Telling it like it is

It's an all too familiar scenario these days: Your biggest customer just went AWOL. Your company's earnings are in the tank and you've got to announce massive layoffs or risk putting the whole operation in the ditch. Who you gonna call?
Communications specialists, corporate flacks, sultans of spin - call them what you will - they are on every CEO's speed-dial these days.

It’s an all too familiar scenario these days: Your biggest customer just went AWOL. Your company’s earnings are in the tank and you’ve got to announce massive layoffs or risk putting the whole operation in the ditch. Who you gonna call?

Communications specialists, corporate flacks, sultans of spin – call them what you will – they are on every CEO’s speed-dial these days.

Indeed, in an economy increasingly marked by plant closures, shrinking earnings and corporate crack-ups, the public relations industry is burning the midnight oil to help manage a spate of nasty news – the likes of which hasn’t been seen since the dark days of the early ’90s.

Make no mistake about it: the stakes are high. When bad things happen to good companies, corporate credibility risks being sullied forever.

Indeed, say the experts, scores of companies routinely make blunders along the way as they are unwittingly thrust into the spotlight in the wake of negative news.

The most glaring slip-up? Battening down the hatches and retreating in silence when things go awry.

‘It’s just human nature to want to clam up,’ explains Bruce Mann, VP of investor relations at Rogers Communications in Toronto. ‘But where there’s smoke there’s fire. You’ve got to battle your instincts and get out there and start communicating or you’re in for trouble.’

In fact, PR history is littered with examples of how corporations can turn the tide – even enhancing shareholder value – following a devastating hit. The gold standard in many books: Johnson & Johnson’s handling of the Tylenol tampering crisis in 1982.

It matters little whether it’s a plant closure, a product recall or litigation, there’s a tried and true way of delivering bad news, says Jeremy Willoughby-Oakes, VP of Toronto’s National Public Relations, which manages both public and investor relations for some of the bluest of Canada’s blue chip companies.

Most important, the PR gurus advise, is to blab early and blab often. In fact, the first few hours of any corporate crisis are critical to how the news is digested – in the media, the public consciousness and the markets.

‘If you hide it, or delay it, it will come back to haunt you again and again,’ warns Chris Traber, an independent public relations consultant in Toronto.

By coming clean quickly, companies are able to control the flow of information and state the facts. Speed is essential in this new media world – companies are increasingly battling to quash rumours that spread like wildfire on the Internet and 24-hour news cable channels.

It’s also important to make a surgical strike rather than drawing out a story for days. ‘Don’t let it dribble out over a week, or you’ll remain in the headlines. Get it all out immediately,’ says Linda Smith, SVP and managing partner at strategic communications firm Fleishman-Hillard Canada in Toronto.

And be honest. Don’t sugarcoat the fact that the CFO has absconded with the corporate kitty and fled for the Cayman Islands, she says.

The companies that tend to find themselves in hot water are those that try to hide something, or try to hide the true reasons for the situation, Willoughby-Oakes adds.

While few corporations ever face the kind of crisis that has gripped New York, they can learn much from its mayor’s handling of Sept. 11 and the aftermath, say the experts. Why has Rudy Giuliani risen to the status of folk hero? Not only did he show great compassion for a country in mourning and those directly affected by the attacks, but he held frequent press conferences to update the world on the facts as they became known. It’s a basic precept to managing any crisis or bad news, the PR professionals say.

But it’s also important that the messages delivered be carefully crafted. A few rules of thumb: a company’s response should reveal what happened, why it happened, and how the company is going to fix it. The public perceives technobabble, legalese and euphemistic spins as what they are – avoidance strategies.

Develop a few key messages and repeat them as often as possible, the experts advise.

‘When there is news to be delivered, identify your spokespeople and make sure they are reading from the same script,’ Traber says.

That means identifying a good spokesperson who understands the dynamics of news. Delegate someone who is articulate, who can synthesize complex ideas and who doesn’t wilt under pressure.

If the news is really threatening to corporate credibility – missing an earnings projection by a mile, or accusations of wrongdoing in the ranks of the top brass – expect the media melee to continue for days.

Indeed, the more scorching the news, the more important to plan a communications strategy that can be invoked over several days, if not weeks and months. That could mean liaising with key editors as well as following up with opinion makers like columnists and analysts on the street, says Smith.

‘News comes in a variety of layers. If it’s a serious issue, the CEO should be visible. If it’s a financial issue, you will likely want the CFO to be there,’ she adds.

It’s also important to make certain you’ve identified all of the key stakeholders in your communications strategy. In all likelihood, they’re likely to include the media, analysts, the public and shareholders as well as employees, she adds.

While few PR types admit to the practice, it’s not unusual to see a glut of press releases with bad news spill into the newsroom after 5 p.m. on Fridays.

The thinking behind such practices? That fewer media outlets will cover the news. At least, it won’t be at the top of the headlines all day long if it is released at day’s end.

‘Clearly no company wants its negative news to be out there all day,’ says Willoughby-Oakes. ‘You want to contain the negativity as much as possible and reduce the amount of media coverage.’

However, Willoughby-Oakes says that those sorts of tricks have largely gone by the wayside. The vast majority of companies these days are in compliance with fair disclosure regulatory guidelines set out for public corporations listed on markets like the Toronto Stock Exchange. Most importantly, fair disclosure rules state that any news which will materially impact the company must be released promptly.

Others like Richard Wertheim, managing partner at Toronto investor relations firm Wertheim +Company, say that it’s valuable to give investors time to absorb the news by holding conference calls before the market opens and after it closes.

‘It’s a hair-trigger market out there. You want to give investors the time to take a deep breath,’ Wertheim says.

Still, he says it’s important that all senior executives be apprised of fair disclosure rules. ‘Selective disclosure destroys credibility,’ he adds.

There’s no doubt that managing bad news is good news for PR firms these days – particularly in a slowing economy.

Freda Colbourne, VP of public affairs of Edelman Public Relations in Toronto, says her firm is spending more of its time in training companies to deal with crises.

That includes everything from devising an action plan, to the nuts and bolts of monitoring chat rooms to putting executives through Crisis 101 simulations.

In a crisis, an organization’s character – with all of its inherent strengths and flaws – is exposed for all to see. That means that managers at all levels must plan ahead for damage control. When the satellite truck is pulling into the corporate parking lot, it’s too late to begin devising a plan from scratch, Colbourne says.

And with a growing number of companies ratcheting back their traditional media spending in the wake of the economic downdraft, both public and investor relations are expected to take on a heightened role in the coming months.

‘The whole PR industry really benefited in the early ’90s because of the recession,’ says Carol Panasiuk, SVP and GM of Cohn & Wolfe in Toronto. ‘I think we’ll see that again.’ What to do when all hell breaks loose
* Call key managers and instruct them to zip their lips. Designate a spokesperson to handle media.
* Remember: Don’t lie. If you don’t know the answer, say ‘I’ll get back to you on that’ – and keep your promise.
* Draft an internal memo about the crisis to read to your employees. But don’t send it out by e-mail – it will likely be leaked.
* Respond quickly to media inquiries. If you are the designated spokesperson, make sure your voice mail offers alternate ways for the media to reach you.
* Monitor chat rooms and message boards. What’s the hubbub on the Internet? Use the information to craft a response to the media. But don’t answer any messages or chat requests.