Crisis Mode Rx

By Hannah Wallace May 31, 2008

When people think of a business crisis, infamous examples like the Union Carbide Bhopol disaster of 1984, when 40 tons of toxic gas leaked from a pesticide plant killed thousands, or the Firestone tire recall of 2000 usually come to mind. But according to public relations expert Jeffrey Caponigro, a crisis doesn’t have to be notorious or even widespread to devastate a company’s bottom line.

“Literally any kind of business can have a crisis. It’s not just the Fortune 500s that need to worry about planning ahead,” Caponigro says. “Whether you own a radio station, a law firm, a sporting goods shop, a car dealer, a flea market or an asphalt paving company, if you are in business, you are vulnerable to a crisis.”

Caponigro literally wrote the book on crisis management. While his bread-and-butter business is what he calls “goodwill PR”—he recently relocated to Sarasota from Detroit, opening a Tampa branch of Caponigro Public Relations to oversee expansion promotions for HomeBanc (formerly Community National Bank of the South)—he has spent the last 30 years digging companies out of disasters. The Crisis Counselor: A Step-by-Step Guide to Managing a Business Crisis (Contemporary Books, 2000) has been translated into five languages and is taught in 100 universities around the world.

The kind of crises small and medium-sized businesses often face might not have the notoriety of a Bhopal or a Firestone, but they can harm a company’s good name just the same. Typical crises range from legal troubles like corporate lawsuits or employee claims of discrimination or harassment to reporting financial results below expectations or even violent threats by a disgruntled employee. “A crisis is any event or activity with the potential to negatively affect the reputation or credibility of a business,” Caponigro says. “It’s easy to recognize a crisis. It’s the situation you are facing that is, or soon could be, out of control.”

It Pays to Prepare

Effective crisis management happens long before a crisis rears its head. “Most companies aren’t prepared for a crisis,” says Caponigro. “If they were better prepared they would be able to react faster and more effectively and wouldn’t be caught flat-footed.”

Caponigro recommends that every company create a crisis plan. To start, he encourages company executives to make two lists. The first details likely scenarios that could negatively impact the business. For example, a manufacturer might list misuse of the product by the purchaser, causing injury; failing to meet delivery schedules, harming relationships with distributors; a member of senior management leaving the company to join a competitor; and litigation against the company that sullies its reputation. The second sets forth all the occurrences which, if they came to pass, would result in grave harm to the company, such as a customer being seriously injured from using the product. Match up those lists and the items that converge are the scenarios that demand your focus and attention.

After you’ve identified your areas of vulnerability, Caponigro explains, you need to fashion a plan to prevent the crises from happening. “It might seem obvious, but people today are too busy,” he says. “They are trying to do more with less and there are too many things happening and they aren’t always able to meet customer demands. Businesses are understaffed and employees are overworked. Quality might be suffering. Most companies don’t stop to think about planning for a crisis before it occurs.”

Areas that need to be addressed in a crisis plan include identifying the audience that would need to be contacted before the news breaks (employees, shareholders, customers and political officials), designating a spokesperson, and assembling a team to craft your message to the media and corporate stakeholders. One of the most important aspects of a crisis plan is ensuring that employees are properly trained in how to react, who to speak to, and what to say.

“A client of ours was in the midst of a crisis relating to allegations of fraud. We heard that 60 Minutes was interested in the story so we had everybody all teed up for who would handle what. As funny as it sounds, one of the most important people in a company is the one who answers the phone,” Caponigro says. “Fortunately, that client had a crisis plan in place and everyone in the company knew what to do, including the receptionist. Mike Wallace himself called about the situation. When the receptionist tried to follow procedures and forward him to the designated company spokesperson, he pressed her for information. He wanted to talk to her, to someone he assumed wasn’t briefed on what to say. But she stuck to the key points we had given her and got off the phone. The story never ran.”

Cultivate Goodwill

Caponigro is an advocate of “insulating your business,” a concept he asserts is the single most important factor in whether a business can survive a crisis.

“A business needs sufficient amounts of goodwill stored up to act as insulation when it requires strong support from those who are important to its success—employees, customers, investors, suppliers, community leaders, the news media and others,” he explains. “Goodwill is the business’ reputation of being credible, trustworthy, honest, caring, forthright, accessible, cost effective, efficient and successful. These traits don’t mean that a business is infallible. But they do mean that the business will receive every benefit of the doubt in the first stages of a crisis.”

The bottom line? “Be communicative. Listen to people. Be involved in the community. Treat people well,” Caponigro advises. “Sometimes businesses think all of that is discretionary. But it’s not, if for no other reason than all of that will help you if and when you have a crisis.”

Advice from crisis counselor Jeffrey Caponigro.

Make decisions in a timely manner. You can’t be afraid to make decisions in a crisis. Failure to do so leads to frustrations, misinformation and lack of support.

Return phone calls from the news media. Often, businesses are more than willing to talk to reporters during good times but refuse to cooperate when a problem occurs and the coverage could be negative. Failing to return phone calls and to treat editors and reporters with courtesy are common mistakes that will only fan the flames.

Prepare information materials in advance. There are a number of items that you will need if a crisis were to occur, including fact sheets describing the business and its history, products and services; biographies and photographs of your top people; and video footage showing your operation in action. Don’t be left scrambling to pull everything together when you are in crisis mode. Have materials prepared and ready to distribute.

Listen to the right people. Everyone has an opinion on how to solve a crisis. Your spouse will tell you one thing, your business partners another. Legal counsel might instruct you not to talk to anyone—even if news media, customers, or community leaders want information. Your public relations counsel might instruct you to proactively inform your key publics about the situation. To whom should you listen? The decision is different for every situation and should be based on experience, professional instincts and information gathered about the situation at hand.

Don’t be misleading or dishonest. If one cardinal rule exists for managing a crisis, it is that you should never intentionally lie or mislead someone whose support is important to the success of your business. An organization’s credibility, once shattered, is very difficult to regain.

SOURCE: The Crisis Counselor: A Step-by-Step Guide to Managing a Business Crisis by Jeffrey R. Caponigro

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