Crisis Management

We all face crises on a regular basis: car crashes, medical emergencies, job situations, etc. Companies face the same litany of crises. The effective companies are the ones where you are not aware they are facing a crisis or it comes and goes quickly because of the effective manner in which it’s been addressed. The success of having a crisis, dealing with it, and it going away quickly is the end product of an effective plan and execution of that plan.

In today’s environment, most companies can be assured of a crisis at some point. How they prepare for and handle the crisis will be important to the victims, to the shareholders and employees, and other constituents including enforcement agencies.

While in the past, the cost of developing a list of risks, and planning a crisis plan around those risks that are an inherent part of the business might seem distracting or a diversion of resources, we have seen from the BP Gulf disaster the impact on lives, the environment, shareholders and employees, vendors, other companies in the industry, the economic health of a region, and government intervention and legislation. This certainly makes the case for a focus on developing and testing a crisis plan.

While Board Leadership for the Company in Crisis

https://secure.nacdonline.org/source/Orders/index.cfm?section=unknown&task=3&CATEGORY=DHS&PRODUCT_TYPE=SALES&SKU=DHS%2D015&DESCRIPTION=Directors%20Handbook%20Series&FindSpec=&CFTOKEN=49342421&continue=1&SEARCH_TYPE=find&StartRow=1&PageNum=1

is a manual of examples and ideas of how to think about and plan for a crisis, this blog will serve as current updates to the manual in responding to a real life environment. For example, the need for very quick and organized communications has changed dramatically over the past five years. We no longer have 24 hours or even one hour to respond to a crisis. Companies have minutes to deliver their message or the blogs or YouTube or the social networks will do it for them.

We should expect to have more shareholders requesting to see the Company Crisis Plan in order to gain confidence that the company they are planning on investing in or have invested in has the ability to address a major crisis appropriately. The crisis plans presented by the five major oil and gas companies was reported as follows “The five companies submitted virtually identical plans to government regulators and to the committee. The 500-page document, prepared by a private contractor, refers to measures to protect walruses and gives a phone number for a marine biologist who died five years ago.”
http://www.nytimes.com/2010/06/16/business/16oil.html

Clearly, this indicates a less than serious effort to prepare for a major crisis.

The following is broken down in the same order as the book (Board Leadership for the Company in Crisis).
1. The Role of the Board in Crisis Planning and Oversight
2. The Crisis Response Plan: A Blueprint for Action
3. Legal Considerations in Crisis Planning and Response
4. Financial Considerations in a Crisis
5. Communications in a Crisis
6. Conclusion
7. Appendices:
a. Crisis Response Planning Inventory
b. Checklist: Potential Sources of Crisis at the Typical Company
c. Sudy: Factors Contributing to Fraud in Financial Reporting
d. Checklist: First-Day Questions for a Board Presented with a Crisis
e. Outline for a Crisis Response Plan
f. Sample Charter Provisions for a Board Committee Charged with Crisis Response Planning and Oversight
g. Considerations in Hiring a Turnaround or Crisis Manager
h. Example of Government Leniency Following Aggressive Actions to Counter Employee Misconduct

The greatest change in the past five years has been in the communications area, so we will address those changes first.

The following NACD webinar addresses the crisis issues boards are thinking about and addressing.
http://event.on24.com/eventRegistration/EventLobbyServlet?target=previewLobby.jsp&eventid=215670&sessionid=1&key=3B003AECBE5BC4F3C89678B012EA3C73

Reputation is not separate from the company. It impacts the stock price, sales, employee turnover, and government regulation. It’s not only a “nice thing to have”. It’s a necessary part of the success of the company.
Does the firm have a plan, is it up to date, is it available anywhere and anytime?
Michael Kempner, the CEO of MWW, reports that 45% of boards view a crisis communications strategy as “moderate, low, or not important to the business”. 15-20% of companies don’t have any crisis communications strategy. Companies will spend thousands of dollars on legal firms, while they don’t see a crisis firm as adding value. The crisis communication company needs to have an equal participation in the decision making process as the lawyers, both in front of the board and with the senior management team.
Communication thoughts to share:
1. There is no such thing as “media”. It is made up of blogs, newspapers, 24/7 cable TV channels, etc. They all have their own perspective and point of view and will go for the sensational.
2. In this environment, a communication plan can include addressing key media directly with the company’s own consistent, compelling and honest message.
3. In thinking through the media plan, having a website set up, but dark with all the key information ready to go public is a great start.
4. The 80/20 rule works for media as well. We need to know who the 20% are that have the greatest influence and have a relationship with them so when we need them, we know who they are and can provide them with key information.
5. The relationships developed in advance of a crisis are key to the success of the company, whether that be with local and national government officials, bloggers, newspaper reporters, environmental groups, etc.

Lastly, have we asked ourselves the key question: what is the worst thing that can happen to us and how would we address that disaster?

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One Response to Crisis Management

  1. Kathy Murray says:

    Suzanne,

    Absolutely agree with this posting. Not only “see the crisis plan” but actually participate in a drill with the firm’s leadership. Nothing is better to prepare for a crisis than experiential learning as a team.

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