The Intersection: Jun 2011

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The Crisis Revolution and Your Bottom Line

In days gone by, crisis communications involved massive product recalls, thorny work stoppages and toxic environmental spills. Size and scope used to be the only things that mattered. But times have changed and organizations are struggling to keep pace.

Today, companies find themselves at risk over less onerous matters, as consumers increasingly employ smart phones and social media channels to voice everyday frustrations that can go viral.  It’s a new world order, and it requires companies to better prepare for crisis situations that could negatively impact their reputations and financial well being.

Take the flash crisis that Delta Airlines found itself in earlier this month. The airline charged a few U.S. soldiers $200 each to check a fourth bag as they returned home from serving in Afghanistan.  The soldiers were frustrated by Delta’s policy, so they posted a video on YouTube expressing their anger.

The video quickly went viral and the American public weighed in with a vengeance.  Consumers were overwhelmingly critical of Delta, and their online outrage triggered extensive mainstream media coverage.  Within hours, elected officials joined the angry mob and Delta found itself in a full-blown crisis.

To Delta’s credit, the company responded quickly and said that it regretted “that this experience caused these soldiers to feel anything but welcome on their return home.”  The company also hurriedly changed its policy on baggage fees for the troops.  Those were both good steps, but the reality is that Delta will be digging out from this flash crisis for months (maybe years) to come.

With so much at stake these days, business leaders are paying closer attention to this growing threat to their bottom line.  But a recent survey of investor relations (IR) officers and financial analysts in the U.S. and Canada suggests that more work needs to be done.

As reported by Barron’s, a majority of the survey respondents agreed that a mismanaged crisis can negatively impact a company’s valuation.  But, only 50 percent of respondents were aware of any crisis simulations their companies were employing to get prepared.

That simply doesn’t connect.  And it’s alarming to think about the cavalier approach that so many companies (maybe yours included) are taking to managing their reputations.  Delta Airlines was prepared to react and it still took a big hit.  Imagine what a crisis of any magnitude could do to an organization that isn’t prepared.

In an effort to help organizations manage their reputations and their financial well being, we at VOX spend a lot of time working with CEOs, investor relations pros, communications officers and other organizational leaders to help them build crisis communications plans and train against possible crisis scenarios.  Here’s a quick look at some of the consulting steps that we take.

First, we engage all of the key departments inside the company.  We define likely crisis scenarios, assign roles, create contact protocols, define key audiences, develop general messages, appoint spokespeople, and more.

Then, we get more specific by creating crisis simulation exercises where the company’s plan is put into action.  Teams are given a crisis scenario that they must manage.  They analyze the situation, create messages specific to the event and go through mock media interviews to feel what it’s like to be in the hot seat when a crisis actually hits.

After decades of experience, we’ve yet to come out of a scenario exercise where the executives didn’t express a tremendous sense of relief in being better prepared for the unknown.  Part of their relief comes from being introduced to a few very basic (yet important) crisis rules of the road.

The first rule is that speed kills.  James Carville used this mantra during Bill Clinton’s first presidential campaign.  It’s true in politics and it’s true in a corporate crisis.  In today’s digital world, reputations can take a big hit in a matter of minutes as tweets and posts frame how an organization is handling a crisis.  Consensus happens quickly online and organizations need to be monitoring issues and reacting to them in real time.

From a tactical perspective, this means that companies of all sizes should always be monitoring what’s being said about them online.  For some organizations, that might mean setting up a basic Google Alerts account.  Larger companies need more sophisticated online monitoring tools and staffers that are well versed in analyzing online conversations and knowing how to respond and/or raise the crisis “red flag” when needed.

The second rule is that your best defense is a good offense.  Make sure that your organization is building its bank of goodwill among key audiences and influencers.  Make sure that you have established online communities and created a spirit of openness and transparency in the way that you conduct business.  When crisis scenarios hit, organizations need all of the allies that they can get, and those connections are much easier to make before a crisis hits.

The third and final rule (for this piece) is to avoid going into the bunker when a crisis hits.  Far too many organizations simply go dark and hope that the issue will go away.  That’s a recipe for disaster.  If you don’t tell your story during a crisis, plenty of people (especially your competitors) will be happy to do just that for you.  We coach executives to embrace the “four R’s” in a crisis: 1) express regret; 2) accept responsibility; 3) implement appropriate reform measures, and 4) provide restitution to those affected.

The size and scope of what qualifies as a crisis has changed.  Today, companies are more at risk than ever before, and leaders are smart to step up their monitoring efforts and preparedness drills to get ready for the unknown. With reputations and bottom lines in the balance, it’s wise to prepare.

Michael J. Marker

Managing Director

317-902-2958 \ [email protected]