Crisis Management

In a world of scandals, containing the damage becomes a full-time job.

At one point in the late ’70s, McDonald’s found itself with a lot on its plate—and none of it tasty. A rumor was spreading that its hamburgers contained—gulp—crushed earthworms. There was nothing to the claim, but that hardly mattered. The fast-food chain had a crisis on its hands.

Rather than sit back and pray for the problem to go away, the company issued a statement that would make crisis-communications specialists proud. It noted that the going price for night crawlers was $3.50 a pound, compared with 39 cents a pound for ground chuck. It did the trick; the rumor drifted away.

Not all crises are handled as adroitly, and bad publicity—justified or not—can irreparably damage companies if they respond inadequately. Napoleon once said, “Four hostile newspapers are more to be feared than 1,000 bayonets.” In today’s 24-hour media world, crisis specialists take those words to heart. Crisis communications, which was still a specialty service in 1983, when Tylenol tampering caused seven deaths in Chicago, has blossomed into an established field, with lawyers scrambling to open their own shops and no PR firm daring to admit it doesn’t “do crisis.” PR professionals now recognize that the way a crisis is handled can often have a greater impact on a company’s image than the crisis itself.

Helio Fred Garcia, a professor of management and communications at New York University who runs his own crisis-communications shop, says crisis specialists are needed today more than ever. “What we have found in the last two years is an unprecedented convergence of factors that have driven public confidence down,” he says. “I call them the Four Horsemen of the Apocalypse—war, recession, corporate corruption and the sexual abuse scandal in the Roman Catholic Church.”

While the growth of the field is difficult to quantify, signs of its newfound popularity abound. Just this fall, crisis communications was added to the curriculum at NYU’s Stern School of Business. Crisis counselors, who once reported to the head of marketing or PR, now speak directly to the CEO. Beleaguered CEOs no longer rely solely on the advice of lawyers to get them out of jams. Saudi Arabia is even using crisis experts to improve relations with the U.S. “I tell people, ‘I am in the crisis-management business, and the bad news is business is great,’ ” Garcia says.

Albert Tortorella, managing director of the global corporate practice at Ogilvy Public Relations, thinks crisis counselors should throw out the textbooks. “The case history, which is used so often to teach in this area, is virtually useless in modern crisis management,” says Tortorella, who worked on the Tylenol scandal. “The idea that a Tylenol, where seven people died, can be compared to the Exxon Valdez, where no one died, is an indication that the case history can’t be used.”

Still, experts agree, a few general guidelines are worth following. First, companies should always respond to a crisis in some way. Staying silent opens the door for rampant speculation. Second, don’t admit wrongdoing or apologize out of hand to gain sympathy. It can backfire—and be unwise legally. Third, if contrition is required, don’t couch it in defiance—a lesson Bill Clinton may have learned but Arthur Andersen didn’t. And finally, be careful which clients you take on. Qorvis Communications, for example, the Washington, D.C., firm hired to improve Saudi Arabia’s image in the U.S., found itself subpoenaed by Congress as a result of the relationship.

The classic mistake is remaining silent and “not being aggressive when a situation calls for it,” says Judy Smith, a partner at Weber Merritt & Smith, part of Omnicom Group’s Clark & Weinstock, who once represented Monica Lewinsky and the family of Chandra Levy. Martha Stewart is a perfect example. The home maven came under fire in February 2002 following the disclosure of a questionable stock sale, but she did not publicly deny wrongdoing until June. And not until her indictment this summer did she take her case directly to the public in the form of a Web site and a full-page ad in USA Today in which she proclaimed herself innocent of conspiracy, obstruction of justice and securities fraud.

“Let’s say she did nothing wrong,” says Frank Kauffman, svp and partner at Fleishman-Hillard in New York. “She should have been out there communicating about her position so that others wouldn’t fill the information vacuum. But she didn’t do that, and in the process, she has heavily damaged herself and her corporation.”

Katie Paine, CEO of her own Durham, N.H., firm, Katie Paine & Partners, says Stewart left herself open to a full year of bad press. “The press has no place else to go, except to other image experts or to the prosecution, so she loses control of her message,” Paine says.

At the same time, Paine thinks Martha Stewart Living Omnimedia will survive. “They have correctly educated the public that there is a difference between the product and the person who may go to jail,” she says. “The public is still buying her sheets and watching her TV program, and that is astounding.”

Paine does give kudos to Stewart’s New York PR firm, Citigate Sard Verbinnen, owned by Incepta Group in London, for some of its strategy. As part of her defense, Stewart accused the government of targeting her because she is a celebrity and a woman. “That was very clever,” Paine says. “It won her some sympathy.”

But speaking up doesn’t always mean admitting wrongdoing. “The biggest danger in this business is to be cookie-cutter,” says Robert Chlopak, a partner with Washington crisis counseling firm Chlopak, Leonard, Schechter and Associates, which has worked for the American Red Cross and Arthur Andersen. “If you are under investigation or charged, then your reputational strategy has to be in line with your legal strategy, which is to maintain your innocence.”

Chlopak cites his firm’s work for Arthur Andersen as an example of a case that doesn’t fit the conventional rules. Andersen initially saw an advantage in voluntarily admitting to the Department of Justice that it had shredded Enron documents. “You acknowledge something happened, but you are trying to explain why that doesn’t amount to criminal behavior,” Chlopak says.

The strategy did not save the firm, but Chlopak says it was the right call. “In a situation where the facts are against your client or you have prosecutors who are determined to make an example of your client, there are limits on how much of a difference good communicators or even good lawyers can make,” he says.

Given the complexity of cases like Arthur Andersen’s, Chlopak tells clients, “If a crisis firm comes to you and says, ‘Here are the 12 rules we use for handling crises,’ end the conversation quickly, and go get a real crisis firm.”

What kind of person works in crisis communications? “Someone who likes hand-to-hand combat every day,” laughs Smith, who has had to do plenty of sparring on behalf of Detroit mayor Kwame Kilpatrick. Last spring Kilpatrick was accused of hosting a wild party with nude dancers where an assault allegedly occurred and of firing a deputy police chief who was investigating accusations of drunken driving among Kilpatrick’s bodyguards. (The Michigan attorney general has cleared the mayor of wrongdoing, although the state police are still investigating.)

Once, Smith says, Fox News called to say it planned to run a story on an alleged connection Kilpatrick had to a Detroit man arrested on drug charges—based on a photo of the two shaking hands. Smith says the photo was from a meet-and-greet and that Kilpatrick didn’t know the man. The worst thing to do, she says, is to let charges go unanswered. “Allegations become facts, and facts become truth in the eyes of the public, whether they are true or not.”

In the Levy case, Smith says she knew Gary Condit had had an affair with Levy. “I said, ‘Let’s wait for the right moment to put out the evidence, which will then put pressure on law enforcement to question him,’ ” she recalls. When the time was right, Smith got Levy’s aunt to give an exclusive interview to The Washington Post. Soon enough, the FBI called Condit in for questioning.

Qorvis Communications’ story is perhaps the oddest. After 9/11, Qorvis landed a plum assignment to improve Saudi Arabia’s image among Americans. The country paid Qorvis and its subcontractors $200,000 a month. (Fees generally range from $25,000 to $250,000 a month, depending on the severity of the crisis and the number of people working on it.) But last December, Congress subpoenaed Qorvis managing partner Michael Petruzzello to testify on the issue of American children being abducted and taken to Saudi Arabia by their Saudi fathers. Congress also demanded that Qorvis provide documents relating to the investigation of the missing children—something Petruzzello refused to do, citing the Saudis’ diplomatic privilege.

“My basic reaction was, you are talking to the wrong person,” Petruzzello says. “As much as one doesn’t want to admit ignorance, I had not a clue [about the child-custody issues].”

But Petruzzello knows that it’s not always smooth sailing in his line of work. “We are not dealing with mall openings,” he says. “These are tough, complicated and often very contentious issues. You don’t want to get in the crossfire, but sometimes it happens.”