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Volume 31, Issue 2

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How would your company evacuate and communicate with employees if a dirty bomb exploded within a 10-mile radius or your building was threatened with radioactive, biological, or chemical agents? Or what if a new, more sophisticated cyber-terrorism attack from a Mideast terror cell suddenly penetrated your firewall and shut down your operations completely?

Does the current crisis plan gathering dust on your shelves really provide up-to-the-minute protection for these types of events?

Any crisis management plan prior to Sept. 11, 2001, is obsolete since it does not deal with many of the new potential terrorist activities that are now part of our consciousness.

At the same time, American businesses are facing a virulent situation – the fallout from the Enron/Andersen debacle. The ensuing virus-like effect of “Enronitis” is infecting every company or industry that was ever affiliated with the now bankrupt energy-trading giant. Manufacturing conglomerate Tyco, the latest company to be scrutinized for shady financial reporting, is in a mad dash to avoid becoming the next-largest casualty case in U.S. history and is hastily selling off its lending unit for an immediate cash supplement. Though Wall Street does seem to approve of Tyco’s quick response, health care products maker C.R. Bard Inc. has just called off its imminent merger with Tyco that was announced in May 2001.

In addition, a black cloud of suspicion and distrust now blankets the accounting industry as a whole and continues to grow as the depth of Andersen’s deception is fully realized. Experts say it’s going to be virtually impossible for the accounting industry as a whole to escape the crisis unscathed. Other professional services’ sectors such as management consulting, advertising and law are beginning to examine their vulnerabilities in the post-Enron world as well.

So, what is the lesson we should be learning from all this? Many companies make the mistake of not preparing for potential crisis situations in advance. As a result, companies often make erroneous decisions, waste critical time and allow the crisis to control them and/or spiral out of control.

An actual crisis is not the time to try to figure out what actions to take, whom to contact or how to communicate with your various constituent audiences.
Being fully prepared ahead of time can be the difference between keeping your business up and running or going out of business.

Preparing for the Unthinkable

The most effective way to prepare for a crisis is to work with an outside firm or expert that specializes in crisis management. These firms can provide a vital outside perspective on how you need to handle any potential situation during a crisis and will bring real-time experience to post-9/11 planning.

An actual crisis is not the time to try to figure out whom to contact, how to control the media, notify your customers, disseminate the information to your employees and international offices, and so forth. Being fully prepared ahead of time can be the difference between keeping your business up and running and going out of business. Crisis planning should involve extensive scenario role-playing by teaching senior managers how to deal with each possible twist and turn within a particular crisis.

In any crisis situation, it’s critical to assess what you can control (i.e. who the lead spokesperson will be, which audiences are communicated with and when, etc.).

There will always be facets of any situation that will be impossible to control such as rogue chat rooms. However, knowing immediately what you can control and taking the proper steps to manage it will impact the outcome of the crisis and determine your company’s reputation moving forward.

If budget is an issue, check your company’s risk management or insurance policy. Many policies will cover the fee for crisis management planning. Being pennywise today will definitely become pound foolish if your company is faced with a crisis.

A solid crisis plan must involve a team effort. The senior executives responsible for your company’s IT, legal (including outside counsel), risk management, audit and tax, and corporate communications must be trained together how to react in a crisis, what steps to take, and how to communicate with employees and external constituents. Lines of communication must be established among all department heads in order to understand what information can be disseminated and what information legally cannot be released.

There are five important steps your company should focus on during crisis preparation. We have created our own crisis management program called CARES, which outlines the following five steps to provide a true measuring stick to better understand how crisis management processes (and actions) can be continually improved after a crisis takes place. By following these steps it also allows for quick modification and changes to be made.

Each step builds off the one before it and asks the senior executives key questions, providing key metrics that demonstrate how prepared they are for any particular crisis situation. Unlike many crisis diagnostic tools, CARES also focuses on and measures specific behavior characteristics exhibited in these stressful circumstances. Because of its generic template, it can be tailored to work within almost any pre-existing system (and can incorporate existing corporate procedures). The details of each will be uncovered during the scenario role-playing enacted by the external crisis communications expert:

Composure and Collection of Information: How composed were the executives after hearing and initially reacting to the crisis? What information was collected and how was it collected? Did the executive collect enough vital information to properly assess the situation?

Assessment: Did the executives adequately assess the situation? For example, did the executives clearly assess the challenges and/or obstacles surrounding the situation and who might be affected?

Reaction: What is the action plan and how was this decision made? Were benchmarks created for success?

Evaluation: How effectively is the situation being evaluated, monitored, and adjusted? Who is being notified and how? Based on new changes, how is the situation being evaluated? What new goals/benchmarks have been set?
Success: Once the crisis has subsided, how effectively do you measure success? What changes to your crisis plan/process were made based on these metrics? How prepared are you for the next crisis? Did your metrics prove effective in measuring the situation?

By implementing a program like CARES, companies can truly measure how well a crisis team performed throughout any situation by providing real recommendations as broadly or detail-specific as needed.

Repairing a Reputation

What happens if your company’s image is damaged by a crisis? How do you win back public support? Reputations are often ruined not by the crisis itself, but in the way the crisis is handled.

The Tylenol case is a positive example of a crisis handled well. When seven people died in 1982 from capsules tainted by cyanide, Tylenol immediately pulled the product from the shelves and developed a safer product that gained the trust of consumers.

The Ford/Firestone crisis was handled poorly since, rather than admitting fault and taking the proper steps to address the crisis, both companies denied any wrongdoing and pointed fingers at one another, quickly eroding consumer confidence. Months later, Ford and Firestone are still struggling with the result of their missteps.

As seen from the above examples it becomes obvious that how you react and respond to a crisis can ultimately be more important than the crisis itself. Below are some simple “do’s and don’ts” that companies should, by rule of thumb, keep in mind when it comes to responding to a crisis.

• Always be the principal trusted source of information about your own affairs.
• There is simply no way that you can be prepared for every single possible scenario, but you can be prepared to react by having the right materials, resources, and facilities in place. For example, companies should have a contact sheet with names and numbers of the members on each crisis team.

There should be a solid procedure on whom to call and the process you should take. Another important factor is key biographies and media list should be on hand at all times. Lastly, there should be a quick reference guide on how to handle physical disasters. For example, each company should be equipped with a list of emergency exits within their building.

• Don’t become an island unto yourself – first class teamwork is absolutely critical for success.
• Smooth communications up and down the organization can prevent further chaos. Therefore, always prioritize constituent communications and create and effective mix of tactics and messages.
• If you don’t want to see it or hear it, don’t say it.
• Be honest, be deliberate, and be fast.
• It is not good enough to react and hope for the best.
• Lastly, learn from your mistakes and certainly set benchmarks to measure success and failure.

Crisis Insurance

A crisis management plan is a company’s crisis insurance. Imagine if your company was destroyed by fire or a terrorist act and wasn’t covered by insurance. It would be virtually impossible to rebuild.

If a crisis unnecessarily overheated because your company didn’t know how to contain it, it’s possible your company’s reputation could be permanently scarred … beyond repair.


Edward Moed is a co-founder and managing partner for PepperCom. PepperCom has conducted crisis management programs for a wide range of mid-sized and Fortune 500 companies. For more information, call PepperCom at 212-931-6100 or visit the Web site at www.peppercom.com.