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No Crisis of Confidence for Those Prepared for the Worst


When bad things happen to good companies, reputations can fall in an instant.

Surprisingly, most companies don't plan ahead for crises, even predictable ones such as product tampering, false rumors or in-house embezzlement. Worse, their top brass often ignore the mounting problems leading to crises, hoping they'll go away.

According to the Institute for Crisis Management in Louisville, Ky., which analyzed business crisis news stories from 1990 through 1999, about 86% of the crises studied had been visible to corporate management before they snowballed. More than 75% were due to management's inaction or inappropriate action.

Crises, when handled well and planned for, can be important learning opportunities. Companies can uncover problems that contributed to the crisis and do things differently in the future.

After the catastrophic gas leak in 1984 at Union Carbide's plant in Bhopal, India, which killed more than 3,000 people and injured at least 50,000, it was found that, before the disaster, the facility had training difficulties, low worker morale and unsatisfactory coordination plans with community services.

"By reacting properly during a crisis, an organization can even gain credibility," said Bill Lampton, founder of Championship Communication in Gainesville, Ga.

This was the case for Advantica Restaurant Group, the parent company of Denny's restaurants, which in May 1994 was walloped by a new crisis just as one was being resolved.

A day before it was to announce a $54-million settlement of two racial discrimination lawsuits, one of its Indianapolis restaurants was taken over by two gunmen, said Karen Randall, Advantica's vice president of corporate communications in Spartanburg, S.C. During the ensuing six-hour hostage crisis, one customer was killed and five people were wounded.

Advantica's upper management acted immediately. The chief executive flew to Indianapolis to express condolences, visit shooting victims at the hospital and serve as the company's spokesperson. The company retained David Shank, president of Indianapolis-based Shank Public Relations, to help handle media and public queries "since he knew the local lay of the land," Randall said.

Advantica, which already had an in-house crisis team, also set up a survivors fund, donating $25,000. It brought in crisis counselors for victims and employees, Randall said. It closed the restaurant, awaiting public input about whether it should be demolished, and offered other jobs to displaced workers.

"But we started getting letters from local government officials, customers and people in the community saying, 'Don't close the restaurant. We miss it,' " Randall said. "They asked us to reopen."

Three months later, after a remodeling, the Denny's reopened. A private reception was held for rescue workers. Customers returned. During the next year, business at the restaurant increased by 32% from the previous year, Randall said.

Experts recommend that companies have an in-house crisis team. It should be a multidisciplinary group that will be ready to act if a worst-case scenario occurs. Include individuals from human resources, public relations and information technology.

Select a spokesperson and provide media training. Typically, in catastrophic situations, the chief executive gets the job.

"Most notably, if dealing with human misery, as when someone is hurt or killed, the top person has to become directly involved, to express their concern for the victims," Shank said. "Or else the company will lose the credibility it had in the past."

However, when handling minor crises, or if the chief executive lacks strong communication skills, someone else should be chosen.

This was the hasty decision made by a Southwest industrial firm after it learned an employee had dumped 3,000 gallons of jet fuel into a lake, jeopardizing the lake's duck population.

David Margulies, the crisis consultant who helped the firm during the situation, recalled that when the firm's chief executive was briefed about the crisis, "He said, 'I'm a hunter. I kill ducks every day. So what if the ducks are killed?' "

The firm quickly tapped another spokesperson to handle media inquiries, said Margulies, president of Margulies Communications Group in Dallas.

Your team should include at least one outside crisis manager, who can objectively appraise your firm's situation and help you orchestrate a response. In the heat of a crisis, you may find insiders' perspectives are skewed, experts said.

"I have seen companies put out press releases, customer letters and employee letters that make the situation seem worse than it was," said Mike Sitrick, one of the nation's top crisis management experts and the chief executive of Sitrick & Co. in Los Angeles.

While your crisis team is occupied, appoint other personnel to oversee operations.

"One of the biggest mistakes people make is that they let the rest of their business slide while handling the crisis," Margulies said.

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