Make 2012 the year your firm creates an effective crisis management plan.
By Bridget McCrea
It doesn’t take a tsunami or catastrophic fire to bring a manufacturer to its knees. Even minor emergencies and events can take their toll on a company’s operations, sales, customers and suppliers. Getting out in front of these issues requires a well thought-out crisis management plan that addresses potential threats and shows owners, managers and staff members how to deal with the issues.
Unfortunately, crisis management planning isn’t top of mind for many manufacturers. Many wait until a crisis occurs and then scramble to clean up the mess. “From my experience 95% of U.S. companies are either completely or seriously unprepared to manage a crisis,” says Jonathan Bernstein, president of Bernstein Crisis Management Inc., Sierra Madre, Calif.
Small to midsized firms are particularly vulnerable, because they lack the board of director’s guidance provided to their larger counterparts. Busy putting out daily “fires” and handling pressing tasks, owners and managers rarely put the time necessary into proactive thinking and planning on the crisis management front. Unfortunately, that way of operating puts manufacturers in a bad position when a product fails, a public relations debacle surfaces or a natural disaster occurs.
“If a big firm is hit, it may have the deep pockets to survive the crisis,” Bernstein adds. “On the other hand, a single, nasty crisis – whether it is a reputation issue or the loss of physical facilities – can be downright devastating for the smaller manufacturer.”
Awareness of the need for solid crisis management planning has grown over the past few decades. Events like the Tylenol capsule poisoning, the millions of gallons of oil dumped into the oceans by major oil companies, the extensive damage caused by Hurricane Katrina, and the earthquake and tsunami in Japan have all taken their toll on North American businesses.
Last year, the global crisis management sector hit a new low record when it posted total losses of $265 billion for the first two quarters of 2011 alone. That exceeded the previous record of $220 billion set in 2005, according to Munich Re, a global firm that insures insurance companies. A significant portion of that impact can be tracked right down to the state, regional and local levels, where companies of all sizes and across all industries reported operational and revenue losses as a result of the events.
Digging down into the precast industry, there are several situations that call for solid crisis management planning. Here are a few examples that could crop up on any given day:
• A newspaper reporter calls your plant’s main phone number saying that an environmental group is targeting the area’s biggest polluters and your plant is on the list because you use cement.
• One of your drivers overturns a load of precast on the highway and a reporter is on the phone with one of your top salespeople.
• You have a serious accident at the plant and a worker goes to the hospital.
• A camera crew shows up unannounced at the plant office and asks to shoot some “B” roll footage.
• OSHA shows up with a local reporter trailing along, looking for information about just how safe your plant is for workers.
• Immigration conducts a raid at your plant based on information it received on your employment rolls.
• A precast panel you manufactured 10 years ago falls off the top of a building and kills someone.
• A bridge piece fails and the contractor is blaming faulty precast construction for the problem.
The list of possible scenarios a precaster faces is virtually endless. In each of these incidences, your employees, family members (particularly when an accident has occurred), the media, the community and the regulatory bodies will be looking for answers.
When the questions arise, Thomas S. Paccioretti, principal at Newport Beach, Calif., crisis management consultancy Broadway Advisors LLC, says honesty is the best policy. “Tell the truth,” says Paccioretti. “Tell it all and tell it now.” In the case of product liability issues, for example, he says any lies or untruths that are told will eventually come back and cause even greater problems for the manufacturer.
“Even if the truth is, ‘We didn’t know anything about it,’ tell it like it is,” Paccioretti advises. “Your company may still take a hit in terms of lost revenues and customers, but you can salvage the situation over time if the people around you know that you told the truth.”
Strong alliances pay off
At Sherman-Dixie Concrete Industries Inc. in Nashville, Tenn., John Higgins II, director of operations, says his team keeps a close eye on potential threats to the firm’s health. With 300 employees working at 10 locations in four states, Higgins says the precaster has formed strong alliances with local firms that can “kick into gear” when equipment failures, power outages or other crises threaten Sherman-Dixie’s operations.
“We recently had a mixer go down at one plant that wound up unable to make concrete,” says Higgins. “We reached out to our contacts at local ready-mix companies and got production back online within an hour.” The precaster used a similar strategy when a bridge crane ceased operation recently at one of its Tennessee plants.
“We called a crane company that brought in the equipment we needed to be able to get by until ours was repaired,” says Higgins. “Through advanced planning we’ve found very effective ways to maneuver around catastrophic equipment failures.”
On the PR front, Higgins says all media-related phone calls are routed to the firm’s corporate offices in Nashville. “If something is going on that would garner media attention, our employees know not to talk to reporters,” says Higgins. “All of our plants are within three hours drive-time from one another, so I and/or our owner can mobilize quickly to deal with such issues.”
To other precasters who are assembling their own crisis management plans, Higgins says to start by looking at the critical areas of the factory and then seeking outside partners who can help when those critical functions fail to operate as expected. “When we acquire a new facility,” says Higgins, “the first thing we do is look at which local firms can help us out when something goes wrong.”
Creating a roadmap
A crisis management plan is something that Bernstein says every manufacturer should have in place. Formulating such a plan needn’t be expensive or time consuming, but there are several elements that must be included in order for it to be effective. “It is far more cost- and resource-effective to prevent crises, or minimize the chances of crises occurring, than to merely respond to them,” says Bernstein, who divides the crisis planning process into the following four major components:
1. Vulnerability/risk assessment: A multidisciplinary risk assessment determines current and potential areas of operational weakness and strength and solutions, because identified weaknesses may result in emergencies or crises of varying magnitudes if not corrected. When working with clients, Bernstein’s team examines every functional area of an organization to identify anything that could lead to a significant interruption in business and/or reputation
2. Analyzing and reporting results/writing crisis plan: Once the vulnerability/risk assessments are conducted, firms should use the results to identify challenges to effective crisis prevention and response – human or systemic – and come up with ways to overcome those challenges. Mobilize a crisis communication team (made up of key managers, owners and employees) to review and modify the recommendations. The team should also discuss scenarios that are most likely to affect the organization and come up with a final list of “most likely” scenarios. Using that information, the team should create a manual that will “guide the entire organization in the communication aspects of responding to crisis situations,” says Bernstein. Be sure to include clear delineation of individual responsibilities and draft responses that reflect the organization’s values while considering the public’s sensitivities and need to know.
3. Training. Employee and manager training is one of the most important components of any crisis management plan. Break down the training into these categories:
• Executive/management orientation. Most employees at the executive and/or management level know how to prevent or respond to crises operationally but are less certain or even ignorant of how to prevent or respond to crises from a public relations perspective, says Bernstein. He suggests conducting a two- to four-hour training session to prepare senior staff members (and to distribute and discuss the crisis plan).
• Employee orientation. Every employee who will be associated with implementing a crisis plan should receive a basic orientation on the content and purpose of that plan.
• Media training. “A media interview is completely different from any other type of interview with which most people are familiar,” Bernstein warns. “There are different rules, different goals and different ways of exchanging information.” Through proper media training, organizational spokespersons can “optimize the results of anything from friendly to extremely hostile interviews by print, radio or TV reporters,” he adds.
4. Crisis plan testing and validation through emergency exercises and simulations. How well will your crisis plans, and the people charged with executing them, perform when the next crisis strikes? “The best time to answer that question is before the crisis strikes,” says Bernstein, who advises precasters to conduct and/or oversee realistic simulations of crises that could affect the company. The most effective exercises and simulations range from discussions that take place in a meeting room to realistic crisis recreations involving people and equipment at one or more locations. Such drills can be particularly effective, says Bernstein, and should involve management, staff and/or emergency personnel who will test out hypothetical emergencies or crisis scenarios (such as a plant accident or a company-wide power outage).
The precast manufacturer that hits on all four areas listed above is the one that will be best prepared in case of emergency – be it a minor power outage, a product failure or a full-scale natural disaster. Ignore this important aspect of your operations and your firm could wind up dealing with major revenue losses, plant closure, lawsuits and even business cessation.
“Unfortunately, companies are generally underprepared for the adverse circumstances they may face,” says James Lukaszewski, president of crisis management firm The Lukaszewski Group in Mount Kisco, N.Y. He estimates that 75% of Fortune 500 firms lack viable crisis management plans and says simply assessing a business’ day-to-day activities can go a long way in getting the planning process started.
“Look at your precast products and their potential weaknesses and vulnerabilities,” says Lukaszewski. “From there, you should be able to come up with a good idea of what operating problems could result in product failures and then take the steps necessary to mitigate these issues.” Going beyond products, he advises precasters to consider issues like employee violence, sexual harassment and other employee-related situations that could have a severe impact on an individual company.
“Those are the problems most companies are reluctant to prepare for,” says Lukaszewski, “and there’s really no school that teaches manufacturers how to deal with this stuff.”
Finally, Lukaszewski says virtual problems (such as those caused by angry customers blogging online or using sites like Facebook to vent their frustrations) also need to be taken into account in today’s information age. “The Web is a huge deliverer of bad news and anger and serves as a platform for people to complain, bellyache and adversely impact companies,” says Lukaszewski. “Don’t forget to factor this into your firm’s crisis management plan.”
Getting Management On the Ball
James Lukaszewski, president of crisis management firm The Lukaszewski Group, says prompt, effective crisis response depends on five essential responsibilities that must be carefully spelled out for top executives. He breaks these responsibilities down as follows:
1. Assert the moral authority expected of ethical leadership.
No matter how devastating a crisis is, in most cultures forgiveness is possible provided the organization, through its early behaviors and leadership, takes appropriate and expected steps to learn from and deal with the issues.
2. Take responsibility for the care of victims. The most crucial element in crisis management, aside from ending the victimizing event, is managing the “victim dimension” (which includes people, animals and living systems). Top management is responsible for taking appropriate steps to care for their needs.
3. Set the appropriate tone for the organizational response. Tone is determined by management behavior and helps the organization meet the expectations triggered by a crisis. If senior management is defensive, the entire organization will be too.
4. Establish the organization’s voice. Put a face and a voice on the organization as it moves through the crisis for external audiences. Tell how you describe the organization, what you are doing, how the response is going, what responsibilities you are taking and what outside scrutiny you are inviting. Use positive language, be helpful and suggest early resolution. Avoid demeaning or discrediting anyone.
5. Lead at every level. Leaders need to act like leaders during urgent situations. Have leaders walk around and talk to people. Focus everyone on the ultimate response process goals. Ninety percent of senior executive activities should have executives out being leaders and motivators of empathy, not huddling in their offices.
Bridget McCrea is a freelance writer who covers manufacturing, industry and technology. She is a winner of the Florida Magazine Association’s Gold Award for best trade-technical feature statewide.