Reputation or brand is probably the most valuable asset of any company. It is often the largest part of the balance sheet under goodwill. When people think about a company or their products, it is really the unconscious consideration of the company's reputation that is at the forefront of their mind. That reputation is what recruits staff, achieves higher prices and keep customers.
A reputation of real value takes a long time to grow - like a tree. And like a tree it takes only a minute to cut it down.
All it takes is a business crisis and some mishandled management for that tree to fall. Years of reputation and credibility is gone.
With loss of reputation being such an extraordinary risk, you would expect companies to be acutely aware of and be planning for events that might damage that reputation. That is rarely the case.
There are a myriad of events that can impact a company reputation:
- Employee layoffs/downsizings,
- financial results below expectations,
- poor employee morale,
- corporate lawsuits,
- discrimination or harassment legal claims,
- negative media coverage,
- negative customer comments online
- damaging rumors,
- terrorist action,
- product defects or quality problems,
- a computer system malfunction or error,
- computer viruses
- violent threats or actions by a current/former employee,
- on-the-job accidents,
- loss of a major customer account,
- government probes or fines,
- boycotts, strikes or pickets and
- becoming a takeover target
For most companies, it is possible to identify high priority, high risk events that can be mitigated and be planned for.
You should start by identifying and assessing the the main reputation risks within your company. Where is your business (and your career) most at risk of a crisis? Many of the crises can be averted before they occur with some forethought.
It is obvious that the best way to manage a crisis is by averting it. Avoid a crisis around company results by setting appropriate expectations. If morale is poor - investigate the causes. They will almost always be significant to your company performance.
Don't put your head in the sand – crises happen! What will be needed when that crisis occurs and of those things which can be done now? Most importantly, does everyone who is going to be involved in managing and communicating about the crisis know what their roles are?
Many companies have little idea that a crisis has occurred until after the event. As companies grow more mature and larger, a resistant culture develops which expunges evidence from the outside world, or does not credit it with it appropriate importance. The most obvious example is customer complaints which often reach hurricane scale before senior management pay real attention. Management often respond to the symptoms of a crisis rather than the causes of a crisis.
You need to identify the real crisis quickly and not be distracted by the symptoms and then take the first, important steps to manage it. Managing a crisis requires a deft ability to resolve the causes of a crisis and also communicate your way out of the symptoms.
Communicate, Communicate, Communicate during a crisis. Ask yourself how will you communicate with your employees, customers, suppliers, the news media and anybody else, when your crisis occurs? Who will be responsible? Who will be your spokesperson, is that person(s) trained to do the job at it? What key messages will you communicate? What is the role of the CEO? Should he remain above the fray or should he show his engagement.
Monitor and analyse the results of your crisis management, recognise what is working and what is not and adapt your strategy. Many PR companies create crisis management plans which they adhere to regardless. Yet most crises go through stages that require different approaches: remain flexible in your approach.
Be proactive. By conducting public relations activities during the year you can build up the goodwill and support of those stakeholders who are important to your business. You can shape people's attitudes towards your business and ensure that they are likely to support you and give you the benefit of the doubt when a crisis occurs? What can you do to make them feel better about the company? Who will ensure that gets done?
Don't let a mismanaged crisis destroy your most valuable asset. Start the planning process today and you'll sleep better tomorrow.
Crisis Management Tutorial 1
The 10 danger signs a crisis might occur.
- A competitor or peer company recently suffered a crisis event. Markets have a domino effect sometimes. Confidence in one financial services company has a habit of spreading to others.
- Your employee morale is struggling. Will employees start bitching about your on Facebook or blogs. Typically, direct sales companies with high staff turnovers can struggle with recruitment if ex-employees start writing about their experiences.
- You have quality problems with your products. Your advertising has been too aggressive setting the wrong expectations or more frequently after sales service is poor. Apple have traditionally suffered from poor repair services. Complaints from customers should warn you of impending crisis: are senior management paying attention to this yardstick?
- Inappropriate actions by employees have occurred without effective correction and enforcement. How many United Airlines staff are throwing guitars and luggage around?
- Company policies are insufficient or out of date and are not communicated effectively.
- The business owner or CEO has a poor reputation. During the credit crunch, the arrogance of CEOs repelled almost all stakeholders. When the large carmakers went to Washington to meet Congress, their decision to fly in private jets spoke volumes about their attitude towards the problems.
- The company's financial condition is unstable or under some tong-term stress.
- The relationship with the media that covers the company and its industry is not a positive one.
- A crisis has previously occurred at the company and the situation has not yet been totally resolved.
Crisis Marketing Tutorial 2
These are the 10 mistakes made most frequently by businesses when faced with a crisis:
- They fail to plan for a crisis in advance, or they plan for the wrong crisis and use an inappropriate plan.
- They ignore the warning signs that (almost always) precede a crisis - except for an act of God. Scan across competitors, across the Internet for the first rumbles of discussion.
- Respond too slowly to the unfolding events. No plan, CEO away on holiday, marketing team at a conference and lo behold nothing happens. More commonly, nobody recognises the magnitude of the potential problems and what was a problem becomes a crisis. One complaint online can gather momentum quickly.
- Fail to communicate - hoping that saying nothing will somehow dowse the flames. Mistake: story momentum is now driven by stakeholders across the Internet who will communicate. Get your message out there.
- Failing to prepare advance. Too often there is no goodwill out there except for the bland marketing message so beloved of marketing departments across the land. Create a community like Apple has which defends the brand whatever the circumstances.
- Not obtaining input, feedback and questions from those important to the success of the business.
- Failing to reply to those inquiring about the situation (i.e., customers, news reporters, employees' families). Shape a message for each segment and make sure they hear it. If there has been a tragic accident, don't go speaking to the Press when the CEO should be visiting with his employees. You look heartless and greedy.
- Saying "no comment" to media questions won't help as somebody else will comment and quite possibly create a number of misconceptions.
- Being unwilling to make necessary adjustments to your crisis marketing strategy. If you are monitoring the environment you will see what needs to be done. Too often businesses get into a bunker mentality which precludes them from seeing and responding to changing circumstances
- Misleading people. Typical response of politicians and increasingly businesses adopt a similar framework. If you are caught out, almost everything you say will be scrutinised. If you don't know the answer - say so. Truth economies don't help in the long term either. Bill Clinton thought he had persuaded the American people with his "I did not have sex with that Woman" speech, but the American people found his distinctions invidious and untrue.
Crisis Marketing Tutorial 3
The 9 most likely outcomes of a mismanaged crisis
1. A significantly damaged reputation that can take many years to repair. Indeed, you may need to totally re-brand to escape the stigma of the crisis. Banks frequently find themselves with an irreparable brand.
2. Loss of employees. People like to work for good companies with strong brands. They enjoy the kudos and the benefits to their career. A damaged reputation reflects badly on them and you will lose your best staff as a result. Long term this is calamitous.
3. A reduced level of staff productivity as they refuse overtime, extend lunch hours and "work to rule".
4. In the end everything leads to lower sales and revenues and then reduced profits. A crisis hits the bottom line for years.
5. There are all the associated costs of hiring lawyers, consultants (like us) and staff time to mitigate the damage caused by the crisis.
6. The very act of managing the crisis takes the company's focus away from its primary business. Suddenly the senior management are in meetings all the time. Staff meetings are dominated by discussions and rumour mongering.
7. As profits and sales fall so employee layoffs and "downsizings" occur with all the attendant costs and morale issues.
8. Profitable products need to be redesigned or relaunched.
9. Possible product or corporate name change.
Crisis Marketing Tutorial 4
There are HUGE benefits from a well-managed crisis. In every crisis lies opportunity.
1. An enhanced visibility and name recognition for the company that can help win a larger market share.
2. The crisis provides an opportunity to show the skill and leadership of the CEO and others. Managing a crisis well enhances a company reputation. Everybody knows that things can go wrong. Problems are not the issue: it's way you handle it. For most politicians, crisis is at the heart of leadership and wins elections.
3. Improved relationships and stronger bonds with stakeholders. When a company responds to a customer with real determination and engagement, that is a customer for life.
4. Crises so often reveal underlying structural problems within a business that drive change. Change that is welcome. Few CEOs can drive change without the symptoms to prove that change is needed. Crisis provides the incentive for stakeholders to see that things need to change.