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The Lawyer's Role in a Company Crisis

By Mike Androvett, Mark Annick and Mary Flood
Androvett Legal Media & Marketing

A company crisis with public relations implications can come at any time. If and when it does, it can be a time of chaos, worry, missed sleep, lost family time, ambiguity and missed communications, coupled with unpleasant undercurrents of blame, passive aggressiveness and fingerpointing. Needless to say, you need a plan.

The tension between the lawyerly instinct to stay mum in anticipation of litigation, and the need to speak candidly internally and externally to soothe and reassure stakeholders is a classic tug of war in many crisis situations.

In the experience of PR and crisis response professionals at Androvett Legal Media & Marketing, the in-house lawyers and general counsel who are best at responding to crises fit this general profile:

  • Level-headed
  • Decisive
  • Unbowed by superiors who are in denial
  • Realistic
  • Able to see a "big picture"

A company can lose more in reputation because of its mishandling of a crisis than it might ultimately lose from the crisis itself. That includes lawsuits, consumer backlash, criminal investigation, indictment or some other negative event. In today's 24/7 news cycle, a company easily can become a punch line overnight, even if eventually it wins in court. Said another way, the value lost in diminished reputation may far outweigh the cost of litigation.

For example, in May 2005, Arthur Andersen won its Enron-related case before the U.S. Supreme Court. By then, however, the company, which once employed 28,000 people, was down to only a few hundred U.S. employees. Allegations of shredding and misdeeds at Enron ruined Arthur Andersen's reputation before the company ever went to trial.

To avoid such an untimely demise, here are some important questions for the lawyer with a client in crisis and the PR implications:

Who is on your Crisis Team?
Decide now who you need on a crisis team. Typically, crisis teams can include company executives, including the CEO, CFO, general counsel and head of human resources. If your company includes a head of marketing and a director of customer/client relations, add them also.

Finally, it should also include your in-house public relations professionals and, potentially, outside consultants who specialize in crisis communications. Depending on the nature of the crisis, you might also consider including a criminal defense lawyer.

As a first step, create a resource directory containing all contact numbers for members of the crisis team. Decide in advance what types of negative events would amount to a company crisis and develop decision-making protocols for implementing a response plan. There should be an emphasis on speed, clarity and truth-telling, even in the face of negative publicity. Although the facts may be against you, many companies learn a painful lesson when they try to run away from bad news or, worse, fudge the facts.

Who are your Stakeholders?
Know who your important stakeholders are, what matters to them, and how they typically consume news about your company. First, there are internal stakeholders. These run the gamut from company executives and employees (and their families), board members, alumni, unions and freelance contractors. Then there are external stakeholders such as customers, suppliers, the general public and the media, among others. In a time of crisis, you'll need to consider how best to communicate to these diverse communities. You'll be faced with developing a consistent overall message even as you tailor more discrete communications for your different stakeholders at varied intervals and through a wide variety of communication channels.

There's a crisis What do we say?
When it comes to framing your message internally or externally, it is almost always better to seize the initiative. There's a temptation to wait until "all the facts are in" or the "dust settles," but your important stakeholders will begin to form impressions long before then.

The crisis team quickly will need to decide what will be said and to whom and in what forum. There are many crisis response messages that can be crafted in advance and tailored to the specific facts. If the crisis is somehow unforeseeable, then start the process of crafting a credible response by identifying what is most likely to be asked by your important stakeholders. For example:

Q. What happened?
Q. What is the company doing in response?
Q. Are the allegations true?
Q. If not, why not?
Q. What impact will this have on the company?
Q. What impact will this have on customers?
Q. What is the company doing to make sure this never happens again?
Q. What happens next?

Another important factor for the team to decide is exactly how it will communicate the company's message. Will the CEO be doing the talking, or a professional spokesperson? Does the company respond in writing only or, instead, through a specific, designated website that might be different than the company website?

At the same time, crisis responders must also monitor what is said about the company and the crisis in the media and on the Internet in social media, blogs, Facebook, etc. In fact, online information sources are becoming among the most influential. Reputation management begins with knowing what information is "out there" and recognizing that inaccurate or incendiary information may demand a response or clarification. Again, the team needs to understand that speed is important. News cycles are virtually instantaneous. Framing the messages and considering how they will be delivered are two things that must be addressed even before you recognize there is a crisis.

Who will speak for the company?
Decide who will speak for the company and let others know that they should forward all queries to that person or to his or her staff. "First responders " such as receptionists, security guards, and secretarial assistants need to be in the loop during a crisis. They must not aggravate questioning visitors or misinform them but rather be polite and refer inquiries to the proper spokesperson. At a time of crisis, first impressions can have an impact on perceptions of the company and the tone of media coverage.

CEOs often are not the best public representatives during a crisis. Their style or philosophy in running a company may not represent a good fit when confronted by pushy, inquisitive reporters. At the same time, don't delude yourself into thinking that a polished, professional spokesperson can merely "spin" the company out of trouble. Instead, you are looking for the rare blend of credibility, empathy, competence and knowledge. Picking the correct company spokesperson is among the most meaningful steps a company can take in meeting a crisis head-on.

Is an apology or admission in order?
You know this from your personal life. When you own up to making a mistake, the grief subsides and you sometimes even gain respect and understanding in the process. If, instead, you hide the mistake or blame others, then it can drag the matter out and erode trust in you. It is very often the same for businesses.

The Sorry Works! Coalition is a collection of medical professionals who have found that acknowledging mistakes not only makes injured patients less litigious, it also helps stem anger and changes attitudes.

The touchstone case study for successfully acknowledging a crisis is the Tylenol case of 1982 when seven people died in the Chicago area after ingesting the pain-relief medication. At the time, the makers of Tylenol, Johnson & Johnson, controlled 37% of the pain-relief market. That share almost immediately dropped to 7%. Company executives chose to ignore legal advice and decided to strip store shelves of Tylenol. At the same time, company representatives spoke frankly to consumers about what they were doing and why. Most crisis response experts believe this bold action saved Tylenol as a viable product.

In our work at Androvett Legal Media & Marketing, we have repeatedly found that important stakeholders are more understanding and supportive when our clients respond quickly to crises by disclosing pending negative events or negative events that have already occurred but are not yet public knowledge. Stakeholders may not like what they hear but they appreciate not being "blindsided. " They will also give you points for facing crises head-on and may offer assistance or additional support.

Have we learned anything from Watergate, Bill Clinton, Martha Stewart, Barry Bonds, etc.?
"Stonewalling" or saying "no comment" can leave journalists or other inquisitors suspicious about the company's motivation and more likely to think the company must be guilty of something. And lying or covering up in any way can make a one-day story drag on for days, weeks or months. Stakeholders can forgive mistakes but usually won't forgive or forget being lied to. A company also can self-inflict damage by claiming it will be transparent and then being anything but. For a government, this could translate into waiting the full amount of time the law allows before handing over a basic public document. For a private company, this could be refusing to answer a question or purposefully calling back after deadline. If the company is forthright in a crisis, then it may – and likely will – be appreciated by the stakeholders and the public. A crisis is not the time for arrogance or doubletalk.

In a crisis, attitude is everything.
You may not think so, but a crisis is also an opportunity to demonstrate empathy, ingenuity or just overall competence. Remember, companies are often punished more for how they mishandle a crisis than for the crisis itself. Companies also can elevate their status by turning lemons into lemonade. Here's one real-life illustration: In Houston, a school superintendent was confronted by an aggressive investigative reporter with news that convicted criminals were somehow getting jobs as school bus drivers. Instead of blindly denying the allegation or attempting to explain it away, she embraced the news, declaring that the reporter possessed important information that would allow the district to create better policies and make the buses safer for school children in the future. The tone of the story went from describing the school district as sloppy and malfeasant to a school district that was cleaning itself up. You may not have the ability to do this in every case but don't ignore potential opportunities while shooting for realistic goals.