09.15.07
ISSN:1528-3836
© 2007 Jonathan Bernstein
Circulation: 4,000+
Estimated Readership: 15,000+
JUST A THOUGHT
One long-standing Chinese response to crisis is to find a scapegoat, sometimes referred to as "killing the chicken to scare the monkey." This is aimed not only at intimidating other wrongdoers, but convincing outsiders the problem is solved.
From "Beijing Seeks Advice to Spin Crisis"
Article by Mark Magnier
Los Angeles Times
September 17, 2007
CRISIS MANAGER UNIVERSITY
Board Leadership For The Company In Crisis
Book Review by Jonathan Bernstein
There are a lot of publications about crisis preparedness and response, but too many suffer from excessive length, pedantic approaches and/or an emphasis on publicity value versus real-life application.
For two years, unbeknownst to me and, I'm guessing, most of you, there's been a publication that was quite the opposite - succinct, easy to read, and designed for immediate practical use.
Board Leadership for the Company in Crisis by Suzanne Hopgood and Michael W. Tankersley is part of the Director's Handbook Series by the National Association of Corporate Directors (NACD). With 120 8 1/2 x 11 pages, it is really more of a manual than a book - i.e. something you can pick up and reference quickly, even under fire.
The Introduction section's title says it all, "Making Immediate Use of This Handbook." The Chapters are entitled:
- The Role of the Board in Crisis Response Planning and Oversight
- The Crisis Response Plan: A Blueprint for Action
- Legal Considerations in Crisis Planning and Response
- Financial Considerations in a Crisis
- Communications in a Crisis
- Conclusion
These chapters are followed by appendices of useful checklists and outlines you can adapt for your own organization.
In the wake of Enron, Arthur Andersen and other corporate meltdowns, corporate boards of directors have become acutely aware of their actual responsibility for effective crisis preparedness and response. Natural and man-made disasters ranging from hurricanes through terrorism has accentuated that awareness. This handbook was written for them, but in fact has information, examples and some turn-key materials useful in the same way I intend this newsletter to be, "for those who are crisis managers, whether they want to be or not."
I particularly like the right way/wrong way examples given throughout the publication and am showcasing, following this review, its excellent two-part "Anatomy of a Meltdown.".
Board Leadership for the Company in Crisis, at $150.00, is one of the lowest-cost investments you can make in jump-starting your crisis readiness. Available at Amazon and www.nacdonline.org (Discounted for NACD members)
Editor's Note: And now, as promised, here is the excerpt from "Board Leadership for the Company in Crisis".
Anatomy of a Meltdown
The INTERNAL Crisis
The kind of major business crisis, largely self-inflicted, that has severely injured or brought down significant public companies, as well as hundreds of smaller companies, has tended to follow a repetitive pattern that is identifiable:
1. A weakness or stress develops in a fundamental area of the business.
2. This development is not immediately brought to the attention of the board by management, or, if it is, it is sugar-coated.
3. Management responds with denial, band-aids, and smoke and mirrors that are ineffective.
4. The company's SEC filings then fail to adequately disclose the problem.
5. Managers cross legal or ethical lines to "fix" or hide the problem.
6. The problem grows. Denial grows. The board remains unaware or misdirected.
7. The problem gets too big to avoid or hide, on the eve of an SEC filing.
8. The board, once it sees the danger, must respond with little preparation.
9. Management's integrity and reliability are compromised in the board's eyes; key managers are terminated.
10. Concerned employees stop working a full day, or leave; vendors stop shipping; customers stop buying; and lenders hesitate to advance credit.
11. The company confronts a liquidity crisis; lack of strategic focus damages competitiveness.
12. A depleted, demoralized management team and a stunned, disillusioned board are left to address the crisis.
13. Months or years of management and board time and attention are absorbed in responding to and recovering from the crisis, along with millions of dollars in unproductive expenses and lost shareholder value, as government investigations and shareholder lawsuits drag on.
The EXTERNAL Crisis
The second kind of major business crisis that can severely injure a company has as its source one or a series of external events, such as severe weather, a government-ordered shut down, or decimation of key markets or suppliers, all of which are outside of the company's control. This event then triggers a chain of calamities, some of which may be self-inflicted. The challenges that an unprepared company may face in such a crisis include:
1. A manufacturing plant and distribution center are severely damaged or destroyed by an explosion, fire, flood, hurricane, or other disaster. The facility is located in a semi-rural area 50 miles outside the nearest city. The county's limited emergency resources are quickly overrun by the situation.
2. Communications systems break down for the company and surrounding area due to a power outage; information technology systems become inoperable.
3. Employees or customers are injured or dead, either as a consequence of the disaster or as a consequence of failure of the company's safety protocols.
4. Some employees are missing and unaccounted for; the remainder are cut off from communication with senior officers and are uncertain what to do.
5. The CEO is traveling and unreachable. Speaking from headquarters, the COO tells the media the situation is close to normal and everything is fine.The CFO, who is on the scene, is filmed by a news camera crew as he angrily orders them to leave.
6. Employees, vendors, and customers are unable to reach the company; the plant manager is assembling a team of employees to dig through the rubble.
7. Payroll for 240 employees, many of them at or near minimum wage, is two days away and none of the records or systems to process it will be available.
8. The company's two largest customers, accounting for almost 50 percent of sales, have been ignored.The company was their "just in time" inventory provider; with no deliveries for 48 hours, they are moving to an alternative supplier.
9. Employees who were present for the disaster give the media emotionally wrenching stories of what happened and how the company has deserted them.
10. The CEO surfaces 50 miles away and delivers the media a written statement prepared by counsel denying the company's responsibility and blaming the weakness of local emergency support.The state attorney general announces an investigation of the company's storage of volatile chemicals at the site.
11. The company's bank sees press reports and a drop in receipts and restricts further credit advances.
12. Most of the directors see the initial reports and start a furious round of calls in a vain effort to find out what happened, while waiting for word of a board meeting to brief them.
Editor's postscript: The scary thing is that these examples, while "fictional," strike way too close to home for some companies I have served over the years. And probably to companies with which you're familiar too!
CRISIS MANAGER BUSINESS ANNOUNCEMENTS
Keeping The Wolves At Bay 3.0 Reviewed
"Keeping the Wolves at Bay" is much more than another media training guide — it is perhaps one of the most concise, insightful, useful and savvy guides to strategic thinking about reputation issues available.
Gerald Baron
Founder & CEO of PIER System and host of Crisisblogger.com
It's like a Swiss Army knife — lots of cool tools in a compact package. In case of emergency, grab this.
Steven R. Van Hook, PhD
Publisher, About Public Relations
The spiral-bound print manual is available for $25, the PDF version for $10. Both can be ordered at www.thecrisismanager.com.
Disaster Prep 101
Bernstein Crisis Management is pleased to present one of the most comprehensive and user-friendly family preparedness texts available today. "Disaster Prep 101." by Paul Purcell, goes above and beyond the simplistic "72-hour kit" concept and provides simple, yet detailed educational material that will drastically improve the ability of any family to respond to all manner of disasters or emergencies. This preparedness package contains over 400 pages of well-organized, original preparedness material written in an easy-to-understand, non-panic format; 80 pages of family data forms and worksheets (many of which are also useful to the employer); and a 2-CD set containing two interactive and searchable links collections for additional educational sources; all the family data forms and worksheets in softcopy format; and a complete emergency reference library of over 450 additional books and training manuals! US$59.95. Available here.
PLAIN ENGLISH DISCLOSURE
Bernstein Crisis Management, Inc. has formal or informal co-promotional and mutually beneficial business associations with a number of the services we mention periodically in this newsletter. No, we can't go into details because that's confidential, proprietary, etc. But our relationship is NOT "arm's distance" and you should know that, since we regularly write about these services as we use them for crisis and issues management or other purposes. That said, you should also know that Bernstein Crisis Management sought the relationships because its staff is convinced that these services are the best of their kind for Bernstein Crisis Management's needs and those of its clients. If you have any questions about these relationships, please contact Jonathan Bernstein, (626) 825-3838.
ABOUT THE EDITOR & PUBLISHER
Jonathan Bernstein is president of Bernstein Crisis Management, Inc., www.bernsteincrisismanagement.com, a national crisis management public relations agency providing 24/7 access to crisis response professionals. The agency engages in the full spectrum of crisis management services: crisis prevention, response, planning & training. He has been in the public relations field since 1982, following five-year stints in both military intelligence and investigative reporting. Write to jonathan@bernsteincrisismanagement.com.
GUEST AUTHORS
GUEST AUTHORS are very welcome to submit material for "Crisis Manager." There is no fee paid, but most guest authors have reported receiving business inquiries as a result of appearing in this publication. Case histories, experience-based lessons, commentary on current news events and editorial opinion are all eligible for consideration. Submission is not a guarantee of acceptance.
LINKS
When I find a site that I think will be useful to my readers or site visitors, I put it on our Links page. If you have a site that would be of specific use to crisis managers and want to discuss a link exchange or other cooperative effort, please write to me, jonathan@bernsteincrisismanagement.com.
LEGAL DISCLAIMER
All information contained herein is obtained by Jonathan Bernstein from sources believed by Jonathan Bernstein to be accurate and reliable.
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