It will come as little comfort to Railtrack and GNER in the painful aftermath of the Hatfield train crash, but a crisis managed well can not only limit damage to a company's reputation: it can actually enhance it.
In contrast, a crisis managed badly can destroy the brand completely, or at best severely damage it, causing sales and the share price to fall.
High-profile examples of good and bad crisis management abound, from the government and the oil companies' handling of the recent fuel blockade (bad), to British Airways' and Air France's handling of the Concorde disaster (bad and good), to the Russian Kursk tragedy (bad).
But not all crises are 'bangs in the night'. A crisis could be a security breach, a product recall, pornographic conversations in the chat rooms of a supposedly family-friendly internet site, or fraud. Many crises begin as 'issues', which creep up on a company because they are neither monitored nor managed.
Most companies will face a crisis of some sort, and being prepared is key. But many organisations refuse to entertain the possibility of disaster, as though by doing so they are tempting fate. Eugene Bacot, director of PR company Oakes Bacot, says: 'Crisis management doesn't make the crisis go away, but it helps firms manage the situation, themselves and their response. If they don't manage the flow of information, the media will do it for them, and the vacuum will be filled with a flow of speculation.'
The proliferation of media, not least the internet and rolling news, means that crises now escalate very quickly. News broadcasters need a story every 15 minutes or less. And consumers, highly attuned to the power of the media, will turn to the internet to voice their concerns - witness the recent crop of 'anti-corporate' web sites.
PR companies are an invaluable resource when it comes to crisis management.
They can help an organisation deal with the immediate crisis, and offer a range of services designed to prepare it for the worst. But for crisis management efforts to succeed, there needs to be a strong relationship at a very senior level between agency and client. According to Adrian Brady, joint managing director of PR agency Eulogy: 'Clients need to take the issue very seriously. But it's easier to talk about building market share than to think about dealing with a major catastrophe.'
Crisis management needs to be seen in the context of reputation management.
Railtrack was pilloried after the Paddington rail disaster last October, while the two train companies involved emerged from the crisis relatively unscathed. According to Mike Regester, partner at reputation risk management consultancy Regester Larkin, this is because 'reputation is like a line of credit in a bank, which a company can draw on when it has a problem.
Railtrack's reputation was in the red when Paddington happened because of the perception that rail travel has worsened since privatisation, and that the company puts profits before people.'
The value of reputation
The need for companies to build and manage their reputations in the good times has become all the more critical with recommendations in the new Turnbull Code on corporate governance that reputation should be classed as a corporate asset that has to be managed and accounted for like other corporate assets.
Regester believes Railtrack made a number of mistakes in the way it handled the Paddington crash. First, chief executive Gerald Corbett gave up the role of key spokesperson too early. 'The perception was that he'd done his bit and now had to concentrate on running the company,' says Regester.
'The media, not companies, decide when the crisis is over. It's like wrestling a gorilla - you take a break when the gorilla does.'
Two weeks after the disaster, the company's communications director referred on Radio 4's Today programme to 'public hysteria' about the safety of Railtrack. The company was forced to issue an apology and the share price slumped.
A couple of weeks later, Corbett was interviewed by the Mirror. When asked whether, if Railtrack were found to have been negligent, he would resign and expect to be prosecuted for corporate manslaughter, Corbett stormed out, pursued by photographers. His action was captured in the pages of other newspapers, and the Mirror mounted a smear campaign against him.
Corbett seems to have learned much about crisis management over the past year. The Railtrack board refused his resignation after the Hatfield crash, and he had support from politicians, rail bodies, even Paddington crash survivors and victims' families. Corbett has demonstrated humanity and control, two key factors in surviving a crisis. His bowed head at the recent memorial service for Paddington victims appeared in several newspapers, and his determination to make the railways safer has resulted in government pledges for major investment. Railtrack's shares have doubled in value since their low point earlier this year.
Both the government and the oil companies handled the recent fuel crisis badly. Tony Blair underestimated the level of public support for the pickets, promising repeatedly that things would be back to normal within 24 hours.
The petrol companies appeared happy to let the government take the rap, hiding behind the defence of the blockade. To add insult to injury, one or two of them tried to raise petrol prices during the crisis. In the same vein, the previous government's repeated claims that beef is safe did little to allay public fears about BSE, despite the chief medical officer's testimony and front page pictures of John Gummer's daughter tucking into a beef-burger.
In contrast, a few years ago Boots withdrew all its cot mattresses in response to a scare story about cot deaths, even though it knew the evidence was flawed and that its mattresses were safe. Boots did what many companies fail to do in a crisis: it recognised that public perception is more important than the facts.
Failing to communicate at all is a classic mistake. Pan Am hid behind a wall of silence when its aircraft crashed at Lockerbie. The company lost 14.5% of transatlantic business as a result, and subsequently went bust. In contrast, when the British Midland plane crashed at Kegworth in the 1980s, chief executive Michael Bishop was on the scene quickly, in his shirt sleeves, talking to the press and others, showing he was in control and showing concern. The airline lost no business as a consequence.
'A single simple action at the top can rescue a situation,' says independent crisis consultant Michael Bland.
Indeed, says Bland, 'if you manage it properly, there is almost no such thing as bad publicity.' When the Sunday People newspaper called Happy Eater to tell the restaurant it would be publishing a survey ranking its burgers the worst in the country, Happy Eater responded by offering a free burger to people who came in with a copy of the said paper. The episode generated good publicity and good business for Happy Eater.
When crisis hits, crisis management planning comes into its own. But the vogue for weighty crisis management manuals has passed. 'They are like empty fire extinguishers: people are complacent because they are there,' says Bland. 'Provided the company is well prepared and the people well trained, a crisis management plan should be very simple - no more than a checklist to be used by people who know what they are doing.'
According to Bland, the approach to a crisis should be three-pronged: concern - identifying a response to the issue, including the communications strategy; containment - ringfencing the issue, ideally designating one senior individual to act as spokesperson; and control - reclaiming ownership of the issue, through generating rather than responding to press comment.
The most senior person in the organisation has to be in the eye of the storm, facing the press and talking to those affected. 'It's easy to get paralysed by the legal issues and say nothing,' says Caroline Black, director at PR consultancy Grayling. 'But by acknowledging the problem, showing a human face and being seen to be taking action, a company can start to recover before too much damage is done.'
As Eulogy's Brady says: 'The public can be very forgiving if they believe the company is acting with integrity.'
'Think, speak, and act like a human being rather than a corporate automaton,' advises Regester. 'Focus on people, the environment, assets and money, in that order. It's a logical sequence, but many companies' first thought is how little they could get away with paying in compensation.'
Facing the facts
When crisis strikes, facts are scant. But 200 calls might arrive in the first hour, so operators need some simple 'fast facts' at their fingertips, which convey positive messages about the company. 'Within a couple of hours the company will know more, but it has to stick to the facts, whatever the pressure from journalists to go 'off the record', speculate, or offer subjective views,' says Fiona Callison, general manager, Scotland, at PR consultancy August.One.
Despite this precaution, it's important to work with the press, adds Callison: 'Always be polite and as helpful as possible. Journalists can be a firm's biggest ally in a crisis, and are a valuable conduit to other stakeholders.' Her message is to communicate honestly, directly and humanely with all audiences, including victims, their families, the local community and employees.
The internet is an invaluable, but frequently overlooked medium in a crisis. Brady says: 'The web is a very controlled medium that allows companies to get their message across far more reliably than through the press or broadcast media.'
Providing the site is up-to-date and has integrity, people will naturally turn to it for information and reassurance in a crisis. It presents a great opportunity to post details about the industry, the company's safety record, research and so on, and Brady recommends companies provide web site addresses alongside telephone hotline numbers.
When crisis strikes, companies should respond by 'being seen to take the appropriate action and express the appropriate sentiments for as long as is needed', according to Regester. Offering promotions or incentives, or mounting a defensive ad campaign are not appropriate. 'That just comes across as bribery and you lose credibility,' says Eulogy's Brady. 'People want to know that problems are being addressed and resolved.'
After they've dealt with the immediate crisis, companies move into 'recovery'.
This should involve a review of the entire business, not least its ethical practices, and could trigger a major rethink.
The crisis management services offered by PR consultants typically begin with a risk audit. This identifies a raft of possible crisis scenarios, and tests the organisation's ability to control the damage to its reputation should any of these crises strike. Agency and client then work out potential responses to such crises. A team is designated to handle the crisis, including the most senior people in the company, and a list of specialists identified - software engineers, scientists, food hygienists and so on - who can be called on for expert advice. Twenty-four hour contact details are collected, and everyone knows what role they will play.
The next step is training. Everyone in the organisation is taught how to handle a crisis. For example, only designated spokespeople are allowed to comment, and switchboard operators are taught how to deflect media pressure. Spokespeople are given media training, and management and operational teams may be walked through crisis scenarios, which could include full-scale enactments of real-life situations. Managers are also helped with internal communication and res-ponding to public concern.
A proactive response to crisis management also means companies should be tracking industry issue, monitoring what is being said about it, particularly on the web site, keeping the web site updated and relevant, and developing relationships with key audiences, including manufacturers' and consumers' associations.
'Reputations can go down the pan in a matter of seconds,' says Grayling's Black. 'But if companies handle a crisis well, it can be a building block that underpins all the other messages about the company. Careful planning can turn a crisis into an opportunity.'
Aurora: managing a potential crisis
On May 1, 2000, P&O's much-vaunted luxury cruise ship, Aurora, was launched amid fanfare and celebration, and embarked on its maiden voyage.
Eighteen hours out from Southampton the captain turned back because a bearing in a propeller shaft had overheated. The captain had reduced the temperature by slowing down the ship, but the problem could only be fixed in port.
The captain notified shore-based management immediately, though it was the middle of the night. The managing director, operations manager, marketing team and PR consultancy Shandwick were quickly alerted, and the crisis management plan kicked in.
Kay Davidson, brand manger for P&O Cruises, explains: 'As soon as the boat turned back, passengers would realise something was amiss, and would contact people back home. So we needed to inform them of what was happening, along with those booked on subsequent cruises, as well as the press. We needed to flag the issue before it turned into a crisis.'
It issued a statement as quickly as it could, ensuring that it had got all the facts right. 'We had a pre-prepared statement, though returning from a maiden voyage was one eventuality we hadn't prepared for,' says Davidson.
The passengers were told what was happening at 10.30am on May 2, and by 7pm the team had talked to 100 journalists. A press conference, fronted by the captain and the managing director Gwyn Hughes, was held at Southampton when the boat docked. This resulted in 38 TV and 131 radio bulletins, 38 national press stories and 233 regional press stories, as well as specialist and trade press coverage and web bulletins.
'We emphasised throughout that at no point were the passengers in danger,' says Davidson. 'Hughes granted every single interview request and he kept that message of reassurance going throughout.'
A compensation package, including a free cruise, was announced to passengers before the ship docked, and they were welcomed back to Southampton by the chairman, managing director and marketing team of P&O. Passengers praised the way they had been dealt with, and press coverage was overwhelmingly favourable. There have been no cancellations, and the 2000/2001 season is already more than 90% booked.
Crisis management - dos and don'ts
1. Prepare a brief, realistic, achievable crisis plan.
2. Ensure that all decision-makers have ownership of the agreed procedure in advance - especially the need to be caring and open.
3. Understand your audiences.
4. Address people's fears, concerns and perceptions - they are what your crisis is really about.
5. Be seen to be doing something about the crisis - and quickly.
6. Be seen to care; show a human face.
7. Conduct media training for spokespeople.
8. Prepare for handling the stress involved.
9. Try to transfer the spotlight of attention from yourselves to another aspect of the crisis (for example, another 'villain' or the human interest angle).
10. Give information - the more you tell people, the quicker they lose interest.
1. Try to prepare in detail for every contingency, thus creating an unwieldy procedure.
3. Say 'No comment'.
4. Hope that the crisis will go away if you lie low.
5. Think that if you just communicate the facts you will win the battle.
6. Try to handle the crisis on the hoof; you must all take a cool, strategic overview from the outset.
7. Hand it all over to the PR people.
8. Hand it all over to the lawyers.
9. Fight back at pressure group extremists or the (minority of) media 'hooligans' - they thrive on combat.
10. Hold a press conference unless you absolutely have to; have you ever seen sharks feeding?
Source: Michael Bland, independent crisis consultant and author of Communicating out of a Crisis, published by Macmillan Business.