Magazine article Risk Management

Corporate Crises in the New Media World

Magazine article Risk Management

Corporate Crises in the New Media World

Article excerpt

Richard Levick is an expert on corporate crises and reputation management. He helps companies manage these issues as president and CEO of Levick Strategic Communications and, last fall, wrote a book on the topic, The Communicators: Leadership in the Age of Crisis. We recently spoke with Levick about how companies can navigate a crisis in 2011.

RM: What is the difference between an organization that navigates a crisis well and one that is forever blemished?

Richard Levick: There are common patterns between why companies succeed and fail during crisis. The first is fear. A company is used to being the engine of capitalism: supplying the jobs, being a great partner in the community, adding to stock value. And then, suddenly, you are the villain in the Shakespearian tragedy. That emotional issue is much bigger than people realize. When CEOs and boards are suddenly thrust into that negative limelight, they tend to become paralyzed. And those first 24 or 48 or 72 hours are critical in determining the narrative. So fear is a huge factor when it makes organizations think that they can do nothing and everything will probably go away.

The second factor is "what got you here won't get you there." What that means is that companies often think, "let's do all the things that we did during peacetime and hopefully that will work well here. As long as we have good quarterly results, everyone will forget." That, of course, is not the truth.

Probably the best example of this is Martha Stewart. During peacetime, she built her brand by being aggressive, uncompromising and doing it her way. Brilliant strategy to build a brand, but not a great way to negotiate with the Securities and Exchange Commission. I can just imagine her conversations with [her defense attorney] Bob Morvillo saying "No, I'm not cutting a deal with the U.S. government because I'm innocent." Well, sorry, but perception always trumps facts. So what got you here won't get you there.

The third thing is "why we can't." What happens during a crisis is that the smart CEO puts together a crisis team including in-house counsel, outside counsel, HR, government relations and corporate communications, and asks them "what should we do?" And any time anyone suggests any course of action, someone in that very smart group says why we can't.

Counsel tells you why you can't for legal reasons, financial tells you why you can't for stock reasons, HR tells you why you can't because it will be hard to communicate internally, etc., etc. No one is willing to make a sacrifice. And in a crisis, particularly if it involves Washington, the Gods of Washington always demand a sacrifice.

So corporations must decide what that sacrifice will be. Is it a product? Is it a brand? Is it an entire company within our company? If you make a sacrifice, the story goes away.

You need look no further than what Speaker of the House John Boehner did with Congressman Chris Lee [after Lee was mired in controversy related to a shirtless photo of him that surfaced online]. What does he do? He makes the sacrifice.

From Speaker Boehner's point of view, the brand is the Republican party. He doesn't want Congressman Lee hanging around and this, for weeks on end, becoming the story instead of health care or tax cuts or deficit cuts. So he says, make the sacrifice; make the Congressman go away. That comes from acting quickly. It was a very smart move.

But in a crisis, someone is always saying why you can't. Well, you can't because that's the guy's job. You can't because he was fairly elected. You can't for all sorts of reasons. But you have to move very quickly.

RM: But there are often legitimate legal and other realities to consider. How do you balance that--the real concerns from the "no you can't" side with the need to act quickly without making missteps? Is it more art than science?

Richard Levick: It is more art than science. …

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