SmartCompany’s nuts and bolts guide to handling a PR crisis (with help from a CEO who has survived the worst-case scenario). By EMILY ROSS
By Emily Ross
SmartCompany’s nuts and bolts guide to handling a PR crisis (with help from a CEO who has survived the worst-case scenario).
One minute Melbourne toy company Moose Enterprise was the darling of the toy world. In 2007 it won the Toy of the Year award for its Bindeez beads, selling 1.5 million units in less than six months, and revenue was up 107% for the 2006-07 financial year.
Then on Melbourne Cup day, November 2007, Moose chief executive Manny Stul received a phone call. A child was in hospital after swallowing a Bindeez bead. Traces of the rave and date rape drug gamma-hydroxy butyrate (GHB), also known as fantasy or Grievous Bodily Harm, had been found in Bindeez.
The press was all over the story, and it had all the tabloid elements – kiddies, scary drugs, made-in-China toys and hospitals. In the following days, nine children around the country would be hospitalised.
As well as the media frenzy, the company was facing operational nightmares – handling the logistics of an international recall, thousands of phone calls from worried consumers, dealing with regulatory authorities. It was the worst situation Moose Enterprise had ever had to deal with.
Within 24 hours of the crisis, Stul had called in Melbourne-based PR firm Royce, which has dealt with PR dramas from peanut butter recalls through to nursing home s?x attacks.
It was time for major damage control. The Bindeez PR action plan included immediately issuing a press statement announcing a voluntary recall of Bindeez. A call centre was set-up, a customer service team was trained, a website created, and retailer and consumer bulletins were released.
Moose Enterprise was swamped with customers wanting their money back (and was still catching up on refunds in January 2008).
While the recall was being managed, Moose was planning to relaunch newer, safer bead toys, Beados. Moose Enterprise had to implement new safety and testing procedures including stricter controls and auditing of supply chain processes, extensive testing on all batches of production and an addition of a bitter agent to stop children eating the beads.
For Manny Stul (pictured) there were many hard tasks. In particular the sheer size of the recall both in Australia and overseas, and trying to get the product ban lifted in Australia and China.
This experience has taught Stul that you can never be too careful. Nowadays, his crisis plan includes having a second factory in mind that can takeover production if the need arises; having a one-page checklist of what to do if experiencing a recall (that is, establish recall website, set up free-call number, appoint call centre, provide regular media updates, brief staff and so on). He also has a list of key people and emergency numbers on hand.
Moose Enterprise is still adding up the costs of the crisis. It’s too early to put a figure on it, and Stul admits it is “huge”, but his investments in a crisis management team and a “good lawyer” were, in his opinion, essential. The company is planning litigation against the manufacturer, which should add to the bills.
But there is some good news. The popular bead toy is far from dead. At a toy trade show earlier in April this year, the new safer toy Beados was hotter than ever. Moose Enterprise has been flooded with orders and the new Beados should be in stores later this month. Not a bad ending to a dramatic chapter in the life of Moose Enterprise.
1. A crisis is an issue ignored. Know your company’s issues.
Developing strategies to the company’s worst-case-scenarios before they happen should be a priority in risk management.
2. Be prepared and create a crisis management team.
Every company needs a crisis plan so that a bad situation doesn’t turn into a disaster. “Sit down and ask ‘what sort of crisis could hit our business?’,” says Royce’s Peter Mahon. List likely scenarios and potential damage. Work out a strategy for key stakeholders and have the plan legalled. Stul’s crisis to-do list and contacts list must be ready too.
3. Make sure all staff understands protocol.
Who is authorised to comment, who isn’t? Make sure this crisis road map is clearly understood at all levels of the company.
For the Bindeez crisis, Stul was overwhelmed by his staff’s commitment. “We found that everyone snapped into gear and worked around the clock to ensure we were getting everything done immediately and efficiently. Having your staff’s understanding, co-operation and dedication is very important because it influences other factors.”
4. Act quickly.
5. Prepare key messages for all stakeholders.
Statements should include information about what has happened, what the company is doing about it and how it is co-operating with relevant authorities. The media will go elsewhere to fill the story if you won’t talk, and it is likely they will use pictures of closed company doors, executives walking off muttering “no comment”. Not a good look.
Prepare the statement and practice those messages (even if only for five minutes) to make sure you can communicate clearly and effectively.
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6. Don’t appoint an underling to make statements.
7. Don’t be afraid of the pack.
Just because a camera and/or microphone are shoved in your face, it doesn’t mean you have to make a comment then and there. If you need to get more information, say so and agree on an interview time. Then stick to your word.
8. Show empathy and genuine concern for people involved in the crisis.
Commercial litigation lawyer, Freehills partner Mark Darwin, confirms that under Queensland law, an expression of regret for an incident or adverse outcome (as long as it is not an admission of responsibility) cannot be used as an admission of liability in the future and affect potential insurance claims. There are similar laws in other Australian states.
9. If you lose the trust of the public, they will lose trust in your brand.
“You can recover from short-term cash flow implications of a crisis,” says Darwin, “but you can’t recover from long term loss of consumer confidence in a brand.” Think about reputational risk, not just financial impact.
10. Make sure your customers/clients can reach you.
Consider having a good relationship with a call centre in case it might be needed in an emergency. Says Mahon: “In a crisis, call centres are a marvellous way of gaining feedback about what the community is thinking.”
11. Stay calm and in control.
Bill Shorten’s handling of the Beaconsfield mining disaster when he was secretary of the Australian Workers’ Union is a case in point. His calm, sincere, empathic and pragmatic approach greatly added to his reputation. Since Beaconsfield he has been elected to Parliament.
Emily Ross is the co-author of 50 Great e-Businesses and the Minds Behind Them. She also works in crisis management as an executive trainer with Media Manoeuvres www.mediamanoeuvres.com.au
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
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