A Time to Vent, a Time to Celebrate

The front page of Monday's Louisville Courier-Journal is one crisis after another:

"Obama to demand automaker sacrifices; GM's CEO resignation likely part of new bailout package"

"Eight slain in nursing home attack"

"Trial to start in death-penalty case"

And the worst crisis from the past weekend:

"Cardinals' flight cut short in upset loss; Michigan State's victory ends historic season for U of L"

Okay, so it's not really a crisis. But it still broke my heart. Congratulations, Michigan State. You were the better team Sunday.

Ah, but the University of Louisville women made the Final Four for the first time ever! This post doesn't have much to do with crises, but sports were my first love. (I started my career as a sportswriter.) So forgive my digression, but I wanted to cry in my beer and pop the champagne cork.

New Crisis Communications Blog Features Comments About AIG

I was trying to figure out what to write here about AIG. Where does one begin? Out of the blue, I learn Larry Smith, President of the Institute for Crisis Management, started a blog himself and in his first post asked readers what they think AIG should do. He already has a number of comments and his own responses. There's a pretty good dialogue going on. Check it out at http://crisisconsultants.blogspot.com/.

Burson-Marsteller Needs to Find a Good PR Firm

I want to share a link to a video that had me, a proud public relations practitioner, squirming in my seat. When done right, PR (and crisis communications, which also is by extension gored in this video) is a noble profession. Too many people still see it as "spin." I don't at all. PR is about communications, which involves something more than 50% listening and something less than 50% message delivery. PR is not the TV/movie image of some slick suit twisting the facts to make a crisis appear to be a blessing for all.

This video attacks AIG for hiring Burson-Marsteller for "working on its image." To paraphrase from Saturday Night Live a generation ago, "Rachel, you ignorant slut!" AIG, I surmise, hired outside help to deal with a very real crisis. There's nothing wrong with that. Here, take a look and please comment.

http://www.youtube.com/watch?v=4xVsYc-y7IY&eurl=http://blog.ragan.com/prjunkie/2009/03/last_thursday_msnbc_host_rache.html&feature=player_embedded

What do you think? By the way, Ms. Maddow is wrong about at least one little fact. I worked for Babcock & Wilcox at the time of the Three Mile Island accident, referenced here. We didn't build the nuclear plant; we merely supplied controls and some steel tubing. We never were part of that crisis. If my memory is right, we kept Burson-Marsteller on retainer well before Three Mile Island.

Online Attacks Are Very Real Crises

Larry Smith, president of the Institute for Crisis Management, sent me an e-mail that made me chuckle. “I have been following the internal crisis upon crisis at Holland & Knight for a couple of years and they keep shooting themselves in the feet...and now there is an 'enemy' that has ties inside the giant law firm and knows how to use digital media to launch almost daily attacks that even the Taliban would envy.” Holland and Knight is a worldwide law firm based in Florida.

Larry linked me to Kara Smith’s blog (http://blog.karasmamedia.com/2009/01/legal-firms-dont-allow-outside-parties.html). She wrote, “Since the end of December, @hklaw has been sending out Twitter Tweets at the rate of approximately 20 per day. The tweets contain links that lead readers back to (HKLaw Investigator) whose profile lists six other sites, each describing its contents as ‘Information, Articles and Complaints involving Holland & Knight Attorneys.’… The problem is, none of the blogs or the @hklaw Twitter page belong to the Holland & Knight law firm, whose URL is http://www.hklaw.com/.”

A knock-off URL! Apparently, some savvy insider has decided to get even over some real or imagined hurt. The @hklaw site links to articles such as Five lawyers leave Holland & Knight in part because of conflicts of interest and The Disappearing Associate... Valentine’s Day Massacre: Holland & Knight fired 70 lawyers and 173 staff.

“This blog and the many links in it,” Larry concluded in his note to me, “tell the story about why every law practice needs its own ‘crisis communication plan’ as well as crisis communications counsel on call and ready to help clients, as well.”

Who could carry a grudge? In Chicago several years ago, H&K defended the billing practices of a partner, Edward Ryan, who was alleged, with other lawyers, to have overcharged a client by 450 hours. H&K said no one did anything wrong. But just last November, “the Illinois Attorney Registration and Disciplinary Commission decided to file charges against Ryan, accusing him of falsifying time on client invoices.” Guess what? Ryan left the firm last year. (http://blogs.wsj.com/law/2008/12/22/former-holland-knight-partner-accused-of-the-perfect-crime/)

In 2005, nine female lawyers accused another partner, Arthur Wright, of sexual harassment. Wright received a private reprimand – and a promotion the following March. The women blew the whistle to reporters, and Wright later “voluntarily” returned to his old job. (http://www.law.com/jsp/article.jsp?id=1112618116450)

(Interestingly, H&K has a page on its web site on How to Conduct a Sexual Harassment Investigation, written by a female in the firm’s Litigation Section. Do as I say, not as I do, I guess. (http://www.hklaw.com/content/whitepapers/RoyalSection.pdf)

If I searched longer, I'll bet I could find many more people in a company this size who have plenty of axes to grind. The moral is: if someone in your organization messes up, investigate in good faith and take the proper corrective action, even if it’s your favorite brother-in-law. Our stakeholders deserve and expect us to do the right thing. Sometimes ethics are a shade of gray. But usually we know what to do for the best of the organization, and that’s to prevent smoldering crises from bubbling into embarrassing and expensive crises.

How Will You Contact Stakeholders Following a Natural Disaster?

Too many organizations' crisis plans don't take into account that sometimes the phones don't work. Take for example the ice storm that virtually paralyzed much of Kentucky and southern Indiana in January. An estimated 9,000 utility poles broke under the weight of the ice across Kentucky and 769,000 lost power, some for more than a week. Mobilizing the National Guard was difficult and took too long because the Guard was depending on the phone system and the internet, according to Adjutant General Edward Tonini. Kentucky Governor Steve Beshear called up the entire National Guard, meaning 4,600 troops. By the time the crisis was winding down, 4,200 had responded. (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2009903100399)

Tonini recommended each of Kentucky's 120 counties needs at least one satellite phone for future crises. "It would have given us better situational awareness quicker," Tonini said. "And maybe we could have given people more relief in a more expeditious manner."

Whether it's ice storms, tornadoes, hurricanes, floods, or earthquakes, you need a back-up communications method to tell employees whether you're open or closed, to call in contractors to get your business running again, to call vendors to say when you need your order delivered, to contact customers with expected delivery dates, and to keep board members and owners aware of the impact on the organization. If you don't have access to a communications system other than phones and internet, now is the time to look into it. We're getting into the tornado and flood season in the U.S.

Duquesne University Shooting Raises Questions of Notification

A robbery and shooting took place two Thursdays ago in a parking garage on the Duquesne University campus in Pittsburgh. No one was injured and two 15-year-old suspects were apprehended moments later. University officials then made a decision that I would question from a crisis communications perspective.

According to the Duquesne Duke, the student newspaper: "When Police informed University officials that the suspects were in custody, they decided it was no longer necessary to send the alert, (Bridget) Fare (university spokesperson) said. The University issued subsequent e-mails to update students and faculty, but students did not receive the e-mail until late Thursday night because of a problem with Computer Technology Services (CTS)." (http://media.www.theduquesneduke.com/media/storage/paper1278/news/2009/02/26/News/Shots.Fired.In.Forbes.Garage-3652199.shtml)

By not informing students immediately, the school left open opportunities for speculation and rumors. While it's true there was no danger to students or the public once the shooters were caught, texting the facts immediately would enhance students' confidence in their school's leadership and would prevent the panic that rumors could have caused. Not communicating immediately was a decision. Not communicating later because of an equipment failure is unacceptable. Someone could lose a life if that happens again.

It reminds me of a lesson I learned many years ago. My employer suffered a significant chemical spill that could be smelled at an elementary school a mile away. Because of odor in the school and a light rain that started falling, the school decided to evacuate to a nearby high school. Down the street was a Catholic school. Those kids were never in danger and the odor had no effect on them. But I heard from the principal later. She said her staff was alarmed because they could see ambulances and school buses racing past their school, but no one was telling them if they should be taking any precautionary measures. Until then, I never thought of that. I then developed and regularly updated a list showing every school, day care, and senior facility within two miles of the plant. In case of a spill that had any impact outside the fenceline, I had people ready to call all those vulnerable population centers, whether there was an impact on them or not.

I hope Duquesne learns from this little slip. This is the second shooting on campus in less than three years. Duquesne better learn quickly that it's better in an emergency to err on the side of notifying stakeholders than to fail to do so.

Managing Risk Includes Avoid, Assume, Reduce, or Transfer Your Risk

The Institute for Crisis Management teaches clients how to establish or strengthen a culture where problems are allowed to surface so they can be dealt with before they blow up. A “kill the messenger” mentality in itself is a smoldering crisis. Keep in mind that two-thirds of all crises are smoldering, not sudden, based on many years of ICM’s Crisis Annual Reports (http://www.crisisexperts.com/2007CR.pdf). The definition of a smoldering crisis is a problem someone knows about but ignores. If your organization successfully brings forward all its smoldering crises and deals with them when they are still little, you theoretically could eliminate two-thirds of your crises.

Don’t worry, this isn’t a commercial. I’m just proud of the fact that our company has been in the crisis communications business longer than probably any other firm. We have a lot of expertise when it comes to crisis prevention. Another feature that makes us unique is the risk management arm of our firm. Applying the risk management process, like communicating effectively, will eliminate many smoldering crises. By planning how to communicate in case of a crisis and by reducing your risks, you will be better prepared to prevent or at least respond when disaster strikes.

Tom Thompson is our go-to guy on risk management. (http://www.crisisexperts.com/Tom.htm) I asked him to write a few graphs about how the risk management side of our firm can help businesses who are looking to pinch every penny these days. Here is what he told me:

“I have written previously that the risk management process is basically the identification and treatment of risks and exposures that can impact stakeholder/shareholder values. Once a risk has been identified there are four tools that are available to evaluate and treat the risk: You can avoid, assume, reduce or transfer the risk.

“Avoid the chance of loss. That means you may need to make a management decision not to encumber yourself. For example: Don’t build a home on a barrier reef that historically has a devastating hurricane visit at least once every five years. Yes, you can purchase insurance, but the deductible and the loss cost may not warrant your investment.

“Assume the chance of loss. If the cost to reduce or transfer the loss is greater than the company’s cost of capital, I would suggest that you assume the risk. Determine the amount of deductible you can manage in the event of a loss and then insure from there. The question, may be – Does the hit to earnings impact stakeholder or shareholder value."

DH: A company I worked for that handled large amounts of hazardous materials had a $1 million deductible because the corporation felt that was the level of risk it could afford, without an impact to share value.

“Reduce the chance of loss: There is so much that can be done to reduce the chance of loss! How you construct your HR policies and procedures and how they are communicated to your employee population can reduce risk by conveying what is inappropriate behavior. Another example is the way contracts with vendors are written. I would love to talk more about this with you. It can save your organization a pile of money.

“Transfer of Risk. Risk can be transferred by insurance policies, contracts and vendor agreements. Our philosophical approach is to evaluate the transfer of risk as the very last alternative. An insurance company’s stated objective is to only pay out 68 cents on the dollar, therefore it would not be prudent to trade dollars with an insurance company. Our view is to consider all the tools available – your cost of capital and your ability to assume some risk prior to making a decision about if or how much to transfer.

“The Institute for Crisis Management realized that a holistic approach to managing crises would set us apart from the typical crisis communications firm. By applying risk management processes, your business will be in a much better position to respond to smoldering and sudden crises.”

Blue Grass Airport Has Red Face

I wrote here on January 15 about a crisis at Lexington, Kentucky's Blue Grass Airport. A story by the Lexington Herald-Leader in November accused Michael Gobb, executive director of the airport, with spending improperly for trips, entertainment, and other expenses, including a strip club, from January 2006 through March 2008 using his airport-issued credit card. He soon resigned, along with three other top airport officials. Six had their credit cards revoked and the chairman of the board was replaced.

Crit Luallen, Kentucky state auditor, released a report last week following an investigation. "A long trail of receipts and questionable expense reports could have exposed the situation years ago. But until recently, virtually no questions were asked, even by the accounting agency the airport hired to keep watch over its books." (http://www.courier-journal.com/apps/pbcs.dll/article?AID=2009902260408)

At the risk of redundancy, people, you can't ignore the meat you know is rotting in your refrigerator. The board and the airport's auditors should have caught a whiff of the stench long ago. It took the Herald-Leader in Lexington to turn this internal scandal into a taxpayer crisis.

""I don't think we have ever seen an audit where so many different individuals involved in the management of a public agency abused the trust with such arrogance and lack of ethical standards,' Luallen said."

The AP article went on to claim that in three years, top officials turned in more than $500,000 in questionable expenses because of a lack of legitimate business purposes, no receipts, or excessiveness. More than 92 percent of Gobb's charges to his airport card lacked proper documentation. The airport's board of directors placed most of the blame on Gobb in its response to the auditor's report, and approved more than 100 procedural changes Luallen suggested. But the board can't point its indignant collective fingers exclusively at Gobb. Check the mirror.

It would have been so much simpler to get rid of the old meat before it rotted. It doesn't matter that Gobb was a nice guy and a highly respected aviation executive. The board has a responsibility and the auditors should have been much more thorough. I'm a trusting kind of guy. But I've learned that you need to have proof that your trust is well founded. Your stakeholders deserve it. Make sure your crisis communications plan includes a section on financial scandals. Then sniff the air to be sure they never happen.

Another One Bites the Dust: Sierra Pre-Filled

Last year, I followed in this blog the ongoing story of a North Carolina producer of medical syringes that prosecutors say sickened hundreds of patients and killed five. I was interested in the tainted syringe story because of the impact on some of our most vulnerable population (The heparin and saline-filled syringes are used to flush intravenous lines during home cancer treatments and kidney dialysis.) and the poor response by Sierra Pre-Filled, part of Chicago-based AM2PAT Inc. The company locked its doors in Angier, unplugged its web site, and disappeared from the face of the earth. The only quote from owner and CEO Dushyant Patel following the product recall was, “There’s nothing more out there,” even as reports continued of sick and dying customers. I still haven’t found out if employees were stiffed for back pay and benefits, largely because the news media did a weak job of investigating what to me was a worthy story. Compare this one to the peanut butter coverage.

I have an update. AP (http://www.msnbc.msn.com/id/29369892/) reported on February 24, “U.S. Attorney George Holding said Tuesday that federal authorities have launched an international search for the executive charged with rushing shipments of bacteria-contaminated syringes…. Two former plant workers who provided prosecutors details about the plant’s operations have pleaded guilty for their roles in shipping tainted syringes…. Plant manager Aniruddha Patel, 43, of Carpentersville, Ill., and quality control director Ravindra Kumar Sharma, 54, of Richmond, Va., each were sentenced Monday (February 23) in U.S. District Court in Raleigh to 4½ years in prison for fraud and allowing tainted drugs into the marketplace.”

Holding said investigators believe Dushyant Patel has fled to his native India. He was indicted in February on 10 charges including fraud, false statements, and selling adulterated medical devices. The AP says Patel’s company sold $7 million worth of heparin and saline syringes in 2006-07. Prosecutors accuse the company of cutting corners and failing to follow rules for checking sterility. They say dates were falsified to make it appear that safeguards were followed. “Our office is committed to pursuing him and bringing him here to account for his actions,” Holding said. “We’re putting all resources available to bringing him back here.”

I’m not sure any crisis communications comments I could make at this point would add any light to this story. You break the law, lie, fail to communicate, lock out your employees without notice, and flee the country. Yep, I’d say this crisis wasn’t handled very effectively.

Credit Unions Prepared for Negative News

I’m impressed with the response recently of the Credit Union National Association (CUNA) to an expected negative news story. CUNA communicated widely and specifically with its members. My local credit union, Louchem, took the advisory and spread it around through the community so that stakeholders beyond credit union managers and employees had the credit union’s version of the story. That was a wise move by Louchem President Ed Wessel.

CUNA expected an unflattering story to air on ABC News or 20/20 on February 20. I didn’t watch either program, but I keep searching ABC news and I don’t see it. I’m guessing it never aired. The CUNA announcement explained, “The reporter did an ‘ambush’ interview at a CUES (Credit Union Executives Society) meeting in St. Kitts two weeks ago after posing several days as a vacationer and filming some of the approximately 200 CU executives attending at poolside, on the golf course, etc. His angle: ‘Why are you here in this exotic location at the same time you’re seeking for help from TARP (Troubled Assets Relief Program)?’ This was the same reporter who uncovered the Merrill Lynch CEO extravagance (e.g., million-dollar makeover of CEO's office).”

The e-mail provided talking points for credit unions that may get calls from local media. Keeping individual locations in the loop seems like common sense to me. But I’m amazed at how many organizations fail to do that. I’ve heard of some that actually have a policy to not bother other locations about an incident at a sister site.

Example: A chemical packaging company some years ago suffered a chemical leak at one of its warehouse facilities. It wasn’t serious, but it made the local news. The company had a policy of keeping information about such gaffes confined to the site. A bored reporter in Atlanta noticed the story and knew the company had a facility there. He contacted the local manager to ask if the same thing could happen there. The manager, caught off guard and unprotected, probably came off looking like an uninformed nobody. Without preparation, without talking points, his response went something like this: “We handle the same chemical and have the same kind of equipment. Sure, it could just as easily have happened here.” Guess what the headline said the next day about that company’s Atlanta facility.

CUNA did what it could to prevent its people from being ambushed. It included talking points on “TARP funds for credit unions,” among which was: “Credit unions have received NO TARP money, and we are not seeking a direct injection of TARP money.” Good information to have when asked by reporters.

Another section was titled, “On the state of the credit union industry,” including a bullet that claimed, “But to be clear and it's important to emphasize that OVERALL, the credit union system is healthy and sound; consumers’ money is safe in a credit union. Deposits in virtually all credit unions are federally insured and backed by the full faith and credit of the U.S. government, just like at FDIC insured banks.”
And this:

• “Many who attended the conference in the ABC News piece are board volunteers (credit unions do not have high-paid board members like banks), and used their own personal vacation time to attend.”

The advisory emphasized that the conference and location were set three years ago. Another section of talking points was, “On the tactics of ABC News.” I think the writer went a bit overboard with the first bullet in this section: “The ABC News piece is ambush journalism, plain and simple. We are outraged that it has falsely impugned the motives of those in the credit union movement.”

Why vent like this in your talking points? Reporters have a job to do, and it’s not unusual for them to use false pretenses to investigate a story. Ordinarily, we don’t mind – until someone does it to our organization. I was working in the chemical industry when, not long after 9/11, reporters at several chemical plants tried – sometimes successfully – to gain access to plants unchallenged to show how easy it would be for terrorists to walk right in. It’s a reporter’s job to challenge safety standards, uncover dishonesty, and identify violations of the public’s trust. Our response to the threat of a reporter invasion into our plant was to ensure security was more vigilant than ever and take steps I can’t divulge to guarantee our plant’s perimeter was as impenetrable as humanly possible – steps we should have taken anyway. Then we made it clear to employees that if a reporter tried to gain access to our plant, we would have the police arrest him for trespassing. If an investigative news report has your panties in a wad, most of the time – especially if you haven’t even seen the segment – keep your emotions in-house. Stick to the information your stakeholders need to respond.

CUNA, you get an A-. Nice job of preventing a one-day negative news item from blindsiding your members and being repeated inaccurately across the country.