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CHAPTER 1
WHAT IS A CRISIS?
The Mail calls to ask about your CFO’s private life. A snarky tweet appears saying that your advertising plagiarises a competitor’s. The branch manager in Swansea rings to tell you that a customer has slipped on a wet floor and broken her pelvis. The FCA informs the media that your broker is being investigated. An MP puts down a question attacking your relationship with HMRC. The FSA condemns a key ingredient of your major brand.
How do we decide that an event is a crisis? Could it instead be an issue – which we need to monitor – or is it just a problem, the kind of thing managers deal with day in and day out?
It’s a judgement call. And it’s yours alone, because no one else in the organisation is either qualified or temperamentally suited to say: ‘This is the real thing: put the crisis communications machinery into action’.
1.1. ONLY YOU CAN DECIDE
Managers typically downplay crises until it’s too late. Then all we are left with is damage limitation. This is understandable: managers are paid to be optimistic and are assumed to be able to predict and control; a nasty surprise isn’t part of their natural planning apparatus.
Reactions to crises are subjective. Organisations who are used to everything going like clockwork see any blip as a crisis. At the other end of the spectrum, super-confident managers will think that there is nothing they can’t solve with native talent. Both attitudes are likely to be wrong.
That’s why your role as an objective expert is crucial. Only you can weigh up the situation without panicking and without false optimism. Only you will appreciate the need for speed.
Unfortunately, in a crisis, we don’t have time to be wrong.
Ivy Lee: Game-changer in Crisis Communications
In the late 1800s and the early twentieth century, US railroads were the ‘dot.com boom’ of the era. Huge fortunes were made by rail monopolists and their investors. The competition was fierce, and slightly mad: lines were built, at massive cost, a few miles away from each other.
Safety standards slipped and crashes were common.
The Pennsylvania Railroad experienced a terrible accident in the town of Gap. The directors invoked the usual SOPs: create an exclusion zone round the crash-site until public interest dwindled.
Ivy Lee, one of the founders of modern PR, was a consultant to the Pennsylvania Railroad. He said: ‘No. We will not keep the press away. We will do the opposite: we will invite them to inspect the site of the crash, tell them why it happened and explain how we will make sure it cannot ever happen again’.
He was a persuasive man. The directors followed his advice and got the best press coverage in the industry that year. They never looked back.
It was Ivy Lee who laid the foundations of present-day crisis communications in 1906. (Museum of Public Relations, 2015.)
1.2. STAKEHOLDERS’ OPINIONS MATTER
The idea of accountability only took root in the mid-1990s. John Elkington started it with his triad: ‘People, Profit, Planet’ (The Economist, 2009). Before then, most companies felt a duty to communicate with their investors but everything else was either marketing or, as GE called HR, ‘the picnic department’ (Financial Post, 2015).
Anyone reading this book will automatically think in terms of stakeholders, but many of our clients don’t and others don’t want to. It is stakeholder opinion – or, more exactly, sentiment – which controls an organisation’s ‘licence to operate’. If stakeholders know us and like us, we are well-placed to emerge from a crisis unscathed. If our ‘licence to operate’ is impaired, we will have trouble.
Business leaders like Lord Browne, Sir Richard Branson and Sir Paul Polman know this instinctively. Others need convincing that stakeholders really matter. We must persuade them that doing and saying the right thing in a crisis is not a choice – it’s the only way we can protect our reputation when our ‘licence to operate’ is under threat.
1.3. THE MOST VALUABLE ASSET
Fifty years ago a company’s value (its market cap) was mainly measured by objects it owned: plant, inventory, patents, buildings, vehicles and so on – things that could be touched and counted. Today the typical Fortune 500 company’s market cap is mostly intangibles – brands, popularity, credibility, the CEO’s personal profile, goodwill and reputation.
Warren Buffett was the first to say that reputation takes 20 years to build and can vanish overnight. He also told managers at Salomon that he would forgive financial mistakes but would be ruthless if anyone’s actions damaged the bank’s reputation. Buffett is the ultimate hard-headed investor: what he meant is that reputation has a financial value far above anything that can be expressed in a profit & Loss (P&L) (Forbes, 2014).
This is why good crisis communications should matter to anyone at the helm of an organisation, whether it’s a public company, a public body or a member of the third sector. It’s about preserving (or losing) financial assets in the form of reputation.
Sir Martin Sorrell made the same point speaking about CSR: ‘Some companies see CSR as the icing on the cake. It isn’t: doing good is good business’ (INSEAD, 2010).
1.4. THE CEO’S PERFORMANCE IS ALL-IMPORTANT
Most of us make snap judgements most of the time. We have to; the average Western European adult is deluged with 4,000 commercial and political messages every day. We rarely think hard or deeply about subjects which don’t directly concern ourselves and our families.
As stakeholders, we form a view quickly on whether a company deserves our support and sympathy or whether it deserves to crash and burn. Most of us liked Lord Browne at Beyond Petroleum (BP). We may not have approved of extractive industries, but we liked what Browne said and how he said it. We may even have supported his idea of ‘Beyond Petroleum’. But most of us didn’t like the way Tony Hayward spoke and behaved in the aftermath of Deepwater Horizon. The consequences for BP’s ‘licence to operate’ have been severe.
Many people (and media) look askance at Sir Richard Branson. Virgin’s ‘licence to operate’ is mixed. But his behaviour and communications when the Virgin Galactic prototype crashed in the Mojave, killing a pilot, were beyond criticism. He got himself to the site as fast as he could. He used Twitter to tell people what he was doing. Once there, he faced the media in person and said the right things. Many people thought differently about Branson, and Virgin, afterwards.
How to Do It Perfectly: James Burke and Tylenol
In 1982 a disaster hit Johnson & Johnson (J&J), one of America’s most successful pharmaceutical companies. Tylenol was the country’s best-selling analgesic with a 30 per cent market share. It was a major contributor to J&J’s P&L.
A maniac (never apprehended) injected Tylenol with cyanide in Chicago pharmacies. Seven people died before the authorities could figure out what was happening.
James Burke, J&J’s CEO, was advised to wait and see how things panned out. He said: ‘No. we are not going to do that. We are J&J. We are going to get back every single tablet of Tylenol from the North American continent.’
He was told this was impossible; no recall expects to recover more than 60 per cent of a faulty product. But Burke was implacable. He went on TV, in person, 24 × 7 and coast-to-coast. His message was simple: if you have Tylenol in your home, do not use it. Take it back to the pharmacy, where you will receive a full refund. DO NOT USE TYLENOL.
It worked. No one else died.
Market-watchers thought this would destroy J&J. They were wrong. The share price wobbled but then held steady for a whole year while Tylenol was off the market.
Investors had decided that Burke was on top of this nightmare. He would sort it out. They trusted him because of his honesty. They admired his bravery.
So did the government. Burke was awarded the Presidential Medal of Freedom in 2000 for putting the interests of the American public before those of his company.
(International Herald Tribune, 2002)
How to Do It Perfectly: Michael Bishop and the Kegworth Crash
Michael Bishop started work in airlines when he was 16. He eventually got the chance to set up his own: British Midland (BM), a short-haul carrier which became very popular with business travellers. BM went from strength to strength.
Then something terrible happened. A 737 came in to land at Kegworth (Peterborough) when an engine flamed out. Unfortunately, the pilot switched off the other engine, so the aircraft crashed on the airfield boundary and 47 people were killed.
Bishop was called by his PA, who lived nearby. ‘Michael – you should get here quickly – I have heard a dreadful noise at the airfield.’ He jumped into his car, unshaven and wearing a cardigan. On the way, the media started calling his mobile phone. ‘What’s happened?’
Of course, he didn’t know. We never know the details when a crisis strikes.
But he did know what to say. He spoke from the heart, unabashed. ‘These are my passengers. These are my crew – they are all friends of mine’.
When he got to Kegworth he insisted on facing the cameras and mics alone. It was his airline. For a week, as the top news item, Bishop couldn’t say why the crash had happened. But he could say how he felt about it and what BM was doing to help the victims’ relatives and the survivors.
Everyone thought that BM was finished. Not so. Ticket-sales rose and the company grew strongly until it was eventually bought by BA.
What was happening here? Michael Bishop’s sheer honesty and likeability overcame all other considerations. We admired him. We trusted him. We believed he would look after us.
Bishop was knighted two years later.
(Media First, 2014)
1.5. CRISIS COMMUNICATIONS
There’s a lot of information and advice in this book. We hope readers will be able to make use of much of it. But it’s obvious that many organisations don’t have the resources to put a full-fledged crisis communication plan in place and keep it up to date.
For these PR professionals, our advice is this: the CEO’s performance is critical.
Your organisation, company or brand will be judged by how well (or poorly) the CEO behaves in the glare of media attention.
If your crisis communications plans are rudimentary, but your CEO performs well, you will – with any luck – survive the crisis with your ‘licence to operate’ intact.
If your plans are near-perfect but your CEO wavers, hides, does the wrong thing, says the wrong thing – or simply does and says nothing – you will probably suffer reputational injury.
If you haven’t the money or the time to do anything else, get the CEO on-board and trained to handle media and stakeholder communications properly in crisis conditions.
1.6. WHAT IS A CRISIS, THEN?
Are people’s lives, health or welfare at risk?
Does the organisation need to act to protect anyone’s lives, health or welfare – whether or not the event is its own responsibility?
Could media scrutiny portray the organisation – fairly or unfairly – in a way which...
