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Crisis Management - How To Plan For The Unthinkable

Wednesday 11 May, 2005
No business wants to face a crisis that could cause them significant business disruption and result in extensive media coverage.

Any sort of crisis that results in public scrutiny and negative perceptions as a consequence of media coverage, can seriously affect the ongoing operation of a business.

If the crisis isn't handled well the outcome can impact negatively on financial, consumer, political, legal or governmental aspects of the business. Staff morale can be diminished and considerable destruction of business value can occur.

Knowing how to prepare for any crisis - having a pro-active approach to emergencies rather than a reactive one - and responding with the right response, is a risk management process identified as crisis management.

As a business owner or manager you possibly consider that you have to handle crises and put out fires almost daily. However it is when you have to manage a significant crisis - one that has the potential to disrupt your business' ongoing income source, operations, stock price or competitive position in the market place - that your skills may be seriously tested.

The most effective crisis management occurs when potential crises are detected and dealt with quickly. Usually the speed with which they are dealt means that they never come to the attention of the business' stakeholders or the general public via the news media.

Inevitably there will be the occasion when a crisis erupts and it will be brought to the attention of the media, the public or the stakeholders. Having a business continuity plan in place will help minimise any disruption, impact or financial damage.

There is also an indirect benefit. Businesses that are sensitive to possible crisis situations, understand the extent to which they could disrupt and damage their business, and have crisis management strategies in place are usually better able to respond more rapidly, calmly and effectively in a crisis.

A crisis can affect any company regardless of its size, industry sector or how long it has been in operation. The damage it can do, in some cases, can be irreparable.

A typical crisis scenario

It's Monday morning and as the company's public relations and communications manager, you've returned to work after a relaxing and rewarding vacation.

You soon discover a litany of problems. There are messages to contact the managing director, the chief financial officer, your company’s legal firm, the HR department and the media.

In fact the press, with their insatiable appetite for news has been highly active in your absence. When you open the morning’s Sydney Morning Herald, there’s a glaring reference to your company’s managing director and an alleged fraud.

You flick to the business section and find your company’s name mentioned again, only this time it’s the firm’s chief financial officer being targeted for an alleged embezzlement of funds.

Corporate fraud, embezzlement, unethical behaviour in the workplace, sexual harassment, unfair dismissals and the like comprise a list of potential crises that can affect the trust, credibility and honesty of your company – essential business elements that you have earned over the years.

However the most serious problem you face at the moment is that you have no crisis management plan in place. You do not have a plan to deal with the unexpected. A crisis can affect any company regardless of size, industry or age.

Planning for the unexpected

Research conducted by the University of Melbourne shows that 27 percent of companies that have suffered a high profile crisis (that is a crisis receiving a great deal of media attention) have closed operations.

According to the national president of the Public Relations Institute of Australia, Robert Masters, these crises occur mainly in the manufacturing and food industries and include anything from food contamination and environmental pollution, to extortion.

Masters’ advises his clients in the food industry to:

  • document their objectives, regulations and reporting mechanisms, in particular statutory requirements;
  • plan how they are going to define the crisis (whether via product withdrawal or recall for example); and
  • determine individual roles and responsibilities.

Having documentation is crucial. Keeping the information up to date is essential. Not adhering to this can be detrimental to a business.

Melbourne University researcher and author of Organisational Crisis Management and Survival, Victor del Rio, believes that having a crisis management plan in place will not necessarily save your company when the unexpected arises.

According to del Rio, extensive research in the United States, shows that much of the crisis management information contained in each company surveyed was either outdated and not relevant, or the key individuals responsible for the plan were not accessible at the time of the crisis.

"Thirty percent of US companies, regardless of size," have implemented crisis management plans, "and almost 80 percent of companies that experience crises in the United States did not use these plans when a crisis arose," Del Rio says.

Not another process!

The stark reality is that organisations need to have processes in place that give responses and reassurances in terms of a crisis. When employers have legal issues, they usually consult a lawyer; when there are management problems, a consultant may be introduced; when business advice is sought, organisations such as Australian Business Limited can be contacted.

The same principle applies to crisis management: "Having documentation when a crisis occurs", says Masters, "'is crucial.' Many companies unfortunately do not know how to handle the communications process whether with their own staff, customers and the community, or the government and media," he said.

“In such a litigious society and to avoid courtroom dramas, businesses should have plans that are operational, up to date, and involve appointed and committed staff," Masters recommends.

“You need designated people to gather and log information, organise contact lists, and notify, where appropriate, customers/stakeholders/government/media. This requires appointing individuals to a committee which will be conversant with actions needed in the event of a crisis and know how to conduct themselves appropriately.” Masters says.

Proactive versus reactive

Public relations (PR) needs to be a fundamental part of any business culture and the proactive use of PR, as opposed to the reactive use, can be beneficial to a business that has suffered a crisis.

"It is this proactive use of public relations," said Marcus Blackmore, managing director of Blackmores Ltd, "that assists in creating community and media images, building brand and support for a company’s products and services.

These are all elements that can help a business when a crisis occurs," he said.

“This is the time when the relationships we had spent years developing through our proactive public relations program became incredibly relevant in our reactive response to the Pan crisis,” he said. The Pan Pharmaceutical crisis almost crippled the industry in 2003.

Industry regulators had audited Pan’s facilities and allegedly found serious breaches of the code of good manufacturing practice that called into question the quality of the products manufactured. More than 1600 products were recalled across a number of brands.

Blackmore realised he was heading for a potentially disastrous situation. His plan of attack - based on outsourcing the function to a PR agency - involved:

  • calling a number of crises meetings,
  • briefing his advisory and customer service teams,
  • drafting a media statement confirming that no Blackmores products were manufactured by Pan,
  • issuing a media statement (also posted on their website and reinforced with a similar statement to all their customers),
  • handling a gruelling round of interviews with major press,
  • placing major advertisements in newspapers.

It was a concerted campaign, a detailed strategy conducted swiftly and carefully, to save the company’s reputation and image.

“Our PR efforts were heavily concentrated in those first 48 hours,” Blackmore said. The company had processes in place to manage negative and positive media “so we could quickly and effectively communicate with all our key stakeholders.”

The outcome was overwhelmingly positive. Surprisingly, while Blackmores lost 20 percent of its customers in the first week of the crisis, the company ended up doubling its May sales, increasing market share, and experiencing a dramatically higher share price.

Lessons learnt from the Pan crisis:

  • Respond quickly and responsibly.
  • Use a diverse range of media to reach maximum audience.
  • Use real people.
  • Speak often and openly to stakeholders.
  • Leverage the brand values.

PR – the secret weapon

It is frequently said within the public relations industry that PR is the “poor cousin of advertising”. However, according to Simon Pearce, managing director of public relations firm Burson-Marsteller, it is a company’s “best kept secret”.

“Media relations is the easy part of public relations,” he said, “the hard part is public relations as an executive management function designed to solve business problems.”

As we have already established, these business problems are endemic to all companies no matter what their size. Not only can they impact drastically on your company’s reputation, they can cause great financial difficulty.

“A crisis that is unexpected and ill prepared for is going to have a greater financial impact in terms of response required as opposed to a crisis that is foreseen and prepared for, and this applies to smaller businesses as well.

The better prepared you are for a crisis or issue the less impact it will have on your reputation, in particular the cost of defending that reputation.” Pearce says.

In essence, Pearce believes, it is about planning, being objective and assessing all stakeholder groups that your business is involved with. “It’s also very much about communicating with these groups on any issue or crisis that may affect your business.

You need to ask yourself as a business owner: who are my stakeholders right throughout the supply and value chain and how might they be affected during a crisis? How might my communication with them be affected?"

Pearce suggests that employers implement safeguards and protocols to minimise the risk of a crisis happening.

“Seek external advice,” he said. “Employers shouldn’t think twice about seeking preparedness advice from an appropriate practitioner.” It is far more cost effective as opposed to “wheeling in practitioners” when the crisis has already occurred.

Businesses need to be prepared for any crisis situation and it is this preparedness that allows an organisation to demonstrate its understanding of its stakeholders and its obligations to further demonstrate its commitment to them.

“If you are prepared, a crisis can become an opportunity to further demonstrate commitment,” said Pearce. “A crisis is not always a negative thing.” Blackmores’ Pan Pharmaceutical crisis is an example of applying correct measures to overcome a crisis and furthermore, benefit as a result.

Buzz marketing – word of mouth

Small business in Australia is the lifeblood of this country and public relations can be a cost effective and strategic approach to raising these businesses’ profiles. However, few smaller companies consider crisis management in their overall business plans. Many do not even have business plans.

It can take years to build a business brand yet it can take a high profile crisis to cripple that business overnight. As much as word of mouth can raise your reputation, it can also cause irreparable damage.

“And while public relations is the best form of advertising, you cannot beat word of mouth,” said Paul Bennett from Bennett Creative Group. “The reverse is such that if there is a crisis in a company then word of mouth can be extremely damaging.

Crisis management needs a crisis management response. You need to plan for the unthinkable, to have responses and reassurances in place. As Masters pointed out, “it doesn’t have to be elaborate, but it is necessary”.

Sound tips for preparing and coping with a crisis


  • Develop contingency plans in advance, preferably as part of your overall business strategy. Review these plans regularly.
  • Nominate a crisis management team. Include where feasible the company’s CEO or managing director, a human resources representative and your company lawyer.
  • Ensure the team members can be called together easily in an emergency.
  • Arrange for all crisis management team members to have a card noting each others full contact details.
  • Have team members role play certain crises.
  • Develop and have in place an action plan with certain team members being given responsibilities for certain areas.

In response to a crisis

  • Immediately announce internally that the only persons to speak about the crisis externally are the crisis team members. The business owner, CEO or managing director should be the central spokesperson.
  • Move quickly to quash rumours. The first hours after the crisis breaks are extremely important because this is when the media takes advantage of the information leaked.
  • Use external crisis management consultants and corporate image specialists who can bring specialised expertise to the table.
  • Work with the media rather than against it.
  • Give out accurate and correct information both internally and externally. Don't try to manipulate information as this can seriously backfire for you and your business.
  • When deciding upon actions, consider not only short-term losses, but also long-term effects.
  • Build into your internal and external communications strategy crisis communication processes to alert staff, shareholders, government, industry, alliance partners and media.

Author Credits

Reprinted with permission of NSW Business Chamber. For more information about this article or NSW Business Chamber, its products, services and membership, please call 13 26 96 or visit the web site: www.nswbusinesschamber.com.au
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