9 Steps to Crisis Preparedness

Bill Ide , Terry Wade


April 1, 2011

As did Johnson & Johnson and Chrysler, corporations in crisis must act decisively to protect their reputation and provide accurate, timely information to the public. Every company must have a plan tailored to its own operations and risks, but the following tenets can serve as a foundation for any crisis management strategy.

First and foremost, in times of crisis, the company needs leadership. While the crisis management team should be small in order to be agile, at a minimum, the team should include a member of senior management, the legal department and public relations. The group must have a defined leader who ensures that the tough decisions are made. Moreover, the crisis management team should be overseen by the CEO and the board, which should have final approval over all actions taken in response to the crisis.

Although reporters, bloggers and activists are often the first on the scene during a corporate crisis, the sooner the company can take control of the story, the better it will be able to limit the damage. In the early 1980s, Johnson & Johnson first heard about its products being tampered with from a news reporter calling for a comment. The company quickly realized, however, that it needed to be open and honest, immediately informing the public what was known about the incident, while asking customers to not use its products until an investigation was completed. Although this has become more difficult due to the emergence of social media in recent years, a company in crisis must make every effort to be the primary source of information. This will often require reacting with imperfect knowledge, but the company should not wait until all of the facts have been fully developed before making an initial statement. If necessary, the company can adapt as more facts are uncovered.

Defining the crisis is important, but a company must also take steps to ensure that further harm does not occur. If the incident that predicated the crisis continues, the compounding effect can be devastating. For example, early in its recent crisis, Toyota was the subject of frequent reports of sudden acceleration incidents involving its vehicles and the company seemingly did nothing. With every story, the public's perception of Toyota was further tarnished. In contrast, Johnson & Johnson immediately asked the public to stop using its product while the extent of the tampering was determined. If Toyota had immediately issued a comprehensive recall, instead of dragging its feet during the initial response, the news stories may have continued, but the slant could have been altered. Without the recall, the media painted Toyota as uncaring -- and it was difficult for the public to view the situation any other way.

The board should investigate the incident to ensure that any company failures have been identified and remedied. While this tenet is not necessarily for immediate public consumption, the board must ensure that similar failures are not occurring in other parts of the company. BP, for example, experienced an explosion at its Texas City refinery in 2005 that killed 15 workers. In response to the incident, BP's board engaged an independent investigator, which found safety deficiencies at the company's refineries. Despite the finding, after 2005, regulators continued to find violations at Texas City and other facilities. Although the exact causes of the oil spill of 2010 remain undetermined, BP's board will face hard questions regarding its oversight given its knowledge of safety deficiencies at BP's other facilities.

Many companies have been successful at leveraging senior management as spokespeople during a crisis. The public likes to see engagement by top management as it shows that the company is fully invested. Both Johnson & Johnson, during the Tylenol tampering scare, and Chrysler, during its odometer scandal, used company leadership to effectively deliver the respective company's messages. Senior management, however, is not always the best choice. In response to the oil spill in 2010, for example, BP initially tapped its CEO Tony Hayward to act as its spokesperson. When apologizing for the incident, Hayward infamously remarked, "We're sorry for the massive disruption it's caused their lives. There's no one who wants this over more than I do. I would like my life back." The public backlash that resulted from this comment and others cost the company much-needed public support and, eventually, Tony Hayward was asked to step down from his position as the CEO. Without proper coaching, the spokesperson can do more harm than good.

Although empathizing can be accomplished on a larger scale through press conferences and declarations, smaller-scale actions that show compassion can ease the concerns of the affected group. For example, while Chrysler widely acknowledged the incident and validated the public outrage in its statements, it also offered replacement vehicles to those affected. Acknowledging and validating the public's response can serve to temper the negative reaction.

When crises are quickly mitigated, the explanation of the response can simply be those steps taken by the company to address the situation. When crises are ongoing, however, the explanation of the company's response often takes center stage. For example, environmental crises often require an extended response by the company: the physical damage of the crisis may not be rectified for several months, and the lasting effects may linger much longer. The company must continually update the public on its response. If the company is not proactive, the media will turn to outside "experts" to explain to the public what the company should be doing.

Although apologies are often difficult for corporations given the potential impact in later litigation, a company in crisis must take those actions that allow it to survive the incident; basically, the company must be willing to lose a battle in order to win the war. Companies should be mindful of potential litigation impacts in crafting its response, but they should not allow a fear of litigation to dictate response. If the company committed an intentional or incompetent act that led to the crisis, the company should apologize for the action. As demonstrated by Chrysler's response to the odometer tampering allegations, an apology is instrumental in diffusing a corporate crisis in which the company is clearly at fault.

Above all else, a company in crisis must communicate with all of its key stakeholders, including, at a minimum, its employees, shareholders, customers, regulators, lawmakers and any affected groups. Although other companies have done this well, Johnson & Johnson arguably did it best in the Tylenol crisis of 1982. In the days and weeks that followed, Johnson & Johnson was in constant contact with the Chicago Police Department, the FBI, and numerous media outlets, which were instrumental in keeping the public informed. The company also worked with its primary regulator, the Food and Drug Administration, and became the first company to be compliant with the FDA's new anti-tampering regulations -- a feat that won the company additional praise in the crisis' aftermath.

The authors would like to thank Amanda Leech of McKenna Long & Aldridge LLP for her contributions to this article.
Bill Ide is chair of the Conference Board governance center advisory board, former president of the American Bar Association, a former general counsel of the Monsanto Company and part of the McKenna Long & Aldridge Governance Center.
Terry Wade is the president and founder of the TheWadeGroup, Inc., which offers clients crisis management, government relations and media training.