The Conference Board Governance Center Blog

Mar
02
2011

Guest Contributor: A How-To on Crisis Management for Boards

GUEST CONTRIBUTOR POST: Suzanne Hopgood is a former crisis CEO and/or board member of public and private companies, several of which were under investigation by the SEC, DOJ, DOD and IRS. She is also co-author of Board Leadership for the Company in Crisis and former managing director of advisory services for the National Association of Corporate Directors (NACD). This post is exclusive to The Conference Board.

By Suzanne Hopgood

While we’re all focused on the new SEC Whistleblower Bounty Program regulations, that is probably not what constitutes the greatest risk to a company.

It remains highly unlikely that an employee who is supporting a family will risk disclosure and his or her job to alert authorities to wrong-doing in the organization.  Secondly, there is a much greater incentive to contact the SEC if the wrong-doing is substantial, resulting in a meaningful award.  If it is substantial, it generally means that it has been in process for a long time. However, companies really want to be aware of wrong-doing long before it reaches that level of materiality and that speaks to a culture within the company of sharing concerns and being rewarded for sharing those concerns.  That requires building trust and a culture of integrity over many years.

If that strategy has failed and the company is faced with an SEC investigation, in today’s environment of transparency and enhanced communication it has become even more important for boards to embrace a crisis plan that includes an efficient and immediate communication system. Not being prepared increasingly means making the company’s reputation vulnerable to reports by the mainstream media and  the growing number of social media sites. The latter group can easily take over instant communications to the outside world, resulting in the spread of false, biased, and /or inaccurate information about the company. The negative impact this trend can have on a firm’s reputation with consumers, shareholders, vendors, and employees should be reason enough for a company to review their communication strategy as part of its crisis plan.

A crisis plan is a strategy to address any crisis.  The crisis will probably never be what the plan entailed, but it will provide the blueprint for the team to act quickly.  Key preparation pieces include identifying the team and conducting a practice drill to identify gaps in the strategy.

The following elements are key:

  1. The crisis team should be identified and familiar with the company. This includes having an outside public relations firm, which may be called upon to craft the company’s message. It also includes a criminal defense lawyer along with the company’s lawyer. When a crisis hits is not a good time to be Googling “criminal defense lawyer” or “public relations firm.” The crisis team should consist of senior management, the CEO, board spokesperson, who may or may not be the chairman, the audit partner, criminal defense attorney, a crisis expert from a communications agency, company counsel, and any other critical experts. Most importantly, 24/7 contact information for all team members needs to be part of the process. They should all be engaged in a mock crisis drill.
  2. The crisis team members should understand their roles in a crisis. For instance, someone needs to be in charge of communication with the company’s constituents such as employees, vendors, shareholders, government agencies, etc. The CEO needs to be the spokesperson and, therefore, should be professionally trained to communicate with the press. If the CEO or CFO are implicated in the crisis, however, that responsibility may fall to a designated board member, who should also have been professionally coached.
  3. The communications blueprint might include a website that can be used in a moments notice and carry the key messages and information the company wants to disseminate quickly. Having a sample of a variety of messages saves time as well.
  4. A blueprint of how to handle a crisis should be part of the plan, but more importantly, discussing the actions and having a mock crisis drill imbeds those procedures in the team participant’s minds. An effective crisis plan is one that’s discussed and practiced.
  5. Document retention is a key  message.
  6. As part of crisis planning, identifying the risks that may lead to a crisis has much focus today.  How thorough is that risk identification process? With Wikileaks’ recent disclosures, are we and should we be thinking about security differently? These questions and answers have an impact on the degree of risk a company has.

A crisis has two pieces: the crisis itself and how the company handles the crisis in protecting the company’s reputation. Frequently the crisis communication professionals are not in the room when communications are being drafted.  Communications is frequently left to the lawyers, who are often focused on protecting the company from damaging litigation. They may not be focused on how the customer is reacting to the communications and how that will impact the long-term reputation and future success of the company.

With advance planning, the crisis team has the ability to address the crisis rather than planning  & acting simultaneously. Planning in a calm environment minimizes the number of mistakes that will be made and gives the company a much better chance of survival, managing reputational risk, and success.



You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Guest Contributor: A How-To on Crisis Management for Boards”

  1. […] A crisis plan is a strategy to address any crisis.  The crisis will probably never be what the plan entailed, but it will provide the blueprint for the team to act quickly.  Key preparation pieces include identifying the team and conducting a practice drill to identify gaps in the strategy. (continue reading… ) […]

Leave a Reply