Dealing with reputational risk

Communicating effectively to all your audiences is an essential part of knowledge management if your corporate reputation is to remain intact. Systems and processes today allow organisations to capture and retrieve information in the most sophisticated way, but if this information is not shared and communicated effectively, your business reputation can still be in jeopardy when crisis strikes. Sue Stapely offers some guidance on how to avoid the bear traps.

Crisis? What crisis?

One definition of ‘crisis’ refers to a two-fold gap – in our knowledge (at the very heart of the term crisis), and in the social reality in which the crisis appears.

Any activity or comment has the potential to undermine the essential confidence that must exist for any business to succeed. The directors or partners, shareholders, customers, staff and stakeholders, and all those who report on or recommend the organisation will be influenced in their perception of that business by a range of factors. Knowledge may exist and be disseminated by many means, but it may not reach the parts that are most influential. Observers of your business can, of course, check its apparent financial viability and corporate health according to external criteria, but the customers and users of your products or services will have their own experiences to inform their views. Your staff will have different benchmarks to reach their conclusions and the wider world may simply form its opinion based on rumour, suspicion and speculation. Overall, most organisations acquire reputations based partly on fact and partly on fiction.

Less corporately socially responsible than thou

Recently, for example, the Employers’ Forum on Disability undertook some research into 50 of the top international companies that produce social reports and profess commitment to corporate social responsibility. Of these, 80 per cent failed to make any reference in their social reports to disability, scoring a massive own goal. All those within the companies scrutinised were familiar with their policies towards their disabled customers, employees and stakeholders. At the same time, those charged with maintaining corporate social responsibility thought that words like ‘inclusive’ and ‘diversity’ automatically included those with disabilities, but without someone to ensure that this knowledge was shared within the organisation and communicated to those who wrote the social reports that were distributed to an external audience, an entire sector of the workforce and customer base was seemingly ignored.

Perception is everything

Today, perception is every bit as important as reality. In addition to hard facts, the reputation of a business is informed by a number of soft values, and we disregard these at our peril. How we feel about Marks & Spencer (M&S), for example, will be influenced – albeit perhaps subliminally – by any or all of the following:

Our enjoyment of the last ready-meal we purchased;
The way the last checkout assistant dealt with us;
The response we got from our partner to the last pair of knickers we bought;
The ease with which we can park our car when using the store;
The erudite article we read on a business page about the company’s turnaround and the City’s reaction;
The ease with which we can reach a local branch in comparison with other supermarkets;
The way our M&S shares perform or the level of the store’s credit card interest rate;
Our understanding of how the company treats its staff;
The messages in the annual report we received and the size of our latest dividend.

Not much to do with knowledge, more to do with a sense of the company from our own observation and feelings.

The slump in that company’s profits was attributed to a multitude of factors, but many agree its commercial fate was sealed as soon as ordinary customers started repeating to each other that its fashions were grim and that nobody wanted to be seen dead in their clothes, even though some of these messages were continuing long after M&S had hired new designers and put successful lines on the racks. Once people start talking negatively about a business, internal moral plummets, the business founders and it often takes Herculean efforts to get things back on track, almost regardless of the quality of its products or the best knowledge management systems. Now M&S’s products are finding favour with the consumer media and customers once more, some time after the media started reporting that the company was recovering. Perceptions have changed and this, together with upgraded products, is driving new shoppers through the doors.

The crisis team

The first stage to ensure your company is not disabled when the unexpected strikes is to assemble the crisis team. This small, core team should include those who lead the business and those who are responsible for its internal and external communications, together with any people with risk assessment and risk management expertise, responsibility for staff, premises and IT. Ideally, these should be people who like each other and who can work together effectively. They should have different but complementary skills, expertise and energy levels. If they are based at different sites, it may be necessary to contrive a number of regular meetings to allow them to familiarise themselves with each other.

Follow the leader

The team must have a clearly defined leader to whom all the others are prepared to defer, without argument. There will be no time to negotiate leadership or manage egos. This individual must be resolute, frank, devoid of sentiment and capable of continuing to make balanced decisions when sleep-deprived. Ideally he or she should also be impossible to dislike and have an accessible, media-friendly personality.

The crisis route map

The next phase of work should provide you with a route map to guide you through any conceivable crisis, and reduce the time you spend speculating or trying out tactics when time may be of the essence. Once you are in the midst of a crisis, you will only have time to select the combination of options that seems the most appropriate in the circumstances and to implement them.

The team first needs to identify the company stance and policies. These may already have been stored somewhere in a system, but now is the time to check they are still up to date and relevant, and will withstand rigorous external scrutiny. They should also be believable and believed. If, for example, customer safety is a key policy for your company and systems exist, training is provided and reference is made to it in external documents, it will need to be checked for infallibility and a defence structured if it fails and a customer is harmed.

The chief executive of a local authority in crisis recently declaimed that he guaranteed the situation his authority was confronting would never arise again. Six years on, it has. A second hit, after a rash pronouncement of this sort, is much harder to take than the first.

Think the unthinkable

Once you have established the company’s credo, with or without the help of external advisers, the team should list all possible disasters that could befall the business and its people. This should include factors such as the collapse of the stock market and share values, a virus that disables the IT systems, a critical piece of prose in a newspaper of note, the sale of defective products, through to the destruction of the head office or satellite offices, the chairman or another senior player being caught in flagrante or a damaging e-mail from a junior employee finding its way into the public domain.

Once you have confronted these horrors, it is much less likely you will be caught unawares and you will discover it is possible to devise ways of dealing with them all. Learn from the mistakes of others. A great deal depends on common sense and advance thought. Few people seemed to have worked out in New York that evacuating a building with over a hundred floors without using the lifts not only takes a very long time, it may actually prove impossible for those who are not very fit, who may in turn hinder their colleagues. In London, it took a random e-mail from a young lawyer about his partner’s sexual preferences, which found its way round the legal world, to convince all law firms of the importance of establishing secure e-mail etiquettes and internal communications systems. Just knowing how young people elect to communicate with each other these days should have signalled that this was bound to happen sooner or later.

Plan to manage

The strategies you need to put in place need not be complex, but it must be committed to paper, explained to all involved, stored in a way and place accessible to all (copies at home, in the briefcase, on laptops and in the car are wise precautions), and the core team members must be clear about their roles in its implementation.

Each part of the plan should be reality checked and tested. This phase should include making up your collective mind about what kind of response you want to make to particular kinds of crises. An excessive response can create a secondary crisis; an inadequate response may complicate the situation, undermine your own credibility or further destabilise confidence in your business.

Similarly, you must manage your time properly. Sometimes you must decide to take action without delay to maximise operational efficiency. At other times, it is more appropriate to insist on legitimacy and acceptability, and to only take action after a final legal judgement has been made and a proper communications campaign carried out. The first option can lay you open to rejection. The second may mean that you simply act too late.

Even with the best preparation in the world and the smartest personnel and knowledge management systems, it is extremely difficult to make really thorough analyses, weigh all the pros and cons and make clear-headed judgements when under fire. However, if you have already given thought to the situations that can arise and have the makings of a response and a few tools to help you think and act, the pressure will be less severe.

It also sometimes helps to latch on to a couple of negative principles, such as, ‘This is what we will not allow ourselves to do in such-and-such a situation, as it would deepen the crisis.’ When it comes to specific operations, you might ask yourselves for each scenario, ‘What are the three mistakes to avoid and the three initiatives to take within the next hour?’

Act out the crisis

A team I advised recently undertook a full simulation of a crisis to test the crisis management team (a wise precaution) and found, in the heat of the moment, that almost all of them concentrated all their endeavours on preparing a press release and readying themselves for an interrogation by Jeremy Paxman, but no-one thought to alert the switchboard or receptionist of the fact that the building was apparently under siege. They also found that after 12 hours of relentless activity, certain tempers became frayed and judgement became impaired. Simulating a worryingly realistic explosion in another client organisation provided priceless experience when a real bomb was planted soon afterwards and a controlled explosion had to take place.

The crisis toolkit

Your crisis plan, once drafted, will form the foundation for your crisis toolkit. In a large, ring binder file and also on disk, on your computer system and your laptop, this should include the following:

Contact details of all those in the core team, including out-of-hours numbers (including mobiles or those of partners with whom occasional nights are spent);
Details of all contractors and suppliers who guard and support your premises, IT and other functions, including your webmaster in case you have to update your website at short notice;
Plans for alternative telephone and computer systems off site;
A brief statement about what your organisation is and does, which could be issued to the press, if necessary, with key messages;
A profile of the managing director, chairman and/or chief executive, or any other senior person likely to be required to act as media spokesperson, together with suitably sober but up-to-date photographs;
The core press contact list used by the organisation in its regular marketing and media relations, including all the newswires and online outlets, together with regularly updated deadlines, e-mail and fax details;
Press release templates for ease of use;
A copy of the list of all employees, ideally with home contact details and the contact details of the HR/personnel team;
An enquiry log in which you and your colleagues can record all queries from and details of all members of the public, media and other groups who make contact.

Some key rules to remember include:

Speak up and speak up fast;
Never lie or dissemble;
Go to the site of the incident;
Always acknowledge the distress or concern experienced, without admitting liability and discomfiting your lawyers;
Always empathise and never blame others;
If you are in the wrong and can do so without exposing yourself financially, apologise – convincingly;
Streamline the approval processes. There will be no time for a committee to agree a press release. Now is the time for autocracy, not democracy;
Be charming and helpful in all your dealings with the media;
Know your limitations and bring in the experts early on if you sense you won’t be able to cope on your own.

Identifying things that can go wrong

Confronting the kind of things that could happen to your business, and how you would deal with them, is cathartic. Here are a few challenges, with some recommended reactions:

Product defect. Admit immediately you are concerned, and act as quickly as possible to recall the product, even going so far as helping your consumers buy supplies elsewhere. When the defective products are returned, carry out a hard-hitting campaign, highlighting your sense of responsibility during the crisis and the fact that safety is at the centre of your policy;
Crisis in public opinion. If the criticism is judged to be well founded, be prepared to carry out fundamental changes. If the criticism is judged to be without foundation or unacceptable, be prepared instead to call up all your troops. If the criticism is true in part, prepare a compromise response;
Intervention in a failure for which your company is not responsible. Act quickly, highlighting the fact that you consider it your social responsibility to assist, even though you are not directly at fault;
Pollution with health risks. Warn all those people likely to be affected without delay, then eliminate the causes of pollution and deal with the effects;
Financial or sexual impropriety of a senior individual. If allegations are true, immediately suspend or dismiss, apologise and field previously identified substitute. Consider supporting the betrayed spouse, if appropriate. Make plain, if possible, that the customers, shareholders or stakeholders’ interests remain unaffected;
Rumour of a public health problem. Whatever your personal conviction, do not deny the possibility of danger if you don’t have rock solid arguments. While awaiting scientific support, look for a social consensus as to the interim measures to be taken. The greater the uncertainty surrounding the risk, the more explicit your policies must be. Respond immediately to the concerns expressed by setting up a short-term study that can provide efficient answers, but don’t pretend that science can answer all the questions. Be wary of hastily prepared statistics.

Implementing your plan when crisis strikes

Once your plan is in place, its overall management resides with the leader of the team, who may be the managing director or chief executive, or the individual they have entrusted with managing the system during a storm. Their primary responsibility is to ensure the coherence and cohesion of the system. This is true knowledge and information management. The director’s task will be made easier by the fact that the major positions to take have already been decided, and systems and structures established.

The implementation of that crisis plan

There will be very limited time in which to contain the crisis and respond. Maintaining media competence is vital. The audiences and communications channels need to be identified and a timetable created. If you are to communicate actively to your staff, your stakeholders and the media, the databases should have been prepared but may require refinement.

The plan of campaign, already drafted, needs to be finalised. Key messages need to be clarified. Holding or ‘win’ or ‘lose’ statements (if litigation is involved) must be agreed. Q&As must be prepared, whereby a crisis team member or external adviser raises all the trickiest questions you and the company most dread being asked. These should flush out all possible skeletons lurking in cupboards and careful, truthful but positive answers should be prepared. External consultants are particularly valuable at getting at the nub of uncomfortable issues in a way that those inside organisations rarely can. If, for example, in the past a lead player in your company promised that an event could never happen again, and it has, your spokesperson needs to be able to deliver confidently a reply to the question, ‘So what went wrong? You said this would never happen again.’

Best practice in a crisis

Finally, good practice remains primarily the responsibility of the team leader. To control the handling of the crisis throughout, they should:

Ensure that the crisis is properly tackled, in a way that neither allows the company to grind to a halt nor is overly Rambo-esque;
Encourage everyone in the organisation to anticipate events. Keep asking, ‘What next?’
Continually identify the major initiatives the system ought to take;
Rapidly identify gaps that can appear in roles and responsibilities, despite the emergency plans you have drawn up. Leave no problems unanswered;
Constantly track down and pinpoint the mistakes made by the organisation in order to correct them immediately;
Remind everyone regularly that the crisis may be a lengthy one. Crises always last longer than initially predicted and their aftermath can take its toll for years;
Provide an intellectual back-up for the team involved in managing the crisis. The instinct to keep quiet and not broadcast a problem means that often the crisis team works in isolation, deprived of support from other good thinkers inside or outside the organisation;
Constantly identify the crisis system’s weak points, both within the organisation and within the environment in which it is operating. Which people and services are the most exposed? What are the effects of the worsening situation? What are the conflicts that loom? What do the latest rumours say? How is this playing in the media? How do your employees feel?
Acknowledge the system from time to time. As the crisis develops, an avalanche of destabilising news and events will confront the system and the team. Unexpected facts will appear to undermine the major principles that have been established. Solidarity and support can wear away in time. The leader will need to make their presence felt throughout the crisis, breathing conviction and courage into the system;
State and reiterate reference principles and values. More often than not a crisis will be won or lost over the major positions you adopt and the reasons why you have adopted them. Both inside and outside the organisation, the way these vital choices are made and perceived is of critical importance;
Manage any contradictions that arise before they lead to rupture. It is particularly difficult for the team leader to ensure that major strategies are defined in a way that allows colleagues a degree of initiative compatible with overall cohesion on one hand, and their need to feel at ease with the chosen line of action on the other. Avoid messages that merely sound like a stiff official response.

Learn lessons

Finally, once the crisis is managed, averted or has died away, learn all possible lessons from it and your collective and individual behaviour throughout. Capture this knowledge and share it widely. Update and revise your manuals and systems and revisit these regularly.

Reward those who performed well, and appraise those who did less well. Consider offering coaching in the skills you observe were deficient.

Never forget that if an issue found its way into the media, it can resurface at any time thanks to the ease with which cuttings can now be retrieved and recycled. Be prepared to cope better if it happens again.

This is knowledge management in action and its value is incalculable.

Sue Stapely is general counsel at Quiller Consultants. She can be contacted at: stapely@quillerconsult.co.uk