And have you got the PR skills to contain the situation? We find out why crisis management planning is a lot like sex.

Tuesday, February 22, 2005: a date CFO Jeff van der Eems’ will remember for some time. The Food Standards Agency (FSA) had just issued a new alert on the food dye Sudan 1.

The additive, the FSA had admitted four days previously, was mildly carcinogenic and had found its way into a range of food products. Now that list had been widened to include Walkers Worcester Sauce flavoured crisps.

A product recall was ordered – while the story continued to dominate broadcast news bulletins and newspaper front pages.

Van der Eems is CFO of PepsiCo UK, which owns Walkers Crisps. Suddenly he had a crisis on his hands. “I was away skiing at the time and I got the call from my controller to tell me what had happened,” he says.

“The FSA had informed us very quickly, so we knew what was going on. We have a very well defined plan here at PepsiCo, so that basically swung into action as soon as we heard there was a problem.”

This wasn’t just general management responsibility: van der Eems also leads the crisis team at PepsiCo UK.

“The thinking behind having the CFO involved in any crisis is that he has a joined up view of the business,” he says. “And once we got started, we knew exactly what we had to do: get the product recalled, make the changes to the multi-packs and get the right products back on the shelf as soon as possible.”

After the logistics had been sorted out, it was a question of getting in touch with key stakeholders.

“The most important people to talk to were our customers and consumers,” van der Eems explains. “We made sure our sales team were straight onto their contacts to keep the lines of communication open. We needed the trade to know we were on top of the situation. That was the first big wave of communication in the whole thing.”

While Sudan 1 actually affected only one of PepsiCo’s products (and carries an infinitesimal risk to health, by the way, which is something the tabloids have been very slow to make clear after the sensationalist headlines in February), van der Eems was acutely aware that a sluggish or indecisive approach could be damaging.

The key to a joined-up and calm response? “It’s all about the planning,” he says.

“Being a food business, we do have well-defined strategies in place to deal with precisely this kind of thing. When a crisis hits, you don’t want to be caught designing a battle plan. You want to be implementing an existing plan. And you need to keep it all well delineated.”

Textbook stuff: the PepsiCo response was a model of good crisis management. But what if you don’t have a well-resourced department on hand to deal with a disaster?

There’s a good chance that responsibility for dealing with a business catastrophe will still land on your desk. So what can you do to prepare for an office flood, warehouse fire or PR balls-up?

Michael Bland is a consultant who specialises in crisis management. He advises firms of all sizes on how best to plan for when the worst happens. He says that while attitudes are changing, disaster planning still isn’t seen as a “value-adding” exercise by most chief execs or FDs.

“Crisis management planning is a lot like sex,” he says. “Everyone talks about it a lot, but very few companies actually do it. As FD, you get rewarded for controlling costs and maximising profits, not for the size, scale or effectiveness of your disaster recovery plan.”

But if you’ve helped minimise the impact of a crisis when it does come – well, that’s invaluable.

It’s why Bland emphasises the need for any business, whatever its size, to have at least a rudimentary plan in place. And your input as FD will add a level of authority and organisation to that strategy that other execs may not bring.

“As FD you need to assess the value of reputation – that is what is usually on the line the most in these situations,” says Bland. “Then the first thing when drafting a plan is to get buy-in from everyone in the organisation – from the PR people to the chief executive, legal, sales and marketing and so on.

In many organisations, all kinds of people may want to take responsibility for the disaster plan and this can lead to problems. You get too many cooks and the process gets muddled.”

Want an example of best practice when you’re faced with a public crisis with implications for your reputation? “Look at the recent incident at the new IKEA store in North London,” says Bland.

“They obviously debated the best way to handle the situation and decided grovelling was the optimum strategy. It worked. They got straight on the case and they defused it pretty quickly.”

Of course, it’s not always reputation at risk when crisis strikes. Sometimes it’s plain old commercial disruption. And that requires a different type of planning.

Edward Gower-Isaac is FD at technology provider Pixology. Just before Christmas the company was plunged into disaster recovery mode by a far more prosaic problem than a riot at a store opening.

“We did a major deal with a supermarket to supply PCs and special software to run on them,” he says. “We’d agreed a contract and had the hardware shipped to our warehouse. It was all signed off by the customer, they’d checked the merchandise and all was well.

“Then the warehouse burnt down. It happened the day I was due to go off for my Christmas holiday. I woke up to about a dozen calls telling me what had happened.”

Luckily Gower-Isaac had purchased special insurance to cover the two-week period when the merchandise was under Pixology’s roof.

As part of the cover, he also opted for the add-on of a dedicated loss adjuster. “So the first thing I did was get on the phone with him to sort it out,” he says.

“I also spoke to the customer and the supplier and reassured them that we were handling the crisis properly. The fire also made it onto the news, so we had to make sure we had a consistent story to tell the press.”

Then it was a question of getting Pixology’s operations back on track. This is the kind of thing that business continuity experts are there to help with. Steven Garrod is director of business interruption experts Garrison Continuity.

“You should identify a small team of senior managers or directors – maybe four to six people – who have the skills and knowledge to manage a crisis,” he says.

Like Bland, he stresses the need to have a plan ready to get your ops up and running again and says there are some quick and simple ways of getting your continuity strategy into shape.

“The first section of your plan should deal with problem escalation and emergency response – to make sure managers take hold of the problem and start to deal with it,” he says.

“The next section should outline exactly what needs to be done to recover the most critical business processes. These will be the products or services most visible to the customer, or that generate the most revenue.”

The final part of the plan should contain important reference information such as phone numbers, equipment specifications, pre-prepared press statements, checklists, insurance details and so on.

“This information is probably available elsewhere,” says Garrod. “But it’s worth consolidating into the plan for convenience’s sake. In a disaster, you might find yourself out on the pavement with no access to IT systems or paper files.”

A one-off crisis can be can be handled with good risk management (including insurance – never forget the insurance...), a decent plan and some level-headed thinking by the FD.

But if you want to know how to cope in a state of continual crisis, talk to John Maguire.

He was a young finance exec at Cable and Wireless in the early nineties when the telco was expanding into Yeltsin’s Russia. He’s seen it all – from gun-toting tax inspectors to the parliament building being shelled.

He was more or less in a permanent state of crisis management, dealing with chaotic bureaucracy, unreliable partners and endemic criminality.

But the problems weren’t all “wild east” nightmares. Maguire recalls a headache with a billing system that was due to be flown out to a new mobile network on the remote island of Sakhalin. “But the hardware was too big to fit on the plane,” he says.

“We desperately needed it to begin operations – without a billing system you’ve got no way of making any money. So after panicking a little bit we ended up ringing round and hiring a military transport plane to move the thing. Thankfully we managed to get it over in time and we launched the network on schedule.”

The lesson? “Don’t panic,” says Maguire. “Things are never as bad as they seem. Just keep calm, research your options, think about it and you’ll solve your problems.”

What if you think the crisis is under control, but others don’t? In all the conversations we had with FDs and experts, getting across the “don’t panic” message to everyone else was a constant theme.

Michael Bland urges his clients to get talking.

“There’s a natural human tendency to want to hide in the times of high stress or crisis,” he says. “There’s also an attitude in some companies of, ‘why should we say anything?’ This won’t work and it’s the wrong approach.

“When disaster hits, you need to understand what others are expecting of you. If you were a customer or a supplier, what would you want to see and hear from the firm? It’s difficult but approaching it like that makes a big difference. Others’ perceptions should be your benchmark of how well you’ve handled a situation.”

Sound advice, and something that Edward Gower-Isaac and Jeff van der Eems were at pains to point out.

We also spoke to the FD of a food manufacturing business that suffered a major crisis recently when an employee was injured at work.

Francis Dee (not his real name) agrees that getting your message out quickly and effectively can mean the difference between a drama and a crisis. Failure to communicate – with staff, customers or the press – can make a bad situation ten times worse.

“We had to handle the fallout with customers in a sensible and controlled way – it was important that they heard about the problem from us and not via the media,” he says. “We also had to bear in mind the concerns of employees.

I knew that the issue would not really become a crisis until the media got hold of it, but to me, internal communications were just as important as good PR.”

Mind you, “the best laid plans of mice and men go oft astray...” No matter what time and effort you put into disaster recovery, when a crisis happens you have to expect to be caught out. It’s a lesson John Maguire, now CFO at Scottish telco THUS, learnt well.

“The most memorable example was at the millennium,” he says. “Like most companies worried about Y2K, we’d invested millions in contingency planning. We’d had consultants in for months, just in case the network went down.

“Of course, as we now know, there were almost no Y2K-related problems at all. But then everyone in the country called home right on the stroke of midnight – and crashed the network!”

It’s a good lesson in accepting that some things truly are beyond your control. Looking back, most of our FDs are fairly sanguine about their experiences. There’s a general acceptance that “stuff happens” – but also that going through a crisis can have benefits.

They won’t always be as explicit as they were for the FD who told us about the roof of his company’s building blowing off. “I’d been negotiating with our mortgage lenders for months to reduce our insurance premiums,” he said.

“Their premiums were three times the open market rate, but they wouldn’t budge. Needless to say, the cost of a new roof and carpets, furniture and disruption was a lot more than the premiums! And the improvements to the building enabled us to sell it several years later at a much better price.”

As Gower-Isaac says, “It’s hard to say whether I’m more risk-averse as a result of the fire. But I’m certainly a better FD for the experience.

The more unexpected things happen to you, the better able you are to cope with any eventuality. I’ll certainly know next time how to handle a crisis.”

How to stop a crisis becoming a drama

From a commercial perspective, getting the right messages across during a crisis is vital. We asked FDs and experts for the dos and don’ts of handling PR when things get tricky.

Don’t hang around. “Act quickly – silence will only encourage speculation,” says Sara Render, chief exec of PR firm Kinross+Render.

“Communicate known correct facts and what the company is doing to contain and control the crisis. If facts are not available, say so, and tell the press you will provide details as soon as an investigation is complete. Never speculate.”

Don’t hide. “Once the press get a sniff, make a statement and make it within their deadline – otherwise they’ll run the story with a ‘no comment’ from you and with speculation from other people,” says our food FD Francis Dee.

“Even if you don’t know all the facts yourself, you can explain what action you have taken so far and what you will be doing to find out the cause of an incident.”

Get everyone on board. “Step up employee communication – most rumours will arise from staff and media will pick up on that in a crisis. Arm them with facts and Q&A materials,” says Render.

Keep it organised. While keeping staff in the loop is important, you don’t want them to be impromptu spokespeople. “The designated press relations people should be the only people to talk to the press – otherwise it’s chaos,” says Jeff van der Eems at PepsiCo UK.

Understand the press. “Put yourself in the mind of the journalist who wants a story and needs to fill column inches,” says Michael Bland. “Ideally you ought to be able fill the pages of their paper or magazine with ‘safe info’ that you put out.”

It’s not just the papers. “Journalists are increasingly likely to use the internet as a primary research tool,” says Render. “Make sure you monitor it and respond quickly to potentially damaging rumours and misinformation.”

It’s worth checking how up-to-date your web site’s company information backgrounder is as well.

Don’t be afraid to “apologise”. “Corporate lawyers may advise against a public apology when the facts aren’t all in,” says Render.

“But a company should at least own up to a problem and express regret. Expressions of concern should be fast and sincere – stating regret and sadness does not make you more liable.”

Hold it together. “In a crisis you, as FD, and your team are often the people that staff look to for reassurance,” says John Maguire. “If they see the FD and their team panicking, it’s really unsettling. So you have to project calmness.”

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