Market Research

Public Relations | Damage Control

Learn the lessons of crisis management through a fictitious company and public relations crisis.

The companies, names and situations discussed here are purely fictitious. The marketing and legal information is real. If your company does not have a crisis communications plan in place–one that includes input from your legal and marketing advisors, including public relations–the time is now to develop a plan. Tomorrow may be too late.

Jones Natural Products 14-hour emergency meeting last month wasn’t about layoffs, sales collapsing or any other textbook business challenge.

Top executives and board members met because Ray Jones, co-founder and chief executive officer (CEO) of Jones Natural Products, Inc., the California-based company, had been arrested for allegedly raping a 12-year-old girl he met via the Internet and for allegedly using the Internet to engage a minor in sexual relations in another incident.

While personally stunned by the news, officials of the dietary supplement firm knew the accusations against the high-ranking individual could put the whole company in a negative light.

For companies whose identities are intertwined with a high-profile executive, managing crises is the key to survival. Though Jones had stopped overseeing daily operations for the company, he was a voice for Jones Natural Products, often providing expertise about political and marketing issues to investors and the media at industry conferences.

“There are only two facts that are relevant to the media and the public market–Was the company involved, and how will the future of the company be affected?” said Harry Black, principal of Black and Black, a Chicago-based public relations firm.

In an era where news travels fast, companies must act quickly and decisively to get their side of the story told. “If they get all the information out quickly, the story ends sooner than if they said nothing,” Black said.

Companies that stall, stonewall or deliver conflicting messages, such as Bridgestone/Firestone and its recent defective tires, or Exxon and the 1989 oil spill from its tanker Valdez, can worsen the situation, communications experts say.

In cases like Jones’, where the matter is unrelated to the company’s products or operations, management should still strive to be open and candid to draw a sharp distinction between the individual involved and the business.

Compounding matters, this supposed incident occurred just a week before one of the biggest deal-making trade shows of the year, Natural Products Expo East in Washington, D.C., where the company would have to face questions from its peers, potential financial backers and customers.

After learning about the arrest that day, Jones’ president Charlie Stone headed straight to the office, where he got on the telephone with board members to gauge their support and get their advice.

Stone, a longtime colleague of Jones at ABC Vitamins before they left to co-found Jones Natural Products in 1998, spent the rest of the day and evening on the telephone with key investors, as well as company managers, who would inform their workers of the arrest. He wanted to alert the employees before the news broke.

On Saturday, the company’s executives and the board derived a strategy, such as creating answers to frequently asked questions for customers and employees, instituting daily meetings, bringing in crisis counselors and catering lunch to encourage discussion among workers.

The next day, Jones’ management held a company-wide meeting with its 87 employees. Stone, who was named CEO after Jones was arrested, assured them that the board and investors remained behind the company.

“Of course, the arrest would be a distraction,” Stone told an anxious crowd, “but other companies have gone through this type of situation and still continued to flourish.”

The message then, and repeated still, was that the incident was a personal matter, not a company issue, which Stone conveyed to employees, customers and investors.

Jack Smith, chief operating officer of Healthy Life Inc., a Canadian company that invested in Jones’ $29 million round of funding, said his first reaction to the news was sympathy toward Jones and the other managers, rather than worrying about the bottom line. But he was confident they could handle the problem.

“I knew it would be a management distraction, but that’s what management does,” Smith said. “Life is full of distractions, and this is a nasty one.”

As much as companies develop game plans for natural disasters or workplace accidents, officials should also determine a plan of action should an executive become embroiled in illegal activities, crises and other public relations nightmares, advisers say.

However, getting management to play “what if” about a prominent member of their team can be difficult. “They think, if we don’t imagine it, it won’t happen,” said Sam Johnson, Crisis Communications Inc. vice president.

Regardless, management must reassure investors and customers that they are taking action, experts say. For example, companies should find out as much as possible about the case from the suspect’s attorney and conduct their own investigation into whether company equipment or property was involved. An organization could expose itself to liability if an executive engages in misconduct using business equipment or facilities.

Through an investigation, a company can better avoid surprises and prevent similar accidents by developing workplace policies and emergency plans. That way, officials can reassure investors that they have control over their business and can help eliminate culpability.

Jones officials are discussing whether they will conduct an internal investigation. The company would not comment on the case.

The Lessons

A crisis can show a company at its best or its worst, and being candid and open with investors, workers, customers and the media can go a long way in weathering the storm. This is an attractive feature from an investor’s view for management to deal with a difficult situation in tough times. The following are a few tips in dealing with a crisis situation.

1. Develop a contingency plan for all types of emergencies, from FDA recalls or product defects to scandals involving top executives.

2. Conduct an internal investigation to determine any company liability and to prevent such accidents from occurring in the future.

3. Create a written public relations crisis communications plan and follow it.

4. Avoid Hollywood clichés. “No comment” responses to the media can be more damaging than making a statement.

5. Ensure that company information flows through one pre-determined spokesperson and the message is consistent.

6. Monitor media coverage and investor’s attitudes to measure the success of your communications strategy.

7. Have a mid- or long-range view–it may take time for the company to recover.

Steven M. Smith, Owner, graduated The Art Institute of Vancouver for Web Design & Interactive Media, Graphic & Web Design and has been feature...