The media recently has been rife with articles and commentary on what went wrong with BP’s horrific oil spill, Toyota’s multiple automobile recalls and stonewalling regulators, J&J’s recalls of multiple products along with allegations of withholding information from regulators, and Goldman Sachs’ disclosure settlement along with reports of it’s taking an adversarial posture with regulators and the public. Fingers also are pointed at basketball star LeBron James for his unseemly national news conference announcing his move to South Beach, and actor Mel Gibson’s words with his former girlfriend billing him as “The Worst Guy Ever.”
Moving back to the business context, the common underlying theme is bad actions by a company, or at least allegations of such, and attempts at crisis management by withholding information from regulators and the public. And quickly following is a public relations effort to cast the company and its executives in the most favorable light.
I’m not a PR expert by any means, but some who are seem to make a great deal of sense. One says “the companies that typically handle crises well, you never hear about them…. There’s not a lot of news when the company takes responsibility and moves on.” Certainly each situation is different and there’s a lot more to effectively dealing with a crisis than this, but it gets to the core of what I’ve seen to be a successful approach, which centers on taking responsibility rather than somehow trying to “spin” the facts. Some years ago my partners and I were called in to help a large financial services company deal with a crisis, where it was accused of a range of malpractices by regulators with the scandal making headlines. Interestingly, the first reaction by senior management was to call in the company’s PR firm, and let them handle it. Fortunately, after discussion, a different and ultimately much more effective decision was reached – to acknowledge the problem, and roll up shirt sleeves to fix the underpinnings that caused the problem. That is, to focus on the company’s internal control system from top to bottom throughout the enterprise, to provide the infrastructure, procedures and protocols, along with cultural enhancements, to put the company on the right track. Indeed, with a great deal of effort, that’s what happened, and the ultimate cost was very manageable and importantly, the company retained its customers, regained it’s fine reputation, and continues to be a leader in the industry and viewed in the most favorable light. It wasn’t PR that did it, but rather getting to what went wrong and fixing it for the long term.
Okay, PR is important and crisis management a critical tool when done right. Actually, advance preparation for handling a crisis is a key factor as well, but that’s another subject altogether. Here the point is that getting infrastructure right, with risk management and internal controls in place with accountability, communication, and related aspects, is what really counts in dealing with a crisis, or better yet, avoiding one in the first place.
© Steinberg Governance Advisors, Inc. 2010. The information presented here does not constitute legal or any other type of professional advice. Companies are encouraged to consult legal counsel concerning their responsibilities for legal and regulatory compliance.