Business Platinum Ventures
Dealing with Crisis

You keep your books carefully and treat your customers like royalty.  You spend conservatively and observe safety procedures to the letter.  That’s all terrific.  Unfortunately, it doesn’t inoculate your company against an unexpected crisis.  Even the best-managed companies face serious, unforeseen problems that can threaten their survival.  How you respond may be more critical than the crisis itself. 

Types of crises vary widely.  They may involve a sudden financial problem, an environmental accident, a defect in a key product or service, injuries to employees or the public or a natural disaster.  Each event is unique, requiring special tactics.  Still, crisis management experts say certain guidelines should govern just about any situation you may face.

HOW SERIOUS IS SERIOUS?

The first challenge is to determine whether the situation at hand is truly a crisis.  This may sound simplistic, but when emotions heat up, it can be tough to tell a temporary blip from a catastrophe in the making.

 One definition of a crisis is anything that affects the short- or long-term survival of a business, or affects the reputation of the brand.  Ask yourself this: Can I imagine this [crisis] putting us out of business or trashing our hard-earned reputation?  If the answer is yes, you’ve got a potential crisis.  Or try the media test.  Will reporters take an interest in this problem? Hint: Anything involving children, public safety, or the environment has crisis written all over it.

DELAYS SPELL TROUBLE

Once you’ve determined you have a genuine crisis, understand that everything you do in response will be judged from the first moment.  When the crisis becomes public knowledge, your first actions will be the ones most closely examined by regulators, customers, the media, and the public.

“The biggest mistake, period, across the board, is denial.  This is true of big companies and small companies,” says Steven Fink, president of Lexicon Communications, a Los Angeles-based crisis management firm that has helped some of the nation’s largest firms through highly public crises.  Undue delays, Fink says, simply make you look guilty.

“The second mistake” Fink says, is “analysis paralysis”— his term for managers who overanalyze a situation instead of acting.

FIRST THINGS FIRST

Obviously, the immediate objective in any crisis is to stem the problem itself during what Fink calls the “acute phase.”  If there are injuries, see that everyone is cared for.  If it’s a product defect, see that the faulty product is cleared from shelves or retrieved from customers.

The next step is to begin letting people know as quickly and openly as possible what is going on.  Those affected by the crisis will appreciate forthrightness and resent anything they take as an evasion.  Obviously, you want to share everything you know with government authorities and those affected.  Keep other customers and your staff fully informed as well.  Keep the message simple, direct, and honest. 

THE PRESS

Dealing with reporters can be particularly daunting for small-business owners, who aren’t always accustomed to interviews (especially confrontational ones) and may not have in-house public relations staff.  Publicity at a time like this is painful, but efforts to avoid or mislead reporters, or to intentionally minimize the scope of a crisis, will only backfire.

There’s no law saying you have to speak with reporters.  Your lawyer may advise you to withhold certain sensitive information from the media for legal or privacy reasons.  But keep in mind the reporters will aggressively pursue anything they sense is a big story.  They’ll be trying to interview your customers, your employees, and everybody else, so the less you say, the less control you have over the story.  Be as open as you can and absolutely honest.  If you don’t know the answer to a question, say so.  If its privileged information, explain exactly why you can’t answer.  But make sure it’s truly privileged and not simply embarrassing or painful.

THE SILVER LINING

It’s not all bad news.  While no company enjoys a crisis, the result doesn’t have to be entirely negative, even if your company is clearly at fault.  “People are very forgiving of honest mistakes,” says Baldomero “Bo” Garcia, regional director for the Michigan Small Business Development Center at Lansing Community College.  Admit the error and conscientiously make amends, and you may enhance your reputation, Garcia says.

Here are some other ideas and suggestions the experts offer:

Think before you act.  Responding quickly is not the same thing as being rash or giving in to panic.  When you first see a crisis breaking, take a few moments to collect you thoughts.

Take care of regular business.  Don’t get so caught up in the problem at hand that you neglect your daily business responsibilities.  Do so and you may compound your troubles by losing valued customers when you can least afford to.  “It is much less expensive to retain a customer than to create a customer,” Garcia says.

Bring in a pro.  Hiring an outside crisis management firm offers some real advantages.  While this may be your first crisis, they’ve been through this many times before and know the ropes.  Second, you can put your staff back to work on what you hired them for, while the outside firm helps with the crisis management firm vary.  Ask what crises they’ve handled in the past and check references thoroughly.

Have a plan.  While there’s no predicting when a crisis will happen, you can protect yourself by having a detailed plan should one occur.  Think about potential problems.  For some companies the potential crises may be obvious.  Other business owners may have to think a little harder about what could possibly go wrong.  Involve your key staff in the planning.

Excerpted from BUSINESS PLATINUM VENTURES
"The Resource for American Express Business Platinum Card Members"
Summer 2002