atkinson advisor

Crises come in two forms. Those that happen to you and those that you cause.

Your company is at risk for both if you don’t anticipate how you will respond if hacked.

Hacking is an insidious, invasive event because most of the time it involves personal data that customers entrusted to your organization for some business purpose. Companies have tried to cover hacks in the past, which led to new laws requiring disclosure for any size of data breach.

The only acceptable response to a data breach is swift and honest. That’s impossible if you haven’t anticipated and prepare for the possibility of a breach. We recommend drafting your worst-case-scenario communication to customers, i.e. the worst possible loss of data. You can always tone it down from there. Make sure to apologize for any inconvenience, emphasize your commitment to proactive communications with customers, and outline cooperation with law enforcement.

And make sure to have your legal team review the communication in advance. You don’t want attorneys holding up the process when customers are waiting to hear from you.

Swift, honest communication will win you points and minimize the overall damage to your company’s reputation.

A slow and overly corporate response creates the second type of crisis – the type that you cause. Communications that shift responsibility, try to rationalize a bad situation, and/or offer no remedy to the problem can actually deepen customers’ pain. That’s not a good thing for you.

BP CEO Tony Hayward didn’t get June off to a great start. In an interview with Fox News, Hayward said, “There’s no one who wants this thing over more than I do. I would love my life back.”

To his credit, Hayward started off well at the beginning of the oil spill crisis by apologizing for the situation. He should have quit then.  

There’s a great quote about leadership that says, “Leadership is about them, not you.” Somebody should read this quote to Hayward every time before he goes on camera.

Was Hayward’s gaffe serious or just (oil-slicked) water under the bridge?

Wall Street has had a bad year on every front. And nearly everyone has suffered.

Right or wrong, the federal government stepped in to shore up the industry and save thousands of jobs.

It’s time for Wall Street to show their thanks to American taxpayers by not paying year-end bonuses. It’s the right thing to do now to show that they are committed to fixing the problems they helped cause.

Wall Street executives cry that they will lose talent. And how is that a bad thing? Are these not the same people who caused the problem in the first place? With more than 100,000 job losses, it’s also a buyer’s market in Manhattan.

The American people have a crisis of confidence in our financial system. The only way to restore that confidence is with leadership and sacrifice.

Next time you have to communicate difficult news, try using the “Stockdale Paradox” as a model. The term is named for Vice Admiral James Stockdale, who spent seven years as a prisoner of war during the Vietnam War. Stockdale said of that time, “You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be.” James Collins coined the term “Stockdale Paradox” to illustrate a primary leadership lesson in his book Good To Great.

Read more about James Stockdale at Wikipedia.

Two recent natural disasters in Asia have shone spotlights on a country that is slowly loosening some media restrictions and another that still doesn’t get it.

After a May 12 earthquake killed more than 12,000 people in the Sichuan province, the Chinese government barred reporters from entering the disaster zone. Some media ignored the command and reported on the tragedy anyway. Instead of reacting harshly, China’s Propaganda Department (an ironic name) softened its stance and asked reporters to accompany rescue teams. The Chinese government’s official news agency, Xinhua, even provided regular updates on death tolls.

Contract that with Myanmar’s junta regime. After Cyclone Nargis swept through in early May, it denied access to reporters and, even worse, aid workers. When the government finally started to release death tolls, they reported much fewer than the 100,000 U.S. officials predicted, wiping away any credibility state media may have had.

Now the rest of the world is largely sympathetic to China’s plight but critical of Myanmar’s secrecy and controlling policies. The world notices when a country doesn’t seem to care about its people or reputation.

Warren Buffett once said, “If you lose dollars for the firm, I’ll be understanding. If you lose reputation for the firm, I’ll be ruthless.”

Nothing can damage the reputation of a firm more quickly than handling a crisis poorly. Scan through the five questions below and note whether you would answer “yes” to key drivers of effective crisis management.

Although these five questions are not a comprehensive audit of your preparedness, they will give you an initial assessment. If you answered yes to all of these statements, your company is probably in good shape. If you answered yes to four, you have done some work but have room for improvement. Three or fewer, you have risks you need to address quickly.