Insignia Talks

…about the power of communication to create, manage and protect reputations

News International has applied many of the right crisis communication tactics to preserve its reputation.  So why is it still suffering criticism and damage?

The first reason is of course the sheer magnitude of the issue, the alleged cover up and the time it was allowed to fester without resolution.  But the timing and sequencing of News International’s crisis management response is also partly to blame.  Let’s take a look at three golden rules of successful crisis communication, how News international applied them and why they failed to prevent reputational damage.

1) Take decisive action to address the problem

News International’s announcement of the closure of the News of  the World on 7 July was the epitome of a decisive move and could have marked a significant turning point in this drama.  It failed to do so because the decision left Rebekah Brooks in post, one of the few current employees who was working for the News of the World at the time the hacking took place.  As a consequence, the decision was seen as expedient, and current News of  the World journalists were perceived more as victims than villains.  More than this though, News International’s action in closing the paper and the words that accompanied it, still indicated an organisation in denial of the scale of its problem.

2) Say sorry

In a crisis, lawyers advise never to say sorry; communicators recommend that it should be the first step.  When News International said sorry via full page advertisements in the national press on 15 July, it started to get its tone of voice right for the very first time.  Even more powerfully, when Rupert Murdoch met with Milly Dowler’s parents to express his regret, even Mark Lewis, the Dowler’s lawyer, commented on his sincerity.  But the apology was way too late to have the  impact that News International desired: it was the right message at the wrong time.

3)  Communicate pro-actively

As a media organisation some have found it surprising that News International’s crisis communication has been so lacking: I see it as a very high profile example of “cobbler’s children”.  It was interesting to note that when Murdochs senior and junior spoke to the Commons Select Committee, News International’s share price went up.  By communicating willingly and pro-actively, organisations begin to exert control over a situation and their reputation.  But it doesn’t help when you appear to have been cajoled, kicking and screaming, to that point.

News International’s crisis really began with a culture which allowed – maybe implicitly encouraged – phone hacking and an inability or unwillingness to confront the problem.   When it exploded, its use of all of the right crisis communication tactics, but not necessarily in the right order, meant that recovery was all the harder.

Jonathan Hemus

www.insigniacomms.com

As we observe News International’s phone hacking crisis lurch from bad to truly horrendous, it’s tempting to feel a little smug, safe in the knowledge that nothing quite this awful could ever affect our business.  But whilst the alleged behaviour of the newspaper and its private investigators sinks below the behaviour of the vast majority of corporations, there are nevertheless lessons in crisis management that businesses would do well to heed.

1) Your corporate culture has the power to create or prevent crisis

Reports from ex-News of the World journalists and other sources indicate that reporters were under enormous pressure to come up with the next scoop, whatever it took.  This would likely lead to an atmosphere where the end result is all that matters: this is exactly the culture in which crises can flourish.

In a corporate environment, similar issues can arise.  A blinkered focus on the bottom line – “I don’t care how you do it, just hit the number” – or an unwillingness to hear about problems which may hint at broader failings - “just sort it out” – are examples of this.

The best crisis management is crisis prevention: this requires leaders to set and exemplify the right culture.

2) Denial is your greatest enemy (part one)

The News of the World appears to be suffering from denial in both senses of the word.  Its initial response was to deny that widespread hacking had taken place. That early denial has been thoroughly undermined by subsequent developments. The effect is that the credibility of the newspaper’s subsequent statements are diminished.  Worse, the paper is seen as either incompetent or disingenuous in making the initial claim.

Businesses must heed this important crisis communication lesson: never make a public statement unless you are 100% certain of its truth. Ignore this, and serious reputational damage will inevitably follow.

3) Denial is your greatest enemy (part two)

Denial that there was a problem may be one of the key reasons why the News of the World has been unable to get to grips with its reputational challenge.  Businesses can suffer the same fate.  When a negative situation faces a corporation there’s a temptation to dis-believe or ignore it: leaders can find it almost impossible to comprehend that such a thing could afflict their business.  The problem is that until you recognise and acknowledge a problem, you cannot deal with it.  Beware corporate denial at all costs.

4) Pay special attention to the internally generated crisis

The News of the World is facing a crisis of its own making, created by the behaviours of its own employees.  This makes its crisis communication challenge so much harder.  The same applies to other businesses: accidents, natural disasters, even terrorist attacks all constitute crises and require professional management.  But the fact that the organisation in question is also a victim of the event gives them a degree of sympathy and understanding in responding to it. Don’t abuse this position: many businesses have suffered sgnificant reputational damage not because of the crisis itself, but because of the way in which they have mis-managed their response to it.

Far more challenging though is the self-inflcted crisis, where no one is at fault but the organisation itself.  Exacerbating this is the fact that many businesses fail to plan thoroughly for the internally generated crisis (it’s much more uncomfortable to contemplate management fraud or sexual harassment than it is to plan for a fire).

Businesses must avoid being blind-sided by internally generated crises by properly considering them as part of their reputational risk assessments, and testing their ability to respond via a well-conceived programme of crisis communication training.

Manage the crisis – don’t let it manage you

The News of the World has failed to apply effective crisis management to the phone hacking saga: the crisis seems to have managed it rather than the other way round.  And that really is the final learning for all businesses: effective crisis communication is about recognising a problem quickly; taking decisive action to address it; and communicating pro-actively to stakeholders to protect relationships and reputation.  News International appears to have failed on all counts.

Jonathan Hemus

www.insigniacomms.com

When the BBC’s Panorama programme apparently showed Primark’s use of child labour in Bangalore, the retailer’s reputation took a serious hit.  With the recent BBC Trust report concluding that footage of boys checking stitching on Primark products was “more likely than not” “not genuine”, it is now the BBC whose reputation is under the microscope.  Indeed this is especially challenging for the BBC whose brand is associated with trust, integrity and high editorial standards.  As we have seen in previous incidents, when a crisis strikes at the heart of an organisation’s brand essence, it has the power to do more damage than would otherwise be the case.

Primark meanwhile has taken the opportunity to seize the communication agenda and lead the post-report debate (in contrast to the policy of non-engagement advocated by a recent Economist article).  Central to this is its microsite “Primark and Panorama; the true story” .  It includes:

• YouTube footage created in a reportage style which seeks to reveal the alleged falsehoods in Panorama’s original programme
• a detailed statement in response to the BBC Trust’s ruling (and a link to the full report)
• a timeline of events
• an ethical trade factsheet
• the opportunity for people to post comments to the site
• a “contact us” section for bloggers, the media, NGOs and other interested parties

The site serves as a template for other businesses wanting to pro-actively manage issues, rather than simply react to them.  Primark clearly made a decision to treat the publication of the report as an opportunity to surround stakeholders with materials and messages supportive of its position.  Using an online platform to host these materials and messages means that anyone interested in the Primark perspective can use it as a “one stop shop”.  Note also how Primark has made good use of search engine marketing to guarantee prominence for its point of view: search for “primark panorama” with Google and at the top of page one is a sponsored link to the microsite.  Without this core resource, Primark would still have been represented in the post-report discussion, but in a less prominent way.

I applaud Primark for the way in which it has exerted control of the communication agenda, but would also sound a word of warning to other businesses before replicating its response in totality.  In communication there are grey areas between influencing, spinning and manipulating. By failing to allow comments to be posted to its YouTube footage and by claiming that the BBC Trust had found that the footage was “fabricated” when the actual ruling fell short of stating this, Primark could be accused of over-stepping the mark. 

It’s also worth noting that the company’s robust and strident response carries an element of risk as it means that any future transgressions will be an even bigger story than would otherwise be the case.  With this in mind, Primark needs to plan both operationally and reputationally for the fact that it is a highly visible media target.

Finally, I would observe that an organisation’s crisis communication response needs to be in keeping with its usual tone of voice.  That’s why Ryanair can be bullish in response to a problem whereas Virgin Atlantic would tend to be more empathetic.  The way in which Primark has communicated following the Panorama programme mirrors its positioning as a down to earth, straight forward brand, underlining the fact that for crisis communication to be truly effective, it must be authentic.

Jonathan Hemus

www.insigniacomms.com

I attended a conference earlier this week at which the head of corporate communications from a UK police force described the overwhelming media interest in a high profile murder investigation.  In particular, she  explained how the names and personal details (not necessarily accurate) of two people were communicated by the media within hours of their arrest and then widely circulated by social media.  This happened despite the fact that the names were not revealed by the police (and that one of them was never charged with any offence). 

The speaker explained how this experience has led to an increased understanding within the Force of the importance of involving communication professionals before an arrest is made in high profile cases.  It struck me that this has broader implications for crisis communications at all organisations.

It’s already well understood by PR people that social media has increased the pace and spread of bad news and that this imposes new standards for effective crisis communication.  But to what extent has this been recognised by our operational colleagues?  Scrambling to react to operational decisions with a communication dustpan and brush was never a very good idea.  Today it is an almost impossible task.

The only viable option is  for communication people to be involved in the planning of major announcements and to have a real influence over how and when they happen.  This is the only approach which offers the opportunity to properly shape how a story plays out and its impact on organisational reputation.  Organisations which fail to embrace this reality and continue to view communication as a purely tactical activity are more likely than ever to suffer serious reputational damage. 

Jonathan Hemus

www.insigniacomms

Sony is not the first company to suffer from hacking, nor is it the first to lose the email addresses (and possibly credit card details) of its customers.  So why are publications like the Financial Times suggesting that its reputation could be seriously damaged?  The answer lies not so much in the security breach of the Playstation 3 Network, but with Sony’s approach to crisis communication once it became aware of the problem.

As  a guest on BBC Radio Five Live’s Victoria Derbyshire programme today (27 April), I was joined by a number of Sony customers, all of whom were concerned about the security breach.  They talked of a lack of trust in Sony, not because of the breach itself, but because of the way they perceived the company had responded to it – with six days of silence.  This is a lesson for all businesses dealing with a crisis: it’s not the crisis itself that damages your reputation; it’s the way that you are seen to be addressing it. 

It also shows that a lack of communication is often interpreted as revealing a  company that is in disarray, doesn’t care or is keeping secrets.  None of these perceptions are helpful when you are in crisis management mode and seeking to protect your reputation.

Sony’s statement contains many elements required of a textbook crisis communication response: an apology; details of the action being taken to address the problem; empathy for the impact on customers; and the involvement of independent experts to help address the problem.  So in this case, the crisis communication challenges are not really about the content of Sony’s statement, but its timing.

It’s  interesting to note that like Toyota which was also criticised for a slow communication response in the light of last year’s product recall, Sony is a Japanese business.  The Japanese business culture may work against a swift and open approach to crisis communication (the same observation was made in the aftermath of the recent earthquake).  Equally, technological companies often wrestle with the idea of early communication: their tendency is to seek every last piece of information about a problem (and ideally resolve it) before saying anything.   The difficulty with this approach is that it may result in an impeccable technical solution, but a severely damaged reputation.  It is this fate that Sony is currently fiighting to avoid.

Jonathan Hemus

www.insigniacomms.com

The report into Heathrow’s crisis management response to pre-Chrismas snow has just been published.  It makes me weep. 

Organisations like BAA should not require a major crisis to introduce professional, thorough and up to date crisis management processes.  And if these were not in place for an organisation at the very hub of the UK’s infrastructure, then how many other businesses are operating without the  requisite crisis preparedness?

Key observations and recommendations in the report include:

The potential impact of bad weather was not fully anticipated - avoid this by conducting a thorough reputational risk assessment which considers the worst case rather than hopes for the best

There was a failure of communication within BAA and with the airlines – work out who your “partners” would be in a crisis and meet with them beforehand to agree how your crisis communication can be clear, consistent and aligned

Crisis management procedures were not clear and required simplification –  first off, ensure that crisis management procedures exist and then audit them for clarity and simplicity.  Brief them in and test them with desktop exercises and then simulations

Messages to passengers were confused and contradictory – make sure you develop communication channels and approval procedures beforehand.  Align messaging with those of your partners.

There was inadequate resource planning – crises demand extraordinary amounts of human resource.  Anticpate this and have contingencies in place to add additional people to your normal team.

There was insufficient testing and training of the crisis management processes and team – centuries of experience have shown that being taught a skill and then practising it leads to better performance.  Crisis communication is no different

BAA has committed £50 million to implement the recommendations contained in this report.  Its chief executive, Colin Matthews, called it “a pivotal moment for the airport and its reputation”.

But BAA doesn’t really need to read this report – its painful experience in December would have been catayst enough for a changed approach to crisis communication.

This report is much more relevant to all those organisations who have not suffered a crisis in the last couple of years.  So, here’s my heartfelt request: please read the BAA report; please act on it. 

There’ll be a number of businesses who fail to do so and we’ll be reading the reports outlining their crisis management learnings in a year’s time.  A copy and paste of the BAA version should probably do the trick.

Jonathan Hemus

www.insigniacomms.com

Last month the Halifax announced that it would be paying customers around £500 million in compensation following a piece of confusing communication about mortgage rates. But assigning a definitive financial measure to the value (or, in this case, the cost) of communication is not always quite so easy.

Often though, we need evidence to demonstrate to colleagues or clients that an appropriate investment in crisis communication planning is necessary.  Fortunately, there are examples and evidence which support the case for the allocation of resources to reputation protection, rather than trusting to fate and hoping for the best.

Recent history shows what happened to BP’s share price in the aftermath of the Gulf Oil spill; look further back and businesses like PanAm and Ratners ceased to exist following ineffective attempts at crisis management.   Oxford Metrica’s research makes a compelling case that the way in which a business responds to a crisis has a direct effect on its future value.  Other studies – such as the Interbrand annual survey – show significant declines in the value of brands that were seen to mis-manage high profile crises. For example, this year’s report revealed that the value of the Toyota brand fell by 16%.

But whilst medium to long term damage to reputation and commercial success are the ultimate cost of poor crisis communication, there are other consequences which are less obvious but just as significant.  The first is the enormous amount of management time that crises soak up.  Fail to assert control over a crisis quickly, and senior management can find themselves engaged in week after week of firefighting.  In the meantime, strategic priorities are ignored leaving competitors free to take advantage.

Poorly handled crises affect staff morale too. No one feels good about working for a business which is seen as incompetent, uncaring or plain bad.  It also makes it harder to recruit new members of staff:  not all publicity is good publicity.

And a mis-handled crisis provides the backdrop to future media encounters.  Financial statements, service launches, executive appointments and other corporate announcements will all be covered in the context of the previous crisis.  In the most extreme cases, it can take years to move on from this position.

From time to time, the precise financial cost of poor crisis communication will be blindingly clear.  But not often.  Nevertheless, there is significant evidence to support the view that investment in crisis planning makes good business sense.  Not least the fact that businesses which have endured crises are usually the ones investing the most time and attention in crisis communication training and planning.  For them, the value of the reputation protection – and the cost of getting it wrong – is all too clear.

Jonathan Hemus

www.insigniacomms.com

When Tony Haywood said that he’d like his life back, a catastrophic crisis got much worse.  When Maclaren announced a recall of supposedly dangerous pushchairs in the US, but failed to do so in the UK, there was public outcry.  When Kraft indicated that it would keep Cadbury’s Bristol factory open but then announced its closure once the takeover was complete, it turned issues management into crisis management.

All three sealed their fate by ignoring a crisis communication mantra that underpins reputation protection.  It is  to always consider the crisis from the outside in, and communicate messages which reflect the interests and concerns of your stakeholders. 

In priority order, these are:

• People
• Environment
• Property
• Finance

In BP’s case, its oil spill affected people, the environment and property: all communication needed to reflect this.  Tony Haywood’s comment on how the situation affected him, jarred badly in this context.

For Maclaren, a perception that its recall decision was guided by financial considerations was damaging to a reputation founded upon caring for young children.

And Kraft discovered that a pragmatic approach to communication which appeared to serve its business interests but resulted in many job losses , caused as many problems as it addressed.

The suggested prioritisation of key messages in a crisis might appear to be obvious, or at least intuitive.  But remember that in a major incident, it’s often the CEO who is wheeled out to face the media. What are they most used to talking about? Money, the topic of least interest and maximum friction in a crisis.

Media training and crisis simulations can help to engrain the right messages in the minds of senior executives ahead of a real incident.  Communicating them consistently and effectively at that time is one of the keys to reputation protection.

Jonathan Hemus

www.insigniacomms.com

BP and Toyota are living proof that a mis-handled crisis causes long term damage to a business’s reputation.  It’s not just the enormous drain on management time and the cost of putting an incident right in the short term that make crises so harmful.  It’s the after effects that linger and taint a business for months, sometimes years.

Take BP which announced its annual results this week (a loss of $4.9bn).  The announcement also included news that the Gulf crisis has cost the company $41 bn.  And the BBC’s business editor, Robert Peston, estimates that the incident will cost shareholders $40bn in lost dividends.  It’s pretty clear then that the Gulf crisis has cost BP an awful lot of money.

But ineffective crisis management has also caused long term damage to reputation.  What’s the first thing that springs into your mind when someone says “BP”?  Most likely a burning oil platform, dirty beaches or oil-sodden birds.  Those images are reinforced by the media: this morning’s announcement of BP’s results on BBC Breakfast was accompanied by those very images.  BP is currently defined by its  crisis and it’ll take a long time to move beyond it.

Toyota faces similar challenges. Bloomberg reported this week that it had endured a 16% fall in the value of its brand, which is estimated to be worth $25 billion less today than it was a year ago. 

Again, that’s significant and very real financial damage in addition to the direct cost of its global recall in 2010.  But that’s not the end of the pain.  Toyota found itself in the media spotlight again last week when it announced a recall of 1.7 million vehicles amid concerns of a possible fuel leakage.  Would other automotive brands have generated  the same amount of coverage when announcing a similar recall?  Very unlikely.  As with BP, the Toyota narrative is now partially defined by its mis-handling of an earlier crisis.  The company would rather talk about something else, but external stakeholders keep tying everything back to its crisis management problems in 2010. 

The bottom line is that crises are expensive and time-consuming to manage in the short term.  But they pose an even greater risk to long term reputation.  Taking steps beforehand to minimise the potential for crisis is essential.  Thorough reputational risk assessments, proper crisis management and crisis communication plans, media training, tests and rehearsals and, crucially, a culture which encourages the identification and resolution of potential problems must all be embraced if businesses are to properly protect their reputation. 

Jonathan Hemus

www.insigniacomms.com

Here are five of the most common reasons I hear for not running a crisis simulation:

1) Money – we’d rather save the money required to commission a simulation, or spend it on something else

2) Time – it requires company time and resource to plan it effectively

3) Attention – it’s hard to secure management time and attention for an exercise

4) Wastage – it only delivers value if we have to manage a crisis for real, and we hope that never happens

5) We don’t need it – either we have a plan that we know will work, or we’re confident that we’ll cope in any case

And here are three reasons why the five excuses above are wrong:

1) Money, time and attention – a well planned, well-executed exercise that delivers real value in terms of protecting reputation does indeed require time, money and attention.  Much of the time and resource can be outsourced to a specialist crisis communication consultancy, but it will indeed require both financial investment and the time and attention of the business’s executives.  But the financial and time investment is modest when compared with the value of your reputation.  And it is insignificant when you compare it with the management time and cost demanded to rectify a mis-managed crisis.

2) Wastage – if you own a valuable car, you insure it.  If you have a nice house, you insure it.  Why should a valuable reputation be any different?  In any case, a crisis exercise delivers more than confidence that you could respond well in the event of a live incident.  It also identifies flaws and weaknesses that can be addressed in advance, making a crisis less likely to occur in the first place.  And that’s without even factoring in the benefits in terms of broader management skill building and teamwork.

3) We don’t need it – I have never run a simulation at the end of which executives questioned its value. Ever.  Each exercise has been enormously valuable in building the team’s confidence and proficiency in applying the crisis communication plan.  Many mistakes are made – but they are made in a safe environment and are not repeated during a real incident.  That’s why you run a simulation.

When a major crisis hits a business in a particular sector, I know that the phone will soon start ringing.  It’ll be competitors of the business in question, urgently wanting to re-evaluate their existing crisis communication plan (sometimes to write it for the first time), or run an exercise to test it. 

They’re the lucky ones: they’ve had a wake up call before their reputation has been destroyed.  Others fail to learn the lesson before it’s too late…

Jonathan Hemus

www.insigniacomms.com