Posts Tagged ‘crises’

I recently had a discussion with someone about self-inflicted and non-self-inflicted reputational disasters. Most of the reputation crises I have worked on and written about were self-inflicted because the early warning signs were there in the first place and leadership had an opportunity to change course. Unfortunately, the early warning signs were ignored or deemed inconsequential. An article in strategy + business, the Booz & Company journal, discusses the concept of self-inflicted black swans (a surprise occurrence that causes a major impact) and provides excellent food for thought.  Essentially, the author points out that there are ways to detect if the culture is ripe for these kinds of disasters and ways to protect against their occurrence. And it all gets down to the organizational culture or DNA. There are some very good suggestions such as clarifying who is really in charge of identifying risk exposure, aligning incentives so that people are rewarded for anticipating and disclosing risk and third, creating unfiltered pathways so that those at the top hear the “ground truth” and not just what they want to hear.

The bonus for me after reading the article was learning about some stats that the authors uncovered. Since I am always looking for good stats to illustrate the downside of reputational disasters, self-inflicted or not, I want to share here:

The unintended consequences associated with a self-inflicted black swan can be devastating. They include negative publicity; huge, sudden costs; lost revenues; lawsuits and criminal judgments; and regulatory penalties. Analysis of the stock prices of companies that suffered such events in 2009 and 2010 in the oil, automobile, aircraft manufacturing, and financial-services industries shows that within two months after a visible self-inflicted crisis, an average of 18 percent of shareholder value was lost, relative to the S&P 500. Moreover, stock price performance continued to diminish over time: On average, shareholder value came down 33 percent within a year.

A loss of shareholder value of 33 percent over a year’s time is catastrophic in my book.  It is worth learning how to prevent these unexpected surprises from occurring and figuring out how to turn these black swans into white ones.

  Lawyers and communications specialists seem at times to inhabit entirely different worlds.  This is something that I’ve often thought about but has received little attention in the public relations and legal counsels’ worlds. So it’s time to think about this new trend in reputation managment that can help companies managing crises and issues better.

Consider this example I was told that has to do with the comments of one anxious general counsel reviewing his company’s first few Tweets.  “Looks good but you have a typo at the end,” the in-house counsel warned the communications officer.  The more socially-savvy communications person quickly replied that the so-called typo — a colon and closed parenthesis — was none other than that now nearly universal icon … the smiley face .

Of course, not all general counsels are so unfamiliar with standard and new social media customs and practices.  However, companies can no longer afford a disconnect between legal and communications.  In times of crisis, particularly, the general counsel  (GC) and chief communications officer (CCO) represent two departments often at odds with one another.  Lawyers typically urge minimal or even no public comment out of fear that admissions might damage a company’s case in a court of law, while communications professionals typically demand prompt public comment, even a CEO apology, to avoid further damage to a company’s reputation in the court of public opinion.

As the “information age” produces one corporate crisis after another and social media zingers multiply at alarming speed, everyone is responsible for keeping a watchful eye on defending company reputation as well as protecting against slander, libel and other legal  difficulties. Despite decidedly different approaches, GCs and CCOs are now both finding themselves participating in the same “reputation management” strategy meetings and conference calls.  They now have no choice but to trust and understand each other.

Here are three ways that these corporate officers can get on the same page:

1. Socialize.   Instead of dealing with problems incident by incident, start strengthening the relationship between GC and CCO by getting them to the table to jointly craft the company’s social media policy and guidelines.  Only about one-third of companies have such policies which leaves plenty of seats left for the two departments to fill. Agreeing to and understanding the needs of the other and providing for thoughtful compromise ahead of time can only help protect against trade secret violations, adverse publicity, confidential leaks and inadvertent disclosures about employee departures and misbehavior. Companies with employees who know  what’s allowable and not allowable on Facebook, Twitter, LinkedIn and blogs because the GC and CCO have cooperated will save their companies sudden embarrassment and reinforce continued cooperation between the departments.
2. Scenario Plan.  The time to build mutual respect is before reputation risk knocks at the door. Best practice requires getting  GCs and CCOs together with CEOs, HR, IT officers and others to rehearse various best and worst case scenarios, online and offline.  After a few sessions of rapid response simulations (we have an online simulation crisis drill called Firebell to do exactly this),  GCs and CCOs will have the opportunity to work out obstacles and craft prepared statements to hypothetical crises that will give them a head start should real crises occur.
3. Value Set.  Anchor both communications and legal concerns to the company’s core values. The values by which a company operates serves as the grease that reduces the natural friction between legal and communications best practices.  Both departments need to consistently call up company values – for example, integrity, good governance and customer always comes first – as the standard by which any legal or communications decision is judged.  Once the primacy of company values is accepted as the ground rule, cooperation between GCs and CCOs can be more easily facilitated.