When bad things happen

A potentially disastrous event could strike your business totally out of the blue. In this special report editor Glenn Baker looks at how to prepare for such an eventuality, and manage an effective crisis response programme.
When a high school science experiment resulted in the world’s second-largest food and pharmaceutical company being fined a cool $217,500 earlier this year – it delivered a number of sobering reminders for all businesses – not least of which is you never know when a major crisis will strike your business, or your brand. The Ribena fiasco ended up costing its makers millions of unnecessary dollars with the subsequent damage control involving newspaper and TV ad campaigns. And let’s not forget the longer-term damage to the brand’s reputation.
There have been many other examples of crisis control being played out through the media. Another that springs to mind is Subway’s staff dismissal issue in Dunedin earlier this year – in this case, as is common nowadays, publicity was largely fuelled by comments posted on a blog site.
More recently, The Warehouse copped some bad press when it released 13,000 red birthday balloons north of Auckland, only to have them washed up on a beach two weeks later (what were the PR people thinking?). Mercury Energy also had some explaining to do after a death resulted from a household power disconnection (as for the management team fronting up to the Muliaga home to pay their respects – that was a gutsy thing to do).
Mother Nature can bring down companies too – JetBlue Airways in the US is still reeling from a severe storm and subsequent timetable meltdown, which left passengers stranded in planes for up to 11 hours, caused 1000 flight cancellations and a seriously wounded reputation. Incidentally JetBlue subsequently ran a textbook PR campaign for damage control which involved:
· Accepting responsibility for your failures,
· Apologising to customers,
· Telling them how you will correct the causes of the disaster, and
· Keeping your promises to improve (walking the talk!)

Disaster can even originate from the top. PR people use the well known example of Gerard Ratner, who, in 1991, while at the head of Britain’s biggest high street jewellery company, described one of their silver decanters as “total crap”. This was at an AGM which, unbeknown to him, was also attended by members of the press. As a result company fortunes plummeted from £110 million in the black to £122 million in the red. Ratner was forced from the board and the brand name subsequently changed to Signet.
Issues can originate from many different sources and affect all size businesses. There is the disgruntled employee who steals confidential information (exposing the business to significant losses); the foreign object that turns up in a restaurant dish or supermarket product; accidental breaches of the Resource Management Act; and, perhaps most common of all, incidents involving dodgy trade practices amounting to a breach of the Fair Trading Act or other commercial or consumer protection laws.
(If you want to see some examples of the latter, log onto the Commerce Commission website, www.comcom.govt.nz/mediacentre, where there’s a wealth of prosecutions to browse through.)
In regard to the RMA, James Carnie, principal of law firm Clendons, reminds us of its strict provisions – one of which states that if a business’s employee, contractor or agent commits an offence under the Act, the business itself will be hard pressed to avoid liability.
“To avoid liability, a business must prove that it took all reasonable steps both to prevent the incident before it occurred, and afterwards in remedying the effects,” he says. “And where liability cannot be avoided altogether, usually the level of the fine for the breach will directly correspond with the immediate action taken after the event, as well as what had gone on before that.”
Technology issues can also bring businesses to their knees because quite often your whole operation literally depends on it. When a server, IP provider or email system goes down – many businesses are forced into serious damage control mode and it can take months to recover.

Damage control
When it comes to crisis or issues management, as it is called in legal and PR circles, there are two factors to school up on: how to prevent the disaster from happening in the first place, and, how best to handle matters after the event has occurred.
Many firms, not surprisingly, don’t have a crisis strategy in place and are caught off guard when a disaster occurs. But, almost always, you will need to seek experienced legal and PR counsel (and neither will come cheaply!) when the proverbial hits the fan.
James Carnie, while personally preferring to be the fence at the top of the cliff rather than the ambulance at the bottom, says it’s urgent that you comprehensively brief a lawyer as soon as possible after the event.
“Find counsel who knows your industry and preferably your particular business, knows the issues, is also in tune with the non-legal aspects and can spend the time immediately.”
Carnie says it’s essential to form a team quickly, and involve legal, technical and PR input as appropriate, as well as senior management with full authority to make immediate decisions. “Management should drive the setting of commercial imperatives and priorities, by fully briefing the advisor team and outlining the key concerns or risks for the business. And most important of all – decide who’s in charge!”
A team approach is important because sometimes lawyers and public relations consultants have different views on the timing and nature of any public statements. PR people may tell you that a straight ‘no comment’ approach is too conservative and sends out the wrong signals – placing more emphasis on legal issues rather than communication is also a mistake they’ll say.
On the other hand, as Carnie points out, ‘knee jerk’ comments can often cause more damage than good.
“It’s important to get your facts right first, because even words spoken after the event can have legal implications. A preliminary comment that simply lets the public know you’re investigating the matter may be all that’s initially required.”

PR perspective
Speed is also of the essence when engaging a PR company to pick up the pieces. Michelle Boag, one of New Zealand’s leading PR practitioners and head of recruitment company PR People, says it’s a shame many companies don’t engage with PR advisors early enough – leaving it until things go bad.
“Always involve PR practitioners in whatever you’re doing. If you’re introducing a new product, for example, they can scope any potential issues in relation to that product.”
After 30 years in the industry, Boag’s view is that a good PR consultant can add value through all levels of a business.
“PR is a fundamental part of business – not just something you call on when you want to make a public announcement.”
When things turn to custard, transparency is the best policy – better to own up to the mistake, apologise and explain what’s being done to fix it.
“The New Zealand market is very forgiving to those who are prepared to take the blame,” says Boag. “And the media love chasing those who are reluctant to talk.
“Explaining that you are going to fix things immediately puts to bed all those people who think the whole incident is some kind of deep, dark conspiracy.”
Boag’s advice for companies wishing to placate the public after an embarrassing incident is to ensure they allocate sufficient resources and funds to do the job. Have senior managers buy into the crisis strategy and communicate regularly, both internally and externally.
“Go to the point of almost over-communicating and remember that your staff are probably more interested in events than external people.”

Acting proactively, even acknowledging that there’s a problem before others know, and being totally upfront, are vital to crisis and issues management, says John Boyd, director of Donovan Boyd Communications. “If you screwed up – stick up your hand and admit it.”
Boyd is a veteran of many crisis PR campaigns and recalls a Janola bleach recall in the 1990s involving a dye reaction and potential cap malfunction.
“It was textbook stuff – I was called in and the situation and potential hazard was explained to me. There was no hesitation in recalling the product, calling in a team of experts including local health authorities and environmental people who could advise us on disposal, and we ran full page colour ads, issued press statements and established an 0800 number. It was hailed as well managed product recall, and fortunately only two claims for damage ever eventuated.”
Going the extra step in solving the problem is a good move, even though it involves spending more money. Boyd also helped manage the Mazda recall campaign in New Zealand several years ago in which Japanese imports, not covered by the factory warranty, were included in the recall, at considerable expense to the company. The move made front page headlines, scoring some valuable brownie points for Mazda, he remembers.
Boyd believes that selecting the right spokesperson is crucial.
“The initial comments may come from the communications manager perhaps, but ultimately it should involve the company CEO – who will exude more confidence and be taken more seriously by the public,” he says. “Just ensure he or she is media trained.”
Boyd says don’t worry if they don’t come across as a Tony Blair or Helen Clark. “If they’re too slick they’ll get in the way of the message.”

Where to turn
Of course it’s best that you establish a firm relationship with a PR and legal firm before you need to call on them. Engage them after the event and you’ll pay top dollar – hourly rates for PR people can range from $100 per hour up to $500 per hour, depending on their seniority. But that figure could pale into insignificance when compared to any brand damage.
Choosing a suitable PR company can be a challenge. One way is to recall a well-handled crisis campaign and find out who did their PR. Alternatively you can contact The Public Relations Institute of New Zealand (PRINZ) – it has a directory of all members and can refer you to someone local who deals with crisis management. If your budget is small – it may be wise to choose a boutique agency that has the relevant experience.
On the legal front James Carnie points out that choosing a lawyer with relevant industry expertise is vital. If the crisis involves a breach of trade practice laws, you’ll need a lawyer with sound knowledge of the Fair Trading Act, Consumer Guarantees Act and related laws; or if the matter is employment related then seek out a specialist employment lawyer.
Meanwhile there’s no better time than now to identify the key risks to your business and get a crisis management policy and procedure in place. Look upon it in the same way you regard insurance – hopefully you’ll never need it, but you can’t afford to run the risk of conducting business without it. Remember, steps taken to avoid a crisis from occurring in the first place are naturally far less costly than the steps required after an event has occurred.
Realise too that companies are under more scrutiny than ever – and there is an increasing call for accountability.
“Consumers and customers are increasingly aligning themselves with the products and services of companies that demonstrate good corporate citizenship,” says Boyd. “People are more selective, there’s more choice, and it’s easy to switch to the competition. So don’t pay lip service to social responsibility – smart companies realise that by putting some ‘credit in the bank, so to speak, they are in a much better position to ride out the storm.”

10 tips for fronting up to the media
The worst case scenario has just played out before your eyes and now it’s time to ‘fess up’ and manage the crisis? While each crisis needs to be addressed in its own unique way, Impact PR’s Fleur Revell-Devlin suggests you stick to the following basics:
1. Tell the truth quickly and clearly.
2. Establish a crisis team, made up of official spokespeople, plus PR and legal counsel. Discuss the key objectives and messages you wish to convey. (The key objectives for a product recall, for example, could be: protect consumers; withdraw products from shelves; establish an 0800 number for consumer queries; inform consumers that the situation’s under control; and minimise brand damage.)
3. Ensure that the spokespeople are briefed on the situation and provide them with refresher media training is appropriate. 
4. If journalists call you directly, take notes and tell them the appropriate person will contact them to answer their questions. Seek advice before returning their calls. Remember you don’t have to answer on the spot – respond only when you have all the information at your fingertips. (NB: If they say they’re on deadline, ask for a time frame for your response!)
5. Establish a press office for news flow. This will ensure there is no misinformation and that all facts are reported correctly. It will also take the heat off you so your PR team can deal with media enquiries and provide additional information as it unfolds.
6. Keep the media updated on the positive way you are responding to the crisis (sell the solution).
7. If necessary, set up an 0800 number (manned by fully briefed staff) for customers to contact you directly with concerns. This gives immediacy to the problem. The number can also be listed on your website and in media releases.
8. Provide your crisis team with any key facts or new information as it unfolds. And when necessary provide experts.
9. Keep a record of all information released and queries you’ve responded to. Debrief, review and evaluate your company’s response and ensure that all crisis materials (protocols and policies) are updated following the event.
10. When the crisis has passed, communicate to the media how quickly you responded to the crisis, the positive outcomes for customers/consumers, and the steps you’ve taken to prevent such events from occurring again.   NZB

Websites relevant to this article:
PRINZ – www.prinz.org.nz