Managing Your Reputation
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Q: Particularly since the terrorist attacks, it's become clear how important it is to have a disaster plan in place for your company. What are some ways I can make sure my company survives a crisis with its image intact?
A: Let me start off with two examples of possible behavior in a crisis: first, what not to do, and then, how a savvy franchise did the right thing.
No one can question the generosity of Starbucks founder Howard Shultz. Shultz and the Starbucks Foundation are leading supporters of literacy programs, environmental initiatives, neighborhood development programs as well as fair pricing for coffee growers internationally. But in one moment, in the middle of a national disaster, ground zero for Starbucks was not the World Trade Center, but how it handled a crisis caused by one of its locations in downtown Manhattan.
As the crisis began to unfold on September 11, an employee of Midwood Ambulance raced into a Starbucks location near the World Trade Center looking for bottled water for the victims of the terrorist attack. Rather than giving them the water, Starbucks charged $130 for three cases, which the ambulance employees had to pay out of their own pockets. If the story ended there, you might chalk it up to an error in judgment by a store manager not knowing what to do in the midst of a disaster zone. But it didn't.
Al Rapisarda, president of Midwood, called Starbucks headquarters a few days later to complain about the incident and was reportedly told by a Starbucks employee, "This could not have happened." On September 17, he then faxed Orin Smith, CEO of Starbucks, repeating his complaint. Reportedly, he did not get an immediate response. It was not until the story began to be repeated on the Internet and in major newspapers that Starbucks finally contacted Rapisarda, offering regrets and refunding the $130 paid by Midway's employees. Thirty years of building a national brand put in jeopardy for $130 and an inability to execute a crisis plan.
Compare Starbucks' reaction to that of a McDonald's franchised location in the same area. Not only did the local McDonald's not close its doors, but it started to cook and cook and cook. It stayed open 24 hours, providing free food, coffee, juice, soft drinks and even bottled water to the rescue workers.
Since September 11, McDonald's, with the support of its franchisees, has served more than 650,000 meals and distributed bottled water, soft drinks and orange juice to rescue and recovery workers at the disaster sites. McDonald's even set up several 45-foot mobile units by the World Trade Center, the Pentagon and the crash site in Somerset, Pennsylvania, to ensure that even if there was no McDonald's nearby, the heroes of September 11 would be fed.
Learn more about handling crises with Crisis Managment: Planning for the Inevitable by Steven Fink.
McDonald's collected more than $4.5 million for the American Red Cross and pledged an additional $2 million from Ronald McDonald House Charities and from McDonald's Corp. to aid in disaster relief. McDonald's was even smart enough to provide cookies and juice to Blood Donation Centers throughout the United States. A great brand and a great company acting with greatness in a time of national disaster.
In the days following the crisis, McDonald's executed its crisis strategy, while Starbucks acted like a deer in the headlights. But should Starbucks management be faulted for the action of one employee in not providing disaster assistance? Maybe. Training employees to deal with crisis situations and to make independent decisions is a responsibility of management. Should they be blamed for the bad press and damage to the Starbucks brand caused by their failure to deal with the crisis immediately once they were informed at headquarters? Absolutely! They forgot the first rule of crisis management, which is don't ignore the crisis.
According to the Institute for Crisis Management, 65 percent of the crises companies face are of the "smoldering" variety. In other words, most are problems companies are aware of that could erupt and therefore are caused by management. Only 35 percent are of the "sudden" variety. Management at Starbucks did not have a real crisis on September 11; the crisis only began once they ignored the problem. Just as businesses have to plan and provide direction to all its locations on how to operate the business, they must plan for and manage through the unexpected crisis. Most professionals agree that the existence of a working crisis plan and its successful implementation must be viewed as important to the survival of business.
In addition to taking immediate action to correct the problem, according to CrisisTrak, a service of Kansas City, Kansas, public relations firm Barkley & Evergreen, you have to be prepared. Barkley & Evergreen recommends a few simple rules companies should follow when dealing with the media following a crisis:
- Have updated company information readily available, including the number of locations (franchised and company-owned), profiles of company executives and key franchisees, and information concerning the system's products and services.
- Keep the telephone numbers of key influentials on hand, including those of management, your crisis management advisors, key vendors, franchisees, the press and anyone else you might possibly need in a crisis.
- Practice your crisis communication plan, and schedule annual training exercises.
- Speak with a single voice. Use only one spokesman. Make certain that the franchisees receive training in crisis management and that they understand how to execute the company's plan, including calling the correct contact person at franchisor headquarters and their responses, if any, to the press.
- Be open, honest and factual with the media.
- Let the media know when you will be communicating with them.
- Keep your message simple. Make certain that everyone can clearly understand and follow the situation.
- Use a steady hand-never panic.
The cornerstone of any good crisis management program is the ability to execute your plan. Companies need to train everyone in their system on how to identify a crisis (something that Starbucks obviously missed), what to do and who in the company to contact.
Speed, honesty and a plan you can execute are all central to an effective crisis management program. Singular in importance in valuing a company's trademark is its reputation. And, unfortunately, the damage from a poorly handled crisis can cause long-lasting and often permanent damage to a company's reputation and its marks.
Michael H. Seid, founder and managing director of franchise advisory firm Michael H. Seid & Associates, has more than 20 years' experience as a senior operations and financial executive and a consultant for franchise, retail, restaurant and service companies. He is co-author of the bookFranchising for Dummiesand a former member of the International Franchise Association's Board of Directors and Executive Committee.
Kay Marie Ainsley, managing director of Michael H. Seid & Associates, consults with companies on the appropriateness of franchising; assists franchisors with systems, manuals and training programs; and is a frequent speaker and author of numerous articles on franchising.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.