Planning Ahead for Crisis Management
It's the nightmare scenario (BusinessWeek.com, 8/3/07) that no business owner wants to imagine: One of your products is recalled due to safety problems or one of your executives is charged with a crime or one of your customers is attacked in your parking lot. Most entrepreneurs have never thought about what they would do in a crisis scenario, but they should, says Devon Blaine, president and chief executive officer of the Blaine Group, a Beverly Hills marketing and public-relations firm that has been in business 30 years. Blaine spoke recently to Smart Answers columnist Karen E. Klein about the unthinkable and how small companies can prepare for it. Edited excerpts of their conversation follow.
How many times over the years has one of the companies you worked for faced a major crisis?Probably a dozen times. Most recently, one of our clients faced the FDA recall of a product they had been importing from China. What's scary is that smaller companies have never thought about something like this happening to them and they have no idea how to respond.
You recommend that every company develop a crisis communications plan. What do you mean by that?I'm not suggesting that you have to run up huge fees with your marketing firm, or take up a lot of time developing a written plan. A plan like this can be very simple—as simple as identifying the attorneys and the other professionals with whom you will interact during a crisis, and knowing where to reach them at night and over the weekend. That could also include executives within your own company. Crisis invariably strikes at 5 p.m. on a Friday.
It also helps if you brainstorm about the kinds of things that could happen to you. Think about what could go wrong, and what you'd do about it, and even if something completely unexpected happens, at least you'll have discussed your response.
What are some of the things you'd need to decide in terms of your response in a crisis?Who handles calls from the press? Is your receptionist going to be the public face of your company? Do your law firm and your PR firm know your company well? Do they know each other? They should at least have met each other and know your company well enough to advise you in a crisis situation.
I got a call at seven on a Sunday night from one of our clients who had just learned that the FDA wanted to recall one of his imported products from China and wanted him to issue a press release first thing the next morning. My first question was, "Do you have FDA counsel?" He did not, nor did he even know where to start looking. I called another client who's been through this, got him some contact information, and by 7 a.m. Monday morning our client had representation from a New York law firm. But that scenario should not have been dependent on my Rolodex.
What about very small companies that don't have a marketing and PR firm on retainer?They'll wind up having to pay an hourly consulting fee to get a professional firm up to speed on their business. The same will happen with the appropriate attorneys, which obviously can be very costly. This is why it's important to have relationships with these professionals before the crisis happens.
What were some of the most challenging aspects of the Chinese product recall case you recently handled?The FDA allowed us to make the recall announcement, so we were able to control that part of it, but we had no control over the media camping out at the company. The CEO did not want to be interviewed, so we issued a formal company statement that had to be approved by the FDA. That happened in about a day and a half, then the FDA posted it on their Web site. Still, both our firm and the company were flooded with phone calls, not just from the international press but also from concerned consumers.
What does a company do when it gets an onslaught of inquiries like that?They are a three-person company, so we handled all the inquiries. There was no way they could do it. They let their phones go to voice mail, and we returned all the calls. We did not talk with the consumers much beyond the formal company statement, because the FDA Web site was full of information about the recall and it was the most reliable guide for consumers. As for the press, a lot of individual questions simply did not get answered. And requests for interviews were declined.
How long did the publicity last?About two weeks. We managed to handle everything for all of our other clients during that time, but about half our time was spent on that situation during that time. We charged an hourly rate to our client, and the fees did get high. The good news is that the company weathered the storm and it didn't go out of business.
How does a company even begin to rebuild its reputation and regain customers' trust after an incident like that?This is the ironic part. Entrepreneurs whose companies normally don't make headlines or play on the evening news envision that the company they've worked years to build is going to go away. But the reality is that while it's a terrible feeling at the time, the publicity suddenly makes your firm larger than life. In many instances, clients we've gone through a crisis with [will] later attract Fortune 1000 customers that would not have known about them any other way.
You mean something that's a short-term negative can turn out to have a long-term positive effect?Absolutely. The negative part fades, and the fact remains that you've gotten the attention of a number of market-makers and potential investors that would never have known about your company otherwise.
One of our clients who had an incident with a Chinese product ended up leading a panel on import safety at a trade show, and got exposure they never would have had before. If you handle the crisis with sincerity and with integrity, that shines through.
What's the best way to respond to a crisis?Honesty is always a good policy. Saying "no comment" is the worst thing you can say to the press. It's just as easy to say, "We're aware of the problem, we apologize for any harm we've caused, and we're taking steps to rectify it." That doesn't say much more than "no comment," but it sure sends a different message. It sounds as though you care, and that's a real important ingredient.
What if there's an ongoing investigation or something else that limits your ability to be fully honest or to talk freely about a crisis?Then you have to talk around the situation or at least around the part of it that you don't know about fully. Sometimes, the FDA does testing that may take weeks and you don't have the results until you have them. The big point is to always, always get back to the press and give them whatever information you can. If you're not able to do that personally, have someone do it on your behalf.
How many firms in crisis wind up going out of business as a direct result?I haven't seen one amongst the companies we've worked with. They have all survived and, in many cases, thrived. I have seen companies go bankrupt after ethics problems, but we haven't had any of those. Two of the firms we've handled crisis communications for sold to other companies but neither of those sales was in direct response to the crisis.
So, the good news is that your worst fears aren't always realized?Definitely not. In one situation, everyone I talked to was positive our client would go under, and they have not.
What additional tips or advice would you give to entrepreneurs who might face a crisis in the near future?Plan ahead. Make sure that your company's financing and your long-term personal financial planning is well-managed, just in case everything does go terribly wrong and you're not able to recover.