Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.
If the tainted meat crisis, propane explosions and investment bank collapses of recent times have one thing in common, it’s that the companies attached to these events have been unexpectedly hauled into the court of public opinion to explain themselves.
Now sadly, it could happen to you. The circumstances might be different but it could happen to you. And if or maybe when it does, it will take effective communication with your stakeholders to minimize the damage done to your company’s operations and reputation.
Joining me to discuss crisis communication and how to do it well is Boyd Neil, a Senior Vice President and the National Practice Director of Corporate Communications at Hill & Knowlton Canada. Boyd, welcome to the Business Coach.
Boyd: Thank you.
Ian: So, in a nutshell, what is crisis communication, we know what corporate communication is, is crisis communication somehow different?
Boyd: Well, I think crisis communication from my perspective is probably best described as communications when the stakes are highest. But in terms of what you are trying to accomplish with crisis communications, I think what you are trying to do is to have a responsible and ethical response to an event that is designed to minimize the damage to your organization’s reputation through active management of employee and public communications.
Ian: Now can you speak to the benefits of effective crisis communication, I mean, what kind of difference does it make between doing it well and doing it poorly?
Boyd: Well, let’s start from the perspective of what is a crisis. You know, an event or a series of events which can severely damage the reputation of an organization and its ability to conduct business. So reputation is a key factor. And there is lots of evidence that effective and ineffective crisis communications can have an impact on corporate reputation. You can actually quantify, you know, if you watch certain crises closely, you could see what the impact is on their stock price. For example, you know when Mattel had Barbie being bashed a year or so ago, Mattel over the space of a few days, their stock price dropped by about 19%. They lost about $2.6 billion in market cap while that crisis was on, the perspective of excessive lead content in some of their toys. You know, on the other hand, for example, Menu Foods which was the subject of the pet food recall which I can’t talk anymore about because it is a client of Hill & Knowlton but nevertheless, if you look back at their stock price when the pet food recall happened, their market cap dropped by 70%, about, you know, $150 million, a much smaller scale than Mattel but nevertheless a 70% drop in market cap over the space of a few weeks. Menu Foods unfortunately was unable to say much at the time about the crisis and they took a big hit. Mattel on the other hand was able to get out in front of it and yes their stock price dropped but you know, 19% is not a significant drop. I tell you my stock portfolio has dropped that much in the last two days.
Ian: Sure. Now would it be much different for a small business? You know, you just mentioned some big companies that have a lot of tentacles stretching out into all aspects of a business in the economy and the consumer world. But you know if you are a small business and you are generally relatively unknown, do you still need to do crisis communication?
Boyd: I think absolutely and it is probably more important to do effective crisis communication. And the reason I say that is to a certain extent, small business depends on trust of its stakeholders, of its customers. It depends on its reputation, it doesn’t have the buffer of large financial war chests. And that means that how you communicate in a crisis, how well you communicate can either reinforce the trust that your customers have in you or undermine that trust. And if you accept that trust is an important factor in operating a small business, then you can see that effective crisis communication is important.
Ian: So what’s your recommended process by which a company should form its message when a crisis hits. In other words you know, what’s your starting point for all of this?
Boyd: Yeah, I mean there’s really, there are two things you have to keep in mind in dealing with a crisis. You have to get the message right and it’s got to be substantiated and you have to accept the fact that there is going to be media attention on you but the media isn’t necessarily your primary audience in a crisis. What you should be doing is thinking who are the key stakeholders for your organization then you should be communicating with. They will be hearing about this crisis but that you want to reinforce how well you’re handling it, how deeply concerned you are about the impact of it. Because those stakeholders will be by your side through the crisis. So sometimes, companies think that, you know, the media is at their door step, they should spend all their time preparing key messages for the media when in fact their messages should be directed to their stakeholders who are the underpinnings of their business.
Ian: So even if you are speaking to the media, you need to be speaking directly to those stakeholders.
Boyd: Yes and speaking directly to them. So you can’t ignore obviously the media in a crisis, but frequently what happens is, is that people spend all their time directing their messaging through the media instead of going directly to the people for whom trust in you is important.
Ian: And the media never tells a story exactly the way you told it to them, that’s for sure.
Boyd: No, that’s not their job. You know, their job is to write a story that brings in all points of view and that means that it isn’t going to be the story that you necessarily as a company want to see. Therefore, go directly to your stakeholders with your story.
Ian: So who’s involved in developing this message and who should deliver it?
Boyd: Well, I think that, you know, the traditional wisdom is if you accept the fact that crisis communication is communication when the stakes are the highest, then it should be the CEO that speaks. And the CEO should be part of the development of the messaging. But sometimes you know, CEOs have a whole bunch of things on their mind and they need help and usually you try to hold together a good team of people legal council, communicators and the CEO to work through the messaging.
Ian: And what media should be used to communicate the message? When I am talking here about the media, I am not saying the Press but are we talking about delivering your message in person, do you visit your customers, do you go through television and radio and print, email, YouTube? I don’t know.
Boyd: Well, I think that you use a combination of all those things, I mean if you are trying to get directly to your stakeholders, then you use the channels you’ve normally used. But today there are a whole bunch of new channels that people can use, social media channels. You know the example of Maple Leaf Foods is probably the best. Michael McCain released his message on YouTube before the advertising was heard on radio and television. So he recognized that there was an opportunity to reach an enormous number of people by posting a very short video on YouTube in which hundreds of thousands of people watched that and it was un-adulterated message, it didn’t cost him anything except for perhaps the taping cost. So you know companies more and more now are using their website. You watched what happened to Maple Leaf Foods website over the period that they managed their crisis and you saw it transformed from a website that was filled with product information to a website that is now focused on their action plan. How do we move beyond this crisis. So they used the web effectively. And that’s another tool for communication.
So again, we are dealing in a different world where there are many many different channels possible to reach a whole variety of stakeholders. If I could use an example, I managed media relations for Swissair for the crash of Flight 111 ten years ago. And at the time, when we were in Halifax, we had no choice but to use news conferences as the method of communication because there weren’t other tools. But if I was managing that media relations today, I would manage it entirely differently. I would be diffusing information through a whole variety of channels and media would just be one of them.
Ian: Now, the general public is definitely using the internet more but they’re also more jaded, they’re cynical, they pretty much assume that when a CEO gets on the television or onto YouTube to explain a crisis that they’re being spun. So what role do honesty and openness play in crisis communication these days?
Boyd: Well I think frankly they’re critical and I think it is a great question because I think without honesty and openness you can’t hope to challenge cynicism or jaded public. And I think you know your level of authenticity when you’re speaking to the public if there has been serious harm is critical to successful crisis management. And I think one of the things that you find these days if you follow the statements that CEOs often make in a crisis, they all sound the same, many of them sound the same. You know, our first concern is for the safety of our customers. It’s nice that they’ve expressed concern but it sounds like spin. Where as if you get a CEO who gets up and says “I am personally devastated by what has happened here. I can’t imagine the pain that people are feeling” etcetera, you know one is spin the other is sincerity and openness. And I think you have to in the crafting of messaging is to recognize that it is better that the CEO stumble and be sincere than it is the CEO be crisp and safe in communicating in a crisis. That will help overcome the jaded public.
Ian: Now, one thing that I don’t think can help overcome the jaded public is just not making any comments at all. And I think in the case of the big Sunrise propane explosion that happened recently in Toronto, the company just didn’t say anything for days if not more than a week. Is avoiding any comment a good thing to do?
Boyd: Well I mean, frankly, I think it’s the worst thing to do. I think one of the things that struck me again if you don’t mind me referring to Maple Leaf Foods was one of Michael McCain’s first statements was something to the effect of there are two counselors I am not going to listen to in dealing with this problem. The first is my legal council and the second is my accountant. And the reason is this is not an issue of legal liability and it is not an issue of money. It’s an issue of human life. And I think that that approach is extremely important. I argue quite strenuously that while legal council should be at the table without question during a crisis because they will protect the company in the long run, that the idea that saying nothing somehow means that you are going to have an easier time in the court is fine. But if you don’t have a company because you have lost reputation and lost trust, then it doesn’t matter how your court case goes. So I don’t think there is any circumstance in which no comment is an appropriate response. You can always say something and you could always reflect back the harm that whatever the action is that your company has been involved in has caused. Perhaps the lawyers can help you work out that wording so it minimizes your legal liability but no comment is really not an option if you want to have a company after the crisis.
Ian: Boyd, you’ve got extensive experience in corporate communication and crisis communication. Just to wrap, would you mind sharing your best or favorite example of crisis communications and which one you think is the worst that you have ever encountered?
Boyd: To be honest, the council being provided to Maple Leaf Foods currently is a competitor firm of mine but it is a text book case of the correct way to handle crisis communication. There is no better model that has happened over the last year or so that I am aware of of successful crisis communication in a terrible circumstance.
Yes their stock took a hit but it will come back because they built trust, because they challenged that jaded public view that CEOs don’t really care, that they are out to just protect their company. They’ve done everything they could and in doing so they prevented precipitate regulatory actions. Young governments are interested in scoring points on things like this. By taking ownership of it, they prevented the government from regulation in the circumstance. So they took the feed out , if you like, from possible political regulation. So it’s the best, there is no doubt about it.
In terms of worst, I think, you know one of the worst examples that is happening right now, it is not so much the crisis communication but the fall out from the Metrolink commuter disaster in California where a Metrolink train ran into a freight train and a number of people, I forget how many, were killed. The spokesperson for Metrolink, Denise Turell, came out and said shortly afterward “It was our fault, our engineer ran the red light”. She, within a day or so was forced to resign because the Metrolink Board questioned whether she should have said that, because the facts are out. Her response was “Our train ran a red light, it was our fault, why should I hide that”. And in fact what’s happening now, you will find on the web is that all kinds of people are coming to her defense, they were happy to hear that instead of hiding, instead of obscuring what actually went on, the spokesperson came out and said “It’s our fault, no doubt about it and we’ll take our hit”. But she was forced to resign which I think is sort of silly on the part of the Board or Metrolink to accept that resignation. They should have kept her on. Maybe she shouldn’t have mentioned that it was the engineer’s fault but you can argue that forever but, you know, the consequence, the fall out from their acting against her given the public opinion is now on her side are clear.
Ian: Boyd, thank you for joining the Business Coach.
Boyd: It was a pleasure. Thank you for having me on
Ian: Boyd Neil is a Senior Vice President and the National Practice Director of Corporate Communications at Hill & Knowlton Canada.
That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. Now if you have any comments or suggestions about the podcast, then please contact me and you can reach me via email at email@example.com.
Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine and I wish you continued success.