Nov 19, 2001;

[SLIDE 21 – Summary]

Summary

There should be robust plans and procedures which provide clarity of authority, responsibilities and actions during a crisis

Communication should be immediate, effective and open

Stakeholder relations - especially media relations - should be built before, during and after a crisis

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[SLIDE 22 – Sun Tzu]

The final slide is a quote by Chinese philosopher, Sun Tzu.

Conclusion

Crises can be exciting for public relations people because they require immediate and intense communication plans. Crises can test PR practitioners full professional competence in many different areas, from media management, organisation, strategic planning and advice to senior management, to communication with the wider family of publics.

It is a major growth area in the industry, with many companies hiring PR consultants to rehearse mock crisis situations and to conduct media training sessions to help senior executives cope with the attention that a crisis can bring.

With the many crises that can happen at any moment, from corporate scandals to natural disasters, a PR person can never be too prepared to face them when they happen.

References

More on the Exxon Valdezhttp://www.mallenbaker.net/csr/CSRfiles/crisis03.html

Argenti, P.A. (2007). Corporate communication. (4th ed.) New York, N.Y.: McGraw-Hill.

Tench, R. & Yeomans, L. (2006) Exploring public relations. (1st ed.) Harlow. Essex: Pearson Education.

Galloway, C & Kwansah-Aidoo, K. (2005) Public relations issues and crisis management. (1st ed). Victoria: Thomson Social Science Press

Cutlip, S.M., Center, A.H. & Broom, G.M (2006). Effective public re-lations. (9th Ed.) Englewood Cliffs: Prentice Hall.

Wilcox, D.L. & Cameron, G.T. (2009). Public relations: strategies and tactics (9th international edition). Boston: Pearson Education.

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