Either the management firm or one of its portfolio companies experiences a public relations disaster. How, when and in what fashion should you consider responding?
Graham Hearns’ answer:
Just about every company has faced or will face a crisis, so we’ve naturally seen a few at The Riverside Company. As owners of more than 75 companies at any given time, we’ve faced a number of big and small crises over the years. Each time, we learn something new and each time we endeavor to do better next time. Here, I’ll look at a time when we made some missteps, then applied those lessons to the next crisis we faced.
Before we developed a protocol for crisis communications, we relied heavily on legal counsel for advice during crisis situations. Now, lawyers still have a place at the table during challenging times, but they tend to be extremely conservative, leading to an often too-cautious approach. In short, we’ve learned that doing and saying nothing can cause great harm.
Years ago, one of our consumer companies was flying high, with an expanding and deeply loyal fan base. They loved the product and trusted the brand…until a product recall. Social media channels were aggressive in their condemnation as fans felt betrayed. We were advised to “stay above the fray” and remain silent, but what started with a handful of blog posts and message board fodder rapidly grew into an angry virtual mob. Our silence was not helping.
By the time we were willing to answer questions, we had no control over the narrative. The product recall was not even particularly bad. No one was harmed in any way by the product defect, and it was corrected quickly. By losing control over the story, however, the brand suffered a loss of consumer trust. Ultimately, it cost tens of millions of dollars in lost value.
It was a painful lesson to absorb, but we now have a formal crisis communications plan that involves our whole firm. We have a system in place for handling anything that might occur, and we work internally and with outside firms to ensure that we deliver timely, consistent and accurate responses during any type of crisis. Silence is deadly. We also stay tuned to social media channels – even those we don’t use – so there are no surprises and we are able to nip small problems in the bud before they become full-blown crises. Boiled down, our approach is to follow the advice of our crisis communications firm: “Tell the truth, tell it all, and tell it first.” This isn’t always possible and feasible, but it’s a good goal and a target we strive to hit.
Unfortunately, our crisis response system is something we’ve had to use a few times. We’re delighted, however, that it’s worked as needed when we’ve called upon it.
One such case was when one of our portfolio company CEOs was arrested for having questionable material on his laptop. We acted on our plan quickly. After ensuring that nothing in our due diligence was missed about the man, we made calls to attorneys, drafted key messages to each affected audience, had a team media-trained and on the ground in the headquarter city, and answered all of the questions posed to us. As a result, the story was in the news for a day or two, and we were correctly perceived as part of the solution rather than part of the problem.
A good plan does not avert a crisis, but confronting it provides a measure of control and usually limits or eliminates the harm caused by the crisis.