Transparency in Tough Times: The New Rules of Engagement for Crisis Management

Transparency in Tough Times: The New Rules of Engagement for Crisis Management PRSA Health AcademyApril 28, 2011 Lewton,Seekins&Trester

The hits just keep on comingSome seem pre-destined • Goldman Sachs & an ethics issue • BP & an oil disaster • Abercrombie & Fitch & something sleazy • GE – so many options • But the tax repayment hoax was a nice twist • Not to mention the Twitter fiasco BUT some crisis fiascoes were truly surprising . . .

Really?? • Toyota? • Pampers??? • J&J??????(and just lately – Amazon??? Sony???Warren Buffett?????????)

Maybe not so surprising . . . • Fleishman-CIRI survey: • Half of IR officers at health industry companies surveyed said their company doesn’t have a crisis plan • Of those who do, only 30% update it at least annually • Yet vast majority say a poorly managed crisis definitely impacts a company’s valuation

“High”lights from recent crises • BP had slashed PR budgets and staff, relied on “rookies . . .who had Hayward walk the beach in a starched white shirt.” • BP now termed prime target for acquisition • Toyota tone deaf to current U.S. Congressional climate • But able to rely on unusually loyal customers • And then “burnedbabybuttgate”

If you can’t trust Pampers . . . • Hard to watch P&G bungle • July 2008: P&G SVP“Mommy bloggers are the new influencers” • May 2010: “We’re insulted that someone would imply that our products are dangerous,” after dozens of Mommy blogger postings about burned baby butts

P&G:Seemed off-key from the start • All about US (“WE are insulted”) • Steadfastly denied there was a problem • Then after barrage of BBB photos online, blamed the parents for bad “diapering” • Then said it’s not a big issue --“small number” of parents – “less than two complaints per 1 million diapers? (do THAT math) • (5400 concerned parents on Facebook alone) • Then attacked the complainers – parents who are “unhappy” with product redesign OR who “supported competing products”

Meanwhile in the blogosphere • Hundreds of parent postings with personal stories in excruciating detail • “I have FOUR kids – I know a BURN.” • “My baby was in agony” • “Just spent two hours at the pediatrician’s” • “I will NEVER buy Pampers or a P&G product ever again.” An trusted consumer brand bungles it, but it’s nothing in comparison to . . . . .

The fall of the ICON of crisis PR • J&J: 50+ recalls in 15 months • Tainted Tylenol, CHILDREN’S Tylenol, Rolaids, Acuvue contact lenses, DePuy hips, cracked syringes of Rx drug, surgical sutures, insulin pump cartridges, FDA consent decree for expanded oversight, kickback lawsuit, settlement of physician bribery lawsuit . . . . • AND the phantom recall of Motrin!

And the CEO says (4/03/10). . . • Incidents are aberrations • Just a “one company” problem • Monday morning quarterbacking • “Not a systemic problem” And at Harvard Business School, the classic Tylenol poisoning case study (crisis the company reacted to, rather than caused) now has a companion: “On Weldon’s Watch: Recalls at J&J 2009 to 2010”

When the crisis comes, it is a CRISIS (new ones daily) • Crisis communications may be only 2% of PR work, but it can often be make or break for the company and the PR team • Reputation can be irrevocably damaged – not only by the company mistake, but also by how the company reacts and responds • The public WILL forgive mistakes – but NOT defensiveness, deceit, disingenuity or arrogance“Sony accused of lying about PlayStation outage”

The stakes can be corporate life, or death . . . . • Loss of market share • Litigation • Damage to reputation • Impact on employee recruitment, retention • Share price and valuation decline • Productivity affected • And all your marketing efforts are undercut “Amazon gets “F” for communication amidst Cloud outage”

If J&J bungles . . .Is there hope for the rest of us? • What’s more high profile than healthcare? • Patients now call Channel 4 before they call the attorney • We’re not immune to whistle blowers, product recalls/patient safety incidents – reputation shredding crises resulting in something we DID • 100% different than managing an external disaster • And our goodwill banks have been tapped a lot • It’s not IF a crisis happens, it’s when . . . . “Community Health Systems discloses more whistle-blower suits”

And there’s a new timeframe: 1440/7/365 • Expectations for “prompt” responses mean nearly instant replies • The good old days: “60 Minutes is downstairs” • Then it was CNN, then Bloomberg, then blogs • Now your first warning is an irate Tweet that goes viral • It’s the Two T Test: In a 10-minute response cycle transparency isn’t a choice – it’s a survival strategy • No time to hide, no time to lie

Transparency isn’t a choice, it’s a survival strategy • Stalling means you waste time and earn audience distrust“A Week Into Data-Storage Flap, Apple Finally Speaks Out” • Hoping it will go away? Public life today is just one Macaca moment away • Silence = you don’t know what’s going on in your own company OR you don’t care enough to talk to your stakeholders OR it’s true and you’re working the shredder • And a lie is always, always, always discovered and then the reputation damage is WORSE"Thank you for your patience while we work to resolve the current outage of PlayStation Network services"

Some make it sound simple:Just write a plan • But it’s not that simple • There’s no cookie cutter approach that works in every case • Even when there’s a crisis plan, often the plan sits on a shelf or is forgotten when the crisis hits • Situations can be anticipated, but real life can be different • And the key variable is people – unpredictable people within and without the company “BP marked the anniversary by suing each and every contractor . . . Time for discredit where discredit is due?”

And the hits keep on coming . . • TODAY’s NY Times • “With Deal, J&J Tries to Pivot” – “appealing to investors who have been troubled . . . tarnished once-golden brands . . . We think J&J should have fixed its consumer unit first . . . Product recalls diminished company’s revenue project . . we have made mistakes, working hard to regain trust (CEO).Finally he says it . . . but by now, every positive story will dredge up all the negatives again, and again, and again.

Same day, same paper . . .. • Jobs Concedes Apple’s Mistakes, and Promises a Fix Hoping to put to rest a growing controversy . . . after a week of silence and no info to consumers . . . Jobs: “Rather than running to the PR department, it set out to determine exactly what happened.”REALLY??? What would PR have advised?????

SAME day, same paper • Sokol Is Accused of Misleading Buffett on Trades Initially, Buffett defended, said no problem . . .. Now he has to walk it back, accusing his once #2 of misleading the company. Buffett – the reputation guy! A “stark turnaround for Berkshire” • (btw) BP Profit Falls as Costs of Spill Outweigh Higher Oil Prices

Same day, ARTS section . . . • PlayStation Security Breach a Test of Consumer’s Trust “Hackers steal information and Sony will pay a price. . . . Sony has never made the transition to a software and services company . . . .”“Who, exactly, is going to volunteer to trust the company again?”

So how do we manage? • The new world order: Everything that used to be on the “good if you can do it” list is now ESSENTIAL. • The new RULES are the OLD suggestions • We have to practice (learn, adopt, execute) the four P’s • Principals • Principles • Planning • Process

The Principals The PR Team The Crisis Team The Spokespeople

The Principals: Your PR Team • The 4 C’s maxim: Companies/CEOs in Crisis Want Calm Counsel • Our collective wisdom and accumulated experience • Our “third party” objective viewpoint -- we’re unemotional, we provide clear guidance based on expertise • Arms, legs and warp speed communications counsel and tactics that can turn things around

The Principals: Your PR Team • So we must be prepared to provide counsel • Sometimes they act on the counsel, sometimes they don’t • Even when they don’t take our advice, we still have to do our ultimate best to help the company survive the crisis -- and ideally, move on to prosper • But above all else, what’s needed is calm . . . . or the illusion of calm

The Principals: Your PR Team • What’s expected: • A team that is THERE 24/7, on site, with no whimpers • Energy, realism, optimism • A team that sees the big picture • All the audiences • The real issues and impact • A team that’s one step ahead . . . .

The Principals: Your PR Team • A team that will help management: • Moderate their emotional responses • Not let anger, bitterness, or fear drive decisions • Face facts with straight talk, even if it’s not what senior management wants to hear • Keep all the balls in the air – remember things that they may forget • Put out the fire AND keep the plane in the air

The Principals: The Crisis Team • Crisis team needs to be formed and normed in advance, meet regularly • Begin with PR’s own crisis team -- cross-functional, cross-level • Notified first and immediately when there are crises AND situations that might become crises • Then add all the key players who will be needed (CEO/COO, legal/risk, HR, operations, finance, others)

The Principals: Spokespeople • The right spokesperson can make or break a crisis in the early hours • This is VERY tricky but VERY important • IN ADVANCE, settle the issue. You can’t do it on a 10-minute timeclock. • Assess potential spokespersons and ID and anoint several for internal and external roles • Role/position, mediagenic, coachable, calm, collected, smart/quick study, good on feet • Match spokesperson to potential crisis situation • Determine, in advance, when the CEO is it, not it

The Principals:Spokespeople • Train, train, train in advance – no time in a 10-minute response window • The new model is beyond “wear blue shirt” • General prep in advance, two-day approach: • Day one – learn the basics, spend as much time on message development as on-camera tips • Let the spokesperson go home and write/practice messages so s/he owns it • Day two: practice interviews (print, TV, radio) • Real-time refresher when a crisis happens

The Principles Pre-Requisites Cardinal Rules Messages That Matter First Responses

Principles: The Pre-Requisites (ABSOLUTES) • Strategic communications plan already in place • Full buy-in of senior management • CPRO part of senior management team • Commitment to internal communications as a priority • Effective internal and stakeholder communications channels already in place and fully road tested

Principles: The Pre-Requisites Strong credibility and good relationships with media (know who you’ll get calls from) And know the social media hubs where your audiences already are Master list of all key audiences Contact database Allies database PLUS: a dark website, smartphone, Twitter and Facebook accounts, corporate blog, and backgrounders/fact sheets already done!

Principles: The Cardinal Rules • You will always respond • No comment – hardly transparent • Telegraphs you have something to hide, company doesn’t care or is totally inept • You will never, ever, ever lie • The truth will ALWAYS COME OUT • The “You Tube” generation is everywhere • Any employee can dial NY Times • You will never be pushed into speculation • Educated guesses that turn out to be wrong just look like lies to the public • “I don’t know” never has to be retracted or walked back

Principles: Messages That Matter Must focus on the harmed party first -- not just OUR concerns Begin with an expression of compassion or empathy if appropriate Be utterly candid -- “I don’t know that now” is OK, “no comment” is not Accept blame IF an error has been made Lawsuits will happen someday, but the Court of Public Opinion is in session now Prove you’re fixing it: What are you doing now? What’s planned?

Principles: Transparency = OWN the story Instead of reacting & providing answers (hiding like we used to do . . .) Take charge of the news – you have to be the dominant producer of news about your crisis, via blogging, tweets and direct communications to stakeholders that runs side-by-side with media outreach Even if there’s nothing much new, keep the updates coming

Principles: First Responses • WE USED TO SAY : Don’t “go public” UNTIL you have all the facts • NOW: The crisis IS public, so you’re either represented or you’re absent • Define, defend yourself or others will do it for you • Acknowledging situation buys some time • Better to say “This is what I have now,” than to have audiences hear and read “The company failed to respond/refused comment.”

Principles: First Responses So go with what you’ve got, refuse to speculate AND promise (and deliver) updates via web, email, tweets, Facebook, etc

The Plan Create It Drill It OWN it!

The Plan:Create It • Must be in sync with HCO values, mission • Foundation: detailed P&P to insure that potential crises are identified ASAP • And make sure employees are oriented and trained to spot and speak up • Detailed info on who does what when • For example, when senior manager hears about a crisis situation – who gets called FIRST? CEO? PR? Lawyer? Figure it out now! • Implementation instructions • Resource and multi-layered contact info – updated weekly

The Plan:Practice Drills • Issues anticipation -- let’s make a list! • The predictable and generic • The “that could be US” opportunities • Strike while the competitor’s crisis is in the headlines • Think BEYOND company-specific potential crises, to the generic • Embezzling • Sexual or racial harassment • Shareholder lawsuits • Government investigations • CEO illness • It COULD happen here!

The Plan:Practice Drills • “Working” – actually role playing situations that could happen – is the ideal time to: • Kill the “no comment” mentality • Try out spokespersons and decision-makers – role play • Confront the “WE DON’T MAKE MISTAKES LIKE THAT” mentality • Thrash things out with legal in advance

The Plan:Practice Drills • Scenario drills allow for: • Assessing probability • Identifying potential audiences by scenario • Assessing severity and risks • Determining – in advance – what the answer to the FIRST question • MUST do quarterly

The Plan:Practice Drills • Draw on real life examples of good CPR, and bad • Start with Toyota, J&J (then and now), Pampers • Then use current/recent real life examples of a company like yours • Road test your team, your plan, your spokepersons, to spot any inbred issues and deal with them during peacetime

The Process: CPR! The Crisis is NOW

The Process:What to do first • Take your own pulse. (remember CCCC) • Bring in outside counsel if that’s part of your plan • Start fact finding, info gathering & audience ID (simultaneously – divide up the work) • We have to ask the right questions and push for answers -- BE the reporter. • Remember -- be the dominant producer of news about your crisis

The Process:What to ALSO do first • While some fact-track, others are ID at which audiences are going to be most affected, concerned • Employees – they’ll hear first, the rumors start here, and they can support OR undercut whatever you say publicly • Stockholders and stakeholders • Influencers and regulators • Customers and “community” • Natural advocates and adversaries

The Process: Simultaneously . . . . • Draft messages • Get management to focus first on WHAT will be said, not how the message will be delivered • Create the corporate story -- the whole story, not just reaction to Q’s. • Buff and brief your spokesperson • Do in-person, aggressive media training once messages are complete • Get the dark site or home page ready

The Process:And then . . . . . • Deliver the message on multiple levels • Get to your internal audiences BEFORE they see the coverage and stay in touch • Stay below radar – e/vmail, CEO phone calls, employee meetings – but assume everything will go public • Media: omnipresence via web and social media, uberresponsiveness to MSM • Update blogs, website, Facebook constantly • Monitor foes – pay attention to what they say but don’t let them drive YOUR message

The Process:And so it goes. . . . . • Track the crisis impact via research • Initially to benchmark and assess the damage • Monitoring -- both traditional and social media and key audiences -- to avoid OVERreaction • Keep the plane flying – “normal life” does go on • Know when to stand down • May not be a hard endpoint

There IS a hard endpoint to this session . . . . . • ppt will be posted at prsa.org/healthacademy • And at www.lstllc.com • Along WITH the LST Prep CHECKLIST – get your very own free copy! • Qs and queries to: • klewton@lstllc.com • sseekins@lstllc.com • ktrester@lstllc.com

Transparency in Tough Times: The New Rules of Engagement for Crisis Management