CRISIS

MANAGEMENT

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 puteffective 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 ofthese eventsas well as numerous otherscan cause an immediate
and prolongedfinancial loss to a company, require an intensive communications effort
directed toinvestors, 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
tocategories of crisis, a company may employ a risk or crisis manager who may
preparestatistical models, review industry data, or work with consultants to
understand how one ormore crises could impact the organization. Once this process of
risk is completed, manycompanies then design a Crisis Management Plan (CMP) to
determine how negative eventscan be avoided or reduced in scope. But business
consultants and public relations expertscounsel 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
writtencrisis 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 thel ess 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
publicrelations developments. After all, business crises often throw multiple financial
blows atcompanies. Diminished sales as a result of unfavorable publicity, boycotts,
etc. are the mostwidely recognized of these blows, but others can have a significant
cumulative impact aswell. Added expenses often come knocking in the areas of
increased insurance premiums,recall/collection programs, reimbursements, attorneys'
fees, and the need to retrieve lostcustomers through additional advertising.
But business consultants and public relations professionals agree that smallbusiness
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
dailybasis," 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 partby 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 acrisis strikes."
The other vital component of crisis management preparation is the creation of
anintelligent and forceful strategy for dealing with various crises if they do occur. "For
manyexecutives, a crisis is something that happens to someone else," wrote
Patterson. "It is adistant thought that can quickly be relegated to the back of the
mind, replaced by concernfor profit and productivity." But business owners and
managers who choose to put offassembling a CMP do so at significant risk. Indeed, the
hours and days immediatelyfollowing the eruption of a crisis are often the most
important in shaping public perception ofthe event. A company that has a good CMP in
hand is far more likely to make good use ofthis time than one that is forced into a
pattern of response by on-the-spot improvisation, orone 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 businessescan
take to be prepared in the event of a crisis. First, companies should perform
anassessment to determine their most likely sources of vulnerability. Second, they
shouldselect 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
practiceinterview techniques. Third, small businesses should prepare positive
messages about theiroperations that can be disseminated to media contacts in the
event of a crisis. Thesemessages may include any points you want the public to keep
in mind during the negativepublicity, such as an impressive safety or environmental
record. Finally, Gordon suggestedthat 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
acornerstone of any business's crisis containment strategy. As Stephanie Smith and Kim
Hunter pointed out in Communication World, "in the throes of a crisis,
effectivecommunication is crucial to a favorable public perception. Actions taken by a
communicatorduring the first moments of a crisis can affect perceptions of an
individual or company wellafter the crisis is resolved."
In order to ensure that your company's perspective is heard, it is vital that you do
allyou can to make sure that your message is accurately presented to any media
providingcoverage of the crisis. "Perception is truth," wrote Patterson. "And, even
though mostexecutives don't like it, the media establishes the perception of your
organization. So, in thisnew public relations discipline of reputation management,
dealing with the media in anorganized, aggressive, and timely fashion is mandatory."
In addition, Scudder suggestedthat effective interaction with various mediaradio,
newspaper, televisionis oftenpredicated on realizing that representatives of those
media outlets are not infallible. "Thereare two things you should not assume on the
part of any journalist," he said. "Knowledgeand perspective. Do not assume they know
the facts. Tell them the facts. And if they knowthe facts do not assume they know
what the facts add up to."Effective communication with media, then, is an essential
element of any CMP. Butconsultants offer other tips as well. Following are a list of
other actions that smallbusinesses should take when confronted with a crisis
management situation:
1. Be open and honest with media and customers alikeSuch a stance may wellgarner
sympathy with customers and consumers, particularly if the crisis is one overwhich
the company has little control, such as malicious product tampering. "Take
theperspective 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
acrisis "will determine how the coverage of the client and the crisis goes and
whetheryou are perceived as good guys who had an accident or bad guys."
3. Utilize only one spokesperson Consultants can cite countless instances in
whichcompanies faced with a business crisis compounded their problems by
usingmultiple spokespeople who gave conflicting statements. "Only one story must
comefrom the company, and it must always be consistent," contended Patterson.
"Whenyou have several people talking to the media during a crisis, several versions of
whathappened usually end up in the various media. This confuses the public,
oftenleading them to believe what you are saying is untrue."

4. Arm yourself with the factsCompanies can hurt themselves terriblywhen they
make public statements based on incomplete knowledge ofevents.
5. Stay on messageengaging in speculation and/or rambling discourses does nothelp
your company's cause. Spokespeople should be candid without being undulynegative.
6. Do not lie or mislead the media, the public, or investigating agencies
Thediscovery of one single lie casts every statement that your company makes
intodoubt.
7. Establish and maintain contact with other important groups Depending on
thenature of the crisis, communication with employee, industry, and community
groupscan 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
withrepresentatives so that they can be kept informed and ask questions, and so
thatyou can get your message across. Is your company faced with an
embarrassingallegation of racial discrimination or harassment? Perhaps a meeting with
localreligious and/or civil leaders would help (provided, of course, that your
companysignals a genuine interest in hearing their thoughts, so that they do not view
themeeting as a cynical public relations ploy). Are your company's production
processesarousing the ire of local civic or environmental groups (and the growing
interest oflocal media)? Arranging a meeting in which they could register their
concerns mightrelieve the situation somewhat (again, provided that your company
shows a genuineinterest in hearing them out and responding to legitimate concerns).