Tuesday, April 11, 2006

Pit Bull Corporate Diplomacy


Handling corporate crises


Wal-Mart, according to a New York Times report, has been looking for a couple of wise guys who could help the global retailer to brighten its public image and to also fight its dirty battles the way politicians do during election times, for example, by doing opposition research on those who attack the company.

Wal-Mart should not forget that those who live in a glass house must not throw stones at others. There are better and more constructive ways for a corporation to build public goodwill than to have an overly aggressive attitude toward its critics. Every corporation gets into trouble but not all troubles turn into a crisis. Some crises are man-made due to criminal intent, negligence or poor product design.

A crisis by its very nature takes everyone by surprise and makes an excellent story for the media, which thrives on scoops and bad news. Companies like Wal-Mart, Proctor & Gamble, and Coca Cola, for example, are not darlings of the news media and a whiff of suspicion is enough for the media to spin yarns on criminal neglect and blame. Crisis management requires some of the best communications and diplomatic abilities on the part of top leadership. Pit bull dogs won’t do.

Although disasters that strike a company such as hurricanes, earthquakes or riots cannot be avoided, enough advanced planning can be done to mitigate the ensuing disastrous effects. Sincere efforts help the company to rehabilitate itself in the public eye and recover its reputation as a reliable company.

Manmade crises due to negligence such as the Exxon Valdez oil spill in Alaska in 1989, Perrier natural mineral water contamination in 1990, or Union Carbide (Bhopal, 1984); or crises due to evil intentions as in Tylenol (cyanide lacing in 1980s) or Pepsi (the syringe hoax case, 1993) could be worse than natural disasters. Manmade crises occur mostly due to poverty of imagination.

But once shock and awe sets in, the crisis develops quickly and draws intense scrutiny by the public and the media. No one can come up with quick answers to myriad questions. This worsens the situation.

In spite of the best intentions and creative exercise of anticipatory imagination and scenario building, any corporation could be hit by a crisis. Smart ones, nonetheless, not only manage a crisis successfully but also turn it to their advantage and renew themselves and come out even stronger, as Johnson and Johnson did after the Tylenol crisis.

Response to any crisis will most likely be based on insufficient information but if a company has a crisis management plan and has built up a sufficient reserve of public and media goodwill, it can overcome the crisis successfully. Building social capital is important. Chemical, pharmaceutical, food, energy and building industries are most likely to be hit by a crisis. Add to it the possibility of terrorist attacks and you would feel that you have no choice but to prepare for crises and calamities. September 11, 2001 will forever remain a benchmark for unprepared-ness, and what the 9/11 Commission called “as a failure of imagination.” Varanasi shows that India is no better in this respect.

Strategic communication experts recommend some important steps for crisis management. For example, establish an early awareness system. Build worst-case scenarios in brainstorming sessions inviting not only senior leaders from different divisions of the company but also outside experts trained in crisis forecasting and management.
Dramatise each crisis to see its maximum impact upon various stakeholders and constituencies. Assess the probability of the occurrence of each crisis.
Prioritise stakeholders since the impact of a crisis will be different on different constituencies. For example, saving the lives of employees is more important in a terrorist attack than thinking about shareholders’ value or the company’s reputation.

Make crisis management an integral part of the company’s business case. Provide workshops and training in crisis management in a virtual environment and through simulation.
Create a crisis task force with command and control and clearly assigned budget responsibilities and accountabilities. Establish communications technology backup systems for data security. Develop a strong and trusting relationship with the media and with civic society activist groups. Do not forget to plan for legal liabilities.

Communication in crisis would depend upon what is at stake. In the case of a catastrophe, of course, human life takes precedent and communication strategy has to be different from the one when there is a product liability or sexual assault. The message and the medium of communication including face to face meetings, town hall gatherings, satellite conferencing, television appearances, newspaper interviews, company’s websites and blogs are equally important. In a crisis, the public hungers for every bit of information.

In a foreign country where the crisis has occurred, communications must be done through a local spokesperson, someone who knows the culture and has credibility. Although it is important that the company should speak with one voice, top managers should be familiar with the crisis plan and its proposed execution if the situation arises.

Defining the problem, getting and synthesising information from various sources to find the cause of the crisis, communicating with affected parties directly, and communicating with the media with as much openness as is necessary and as often as it is absolutely essential during the crisis are important steps that require the expertise of a seasoned corporate diplomat rather than a hired gun with the attitude of “Let’s nail them.”

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