atkinson advisor

TJX, the parent company of TJ Maxx, revealed in its most recent SEC filing that hackers may have stolen more than 40 million credit card numbers of customers.

Bad things happen to good companies. At the same time, they cannot hide behind the bad news.

The company learned about the security breach last December and promptly began working with law enforcement. It disclosed the breach when law enforcement officials said doing so would not jeopardize the investigation. This was the right course of action.

The latest disclosure, however, is disturbing.

Mistake No. 1: An SEC filing is no way to share bad news with customers, especially something as personal and worrisome as identify theft.

Mistake No. 2: The complete absence of the CEO Carol Meyrowitz. She should be meeting with reporters to apologize to customers for the error, explain the next steps, and tell customers how they can get help. So far, that doesn’t seem to be the case.

Security analysts estimate the breach could cost TJX $1.5 billion to fix. The loss of goodwill will be infinitely larger for every day the company buries its head in the sand.

Bad things happen to good companies all of the time. When the big crisis strikes, nothing will be more important to your chances of survival than the level of trust between you and your key audiences like employees, shareholders, clients, and even the media.

Trust is much like a bank account. You make deposits and withdrawals over time. The greater the overall balance, the more reserves you have to draw on when you need them.

From time to time, it’s good to check your balance in your trust accounts.

1. Who are your four or five key audiences right now? 
2. What is the balance of your trust account with each of these audiences? 
3. Was your last transaction a deposit or a withdrawal? 
4. How does the balance compare to this time last year? 
5. What can you do right now to improve the balance with each?

The scandal involving former U.S. Congressman Mark Foley has been a highly public, highly negative situation that may have been prevented.

As is often in these cases, the public crisis, which ultimately resulted in Foley’s resignation, was the result of poor issues management behind the scenes.

In September, ABC broke the news of Foley’s inappropriate relationships with House pages. It turns out that five years earlier Republic Party staff members had been warning House pages to avoid Foley.

The lack of action resulted in a public scandal that has resulted in investigations – including the House Ethics Committee, the FBI, and now the State of Florida – that promise to keep story in the public eye for months to come.

What lessons can we take from this scandal?

1. Be accepting of bad news. Most people would rather have plausible deniability than accept that something bad is happening inside their organization.
2. Get an early accurate assessment. Most crises result from a poor early assessment that creates a laissez faire attitude toward the issue.
3. Take the appropriate next step. Sometimes, the next step is simply to monitor the situation. Sometimes, the next step may be to correct or stop the offending behavior.
4. Follow through. Issues rarely if ever die on their own; they simply hibernate. And, they tend to come out of hibernation at the most inappropriate time in the future.

A shank is one of the worst golf shots imaginable. It’s embarrassing and unsightly.

RadioShack hit the equivalent of a business shank on Aug. 31 when it laid off 400 employees with an e-mail that read: “The work force reduction notification is currently in progress. Unfortunately your position is one that has been eliminated.”

The public reaction was swift and caustic for the struggling company.

A corporate spokesperson explained that employees knew they would learn their fate via the fateful email. Rationalizing the bad decision only made the wound deeper.

Something bad has happened, but the news media doesn’t know about it yet. If the word gets out, your company’s reputation could take a big hit. Should your company be proactive about releasing the news or wait to see if someone calls?

This is a difficult question. The answer is entirely up to you, your culture, and your confidence in working with the news media. The following decision tree will help you make a better assessment:

The first consideration is how likely the bad news will get out. If you consider all the possible ways the news could get out and decide that all are very unlikely, then your chances of negative media coverage are slim and you may opt not to communicate the news proactively.

The scenario changes when it is very likely the news will get out. Since you have a high suspicion the news will get out, you have to consider whether to use a proactive response or a reactive response. Proactive means that you release the news in a controlled way. Reactive means that you wait until the news breaks and then respond.

This decision is ultimately driven by many factors, particularly the likely tone (neutral, somewhat negative, or highly negative) of the news coverage. The proactive response has a greater likelihood of generating a neutral or somewhat negative article. By contrast, the reactive response has less likelihood of generating a neutral article or somewhat negative article since you are responding to the other side of a story that is already out.

There is neither a single nor a simple answer for these situations. Knowing how to assess them properly can improve your overall response.

Mississippi Power got it right in the aftermath of Hurricane Katrina. The company restored power to 195,000 customers in just 12 days.

Company executives attributed the company’s success to its can-do spirit, clear lines of responsibility, and decentralized decision-making. The relief effort exceeded its own goals in large part because employees knew exactly what to do in the situation. As one employee put it, “If you don’t know what you’re supposed to do, the manual is not going to help now.”

Mississippi Power’s success provides an outstanding framework that any company can use to evaluate its own crisis planning. The USA Today website has an excellent article about the effort and lessons learned.