Can businesses effectively prepare for the unpredictable?

Executive Summary

For CEOs, the world is a scary place. Growing technological complexity, the advent of an interconnected global economy in which a disaster in one region can reverberate in others, and the increased use of social media contribute to the number of crises that businesses face. How a company limits the damage is the focus of the burgeoning field of crisis management—a field that did not exist 25 years ago. Crisis managers agree that executives should plan for crises long before encountering any and strive to build an organization that is less vulnerable to them. But many note that planning will get a company only so far; the unexpected things that can go wrong are too great. Experts disagree about the importance of public communication: Does apologizing for a mistake help? It can, but only to a degree. As one expert put it, when a crisis hits, CEOs “pretty much have to accept that you're going to lose,” at least in the short run.

Resources

Bibliography

Books

Dezenhall, Eric, “Glass Jaw: A Manifesto for Defending Fragile Reputations in an Age of Instant Scandal,” Twelve, 2014. A professional crisis manager explains how situations can spiral out of control on social media and the Internet and suggests containment strategies.

Diermeier, Daniel, “Reputation Rules: Strategies for Building Your Company's Most Valuable Asset,” McGraw-Hill, 2011. A University of Chicago professor of public administration argues that active attention to building a strong reputation is crucial and describes potential sources of reputational risk.

Articles

Eaton, Colin, “Oil spill legal worries still haunt BP investors,” http://FuelFix.com, Oct. 13, 2013, http://tinyurl.com/ln3lmo8. Uncertainty about the final legal and regulatory fallout from BP's 2010 oil spill will continue, perhaps for many more years, making potential investors wary.

Goodman, Peter S., “In Case of Emergency: What Not to Do,” The New York Times, Aug. 21, 2010, http://tinyurl.com/ktafhxv. Several top crisis managers discuss communications and other errors committed by companies and individuals involved in some recent high-profile crises.

Halzack, Sarah, “Home Depot and JPMorgan are doing fine. Is it a sign we're numb to data breaches?” The Washington Post, Oct. 6, 2014, http://tinyurl.com/ntlhh3c. Security breaches compromising customer data are increasingly seen as a source of business crises, but the public may be less concerned than thought about such incidents.

Heineman, Ben W. Jr., “Crisis Management Failures in Japan's Reactors and the BP Spill,” Harvard Business Review blogs, March 17, 2011, http://tinyurl.com/mxc9uls. A senior fellow at Harvard Law School and former General Electric general counsel argues that clear lines of responsibility have been lacking for crises caused by the failure of complex technology but are particularly needed in such crises.

Moore, Derek, “Crisis Management planning – like painting the garden fence?” TTG Digital, Aug. 4, 2014, http://tinyurl.com/lpxeb6d. Managers of small but complex businesses, such as in the travel industry, often ignore crisis preparation at their peril.

Olenski, Steve, “Nearly Four Years After Deepwater Horizon, Has BP's Brand Image Recovered?” Forbes blogs, Jan. 24, 2014, http://tinyurl.com/kua63j2. A commentator argues that BP's reputation with retail customers will improve over time because younger consumers will be less and less familiar with the 2010 Gulf of Mexico oil spill.

Temin, Davia, “The Role of Boards in Crises: 10 Steps For Directors Before, During And After Crisis,” Forbes blogs, Oct. 8, 2014, http://tinyurl.com/p43xz8x. Board members of for-profit and nonprofit organizations should become much more involved in monitoring crisis risks and managing existing crises, according to a crisis management strategy consultant.

Washkuch, Frank, Diana Bradley and Lindsay Stein, “Crisis experts: Malaysia Airlines had to respond where news is breaking – on Twitter,” PR Week, July 17, 2014, http://tinyurl.com/pzj5rjp. Crisis announcements are now appropriately made on Twitter, experts say, but the medium's brevity demands care.

Reports and Studies

“Profit and Principles – does there have to be a choice?” Royal Dutch Shell, 1998, http://tinyurl.com/pyds7gx. In the wake of activists' attacks on its environmental and human-rights records, the Shell oil company touts its commitment to socially responsible operations.

Barrage, Lint, Eric Chyn and Justine Hastings, “Advertising, Reputation, and Environmental Stewardship: Evidence from the BP Oil Spill,” National Bureau of Economic Research, NBER Working Paper No. 19838, January 2014, http://tinyurl.com/m3nlo2r. Economists find that BP's “green advertising” campaign conducted in the years before the 2010 Gulf of Mexico oil spill helped the company retain retail sales and market share after the crisis.

Smith, N. Craig, Sean Ansett and Lior Erez, “How Gap Inc. Engaged With its Stakeholders,” MIT Sloan Management Review, June 22, 2011, http://tinyurl.com/n4uvdj2. The company found that monitoring did not stop labor and human-rights violations in its foreign factories, but setting up two-way communications channels with workers' rights and other foreign groups to proactively identify problems proved more successful.

Valukas, Anton R., “Report to Board of Directors of General Motors Company Regarding Ignition Switch Recalls,” Jenner & Block, May 29, 2014, http://tinyurl.com/k24ybmu. Internal investigative report on General Motors' 2014 ignition-switch recall crisis describes long-running cultural problems in the company.

The Next Step

Activist Campaigns

Horovitz, Bruce, “Subway to remove chemical from bread,” USA Today, Feb. 10, 2014, http://tinyurl.com/l6l8794. Subway said it will remove a chemical ingredient from its bread that is also used for elasticity in yoga mats after a petition launched by a health activist and food blogger gathered 58,000 signatures.

Kitroeff, Natalie, “Activists Fight Merger of Two Companies Accused of Preying on Students,” Bloomberg News, Jan. 26, 2015, http://tinyurl.com/kdgku4f. A $24 million merger between two student loan companies has stalled for more than a month after activists and members of Congress expressed concerns over unfair company practices.

Sullivan, Tom, “Lego to drop Shell partnership bowing to Greenpeace pressure,” Agence France-Press, Oct. 9, 2014, http://tinyurl.com/kdxxms7. Lego plans to end its marketing partnership with Shell after pressure from Greenpeace activists, whose popular videos linked Lego's toys to Shell's environmental pollution.

Executives

Devitt, Polina, “Weak rouble helps Russia's Norilsk weather metals fall-CEO,” Reuters, Jan. 23, 2015, http://tinyurl.com/lcoa8du. The CEO of a Russian metal company said he was unconcerned about the political unrest in Ukraine and declining metal prices because depreciation of the Russian ruble stabilizes any effects on company revenues.

Kapner, Suzanne, “American Apparel CEO Made Crisis a Pattern,” The Wall Street Journal, June 25, 2014, http://tinyurl.com/lkcg6zt. Former American Apparel CEO Dov Charney's personal handling of the company's finances, combined with a series of high-profile scandals, pushed the company into an ongoing pattern of crisis.

Vlasic, Bill, “G.M. Chief Steps Up to Handle Safety Questions,” The New York Times, March 18, 2014, http://tinyurl.com/kbf6bp4. Newly appointed General Motors CEO Mary Barra quickly shouldered blame for vehicle recalls and faulty ignition switches by publicly responding to the media and federal officials.

Public Relations

Halzack, Sarah, “Publix is looking for a crisis PR agency — just in case it gets hacked,” The Washington Post, Oct. 8, 2014, http://tinyurl.com/kfxbyrg. The supermarket chain Publix hired a public-relations firm to prepare for a crisis resulting from a potential large-scale data breach of customer information.

Kristobak, Ryan, “Sony Hires Olivia Pope Inspiration Judy Smith To Handle ‘Interview’ Runoff,” The Huffington Post, Dec. 21, 2014, http://tinyurl.com/pvempna. Sony hired one of the nation's top public relations professionals to protect the company's reputation after a data hack leaked sensitive company information and led Sony to cancel the premiere of “The Interview.”

Terlep, Sharon, “NFL Draws Up a New Defensive Scheme,” The Wall Street Journal, Sept. 26, 2014, http://tinyurl.com/mf2oe67. The National Football League turns to a Washington-based public-relations firm for help handling an evolving crisis related to its investigation of a player's domestic violence case.

Social Media

Dennys, Harriet, “Sainsbury's mocked for ‘Fifty Pence Challenge’ to boost profits,” The Telegraph, Sept. 30, 2014, http://tinyurl.com/mj6tslt. U.K.-based supermarket chain Sainsbury's responded via Twitter to users mocking the company after it accidentally displayed a staff poster directing employees to encourage additional customer spending.

Einhorn, Bruce, “AirAsia CEO Turns to Twitter for Crisis Management,” Bloomberg News, Jan. 5, 2015, http://tinyurl.com/owzgos8. AirAsia chief executive Tony Fernandes continually tweeted his support for families and staff after one of the airline's planes crashed near Indonesia on Dec. 28, 2014.

Marinucci, Carla, “Social media shifts rules for PR crises,” San Francisco Chronicle, Feb. 17, 2014, http://tinyurl.com/b64vwqd. Crisis communication specialists' responsibilities have shifted from responding to crises after they happen to anticipating them before they occur, according to a former communications director for ex-California Gov. Arnold Schwarzenegger.

Organizations

Bernstein Crisis Management Blog
Bernstein Crisis Management Inc., 700 S. Myrtle Ave., #404, Monrovia, CA 91016
626-825-3838
www.bernsteincrisismanagement.com
Blog by crisis manager Jonathan Bernstein about crisis news.

Corporate Watch
c/o Freedom Press, Angel Alley, 84b Whitechapel High Street, London, E1 7QX, United Kingdom
+44 (0)207 426 0005
www.corporatewatch.org
Liberal nonprofit that tracks trends in activist and public anti-corporate views.

The Crisis Blog
http://thecrisisblog.tumblr.com
Blog by author Steven Fink that discusses crisis news.

Institute for Public Relations
2096 Weimer Hall, Gainesville, FL 32611-8400
352-392-0280
www.instituteforpr.org
Nonprofit foundation that supports and promulgates research on crisis management, corporate social responsibility and reputation management.

International Crisis Management Association
Sovereign Court, 230 Upper 5th St., Milton Keynes, MK0 2HR, United Kingdom
www.icma-web.org.uk/index.html
International nonprofit membership organization that promulgates research and education on disasters and disaster management.

National Communication Association
1765 N St., N.W., Washington, DC 20036
202-464-4622
www.natcom.org
Scholars' group that supports research and learning on communications, including crisis communication.

Public Relations Society of America
33 Maiden Lane, 11th Fl., New York, NY 10038-5150
212-460-1400
www.prsa.org
Membership society for public-relations professionals, including crisis management specialists.

Steelhenge Crisis Thinking
16 St. Martin's Le Grand, 6th Fl., London, EC1A 4EN, United Kingdom
+44 (0)207 871 1565
http://crisisthinking.co.uk
Blog by staff of U.K.-based crisis consultancy group.

DOI: 10.1177/2374556814563286