atkinson advisor

Take-Two Interactive publishes (through its Rockstar Game subsidiary) the violent yet exceedingly popular videogame Grand Theft Auto: San Andreas. The videogame made national headlines recently when an avid gamer learned how to unlock sexually explicit scenes with a prostitute. Instead of apologizing, the company blamed the programmers for uncovering the scene and even game buyers (its customers) for downloading and installing the unlock code.

Because of its initial stupidity of including the scene coupled with its refusal to apologize, the company is about to play a new game called Take-Two Interactive: Corporate Crisis. Level One is a Federal Trade Commission inquiry about company advertising policies; Level Two, a Congressional investigation; and Level Three, a class-action lawsuit by angry parents. Even if the company wins all three levels, it has pretty much guaranteed the entire gaming industry will have additional oversight and scrutiny.

Thanks for playing.

During a crisis, is it better to win in the court of law or the court of public opinion? The answer depends upon perception of guilt — how strongly people believe that you or your company is responsible for the crisis.

When the perception of guilt is low, executives and companies have a good chance of winning in the court of law and the court of public opinion. Pepsi and Wendy’s have both experienced hoaxes designed to defraud. In both cases, perceptions of guilt were low, the companies demonstrated their cases effectively, and, ultimately, the companies prevailed.

A high perception of guilt is another matter. We are quick to form perceptions of guilt yet are, for the most part, forgiving and believers in second chances. If the perception of guilt is overwhelming, it is often best to admit wrongdoing, accept the ramifications — which are often much less in the initial stages — and move on. People will forgive and forget. Hugh Grant confessing on The Tonight Show two days after his arrest for solicitation immediately comes to mind.

By contrast, we tend to be ruthless and unforgiving when the perception of guilt is high and the accused party attempts to rationalize the situation, blame a third party, or fails to accept responsibility.

Ego is often the sticking point. The will to win at all costs comes with a price, most often for people tangential to the crisis, such as employees and stakeholders. Arthur Andersen was ultimately acquitted in the Enron case, while the company’s employees paid the price as the company folded. Martha Stewart got six months in jail, while shareholders of Martha Stewart Omnimedia were pummeled during the two years of her court case.

The perception of guilt is an external phenomenon. Winning in the court of law and the court of public opinion requires putting aside ego and having trusted objective counselors who will provide honest feedback about the external perception of guilt. Only then can the leader make the choice about where and how hard to fight.

Every potential crisis situation is unique, no matter how many times your company has been through a particular situation. A lack of communication is often one of the reasons that a potential crisis situation spirals out of control into a full-blown crisis.

The most important part of any crisis response is alerting and involving the right people who can help analyze the situation and recommend the best steps to solve it. This does not mean the same people make up the list every time.

The right people will vary with the situation and its potential impact. Here are some key thoughts when planning for crises:

• Who will the situation impact the most? Sales needs to know if customers can be impacted. HR needs to know if employees are at risk. Investor relations for shareholders. And so on.
• What are the odds of the media learning about the story? If the odds are high, the marketing/corporate communications department can help on the front end by drafting a standby statement, preparing executives for potential questions, and ensuring consistency of communications to all target audiences.
• What resources are necessary to solve the crisis? Because every situation is unique, the resources to solve that situation are unique as well. As situations evolve, you may need temporary personnel, equipment, technical assistance, or office space. Anticipating these needs and having resources in place will save you valuable time and, ultimately, may save your business a lot of money.

Will Your Next Mistake Be Fatal? Avoiding The Chain Of Mistakes That Can Destroy Your Organization by Robert Mittelstaedt

Will Your Next Mistake Be Fatal? is a compelling study of business crises and disasters that resulted from a series of preventable but unchecked mistakes.

Mittelstaedt’s extensive research shows a common pattern in crises from the collapse of Enron to the Titanic:

• An initial problem, often minor in isolation, that goes uncorrected 
• A subsequent problem that compounds the effect of the initial problem 
• An inept corrective effect 
• Disbelief at the accelerating seriousness of the situation 
• An attempt to hide the truth about what is going on while an attempt is made at remediation 
• Sudden recognition that the situation is out of control 
• Finally, the ultimate disaster scenario

With numerous examples, Mittelstaedt analyzes multiple-mistake crises from the perspectives of execution, strategy, culture, business cycles, and more.

Fortunately, he also offers 38 specific insights that companies can use to recognize warning signs and make appropriate corrective action before it is too late.

Bad things happen to good companies. Many companies in turn compound the problem by trying to communicate logically with facts, figures, and justifications in a highly emotional situation. The resulting loss of confidence and respect can haunt a company for years.

The most important words any executive can say in response to a crisis are “we deeply regret…” or “we want to extend our sympathies to…” Most importantly, these should be the first words you say. People form emotional bonds in the first 30 seconds or less. That is how little time you have to make a connection. These words are the key.

The emotional connection is so important because emotions drive 80 percent of our decisions. That percentage is likely much higher in a crisis when emotions are naturally heightened. Nobody will care what you have to say until they know that you care.

Expressing regret or sympathy is not an admission of guilt. These words are simply emotional reflections of what you and other people are feeling at the time. Crises are times for us to be more human — not less.

They say that bad news comes in threes. In this case, it also comes with three letters: CBS.

CBS’ credibility is now on the line just as it was for The New York Times with Jason Blair and USA Today with Jack Kelly. A Los Angeles Times editorial said it perfectly: “Inevitably, bad things happen to good news organizations. The test of a serious journalistic enterprise is how it reacts to internal crisis.

CBS’ failure is more than another media scandal. It increases the lack of trust that corporate America already has in reporters. Trust us, the gap is huge and growing wider every day.

CBS’ apology was right, but it should have come sooner. To restore its credibility, CBS must now throw all of its investigative powers behind the source of the debunked National Guard papers. Anything less could seriously jeopardize the network’s future among the national media elite.