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In Case of Emergency

Hurricanes, terror attacks and other large disasters can doom an unprepared biz. Here's how to plan for the worst.

Opinions expressed by Entrepreneur contributors are their own.

Lonnie Lehrer thought he was prepared for anything. The CEO of Leros Point to Point, a New York City limousine service, had redundant computer systems for his dispatch software, battery backup for each computer, off-site copies of his customer data, even a spare generator. If New York were nailed by a bad winter storm or another big blackout, Leros would still be in business.

Then the first plane hit the World Trade Center on September 11, 2001, and all Lehrer's plans went down with it.

"Ninety percent of our business is tied to the airports," says Lehrer, 55. "We went from being a $7 million company to a $700,000 company overnight."

Lehrer knew if he didn't move fast, he'd be out of business in a week. Within two days, he'd slashed his own salary by 50 percent, negotiated a moratorium on loan payments with Ford Motor Co., and told his drivers they'd be facing a few lean months of partial salaries until business picked up. He also had to drop drivers who were independent contractors, lay off two staffers and reassign others temporarily.

But Lehrer's quick reaction paid off. Business slowly returned and is now better than ever: Leros recently acquired two smaller companies and expanded operations, bringing annual revenues to nearly $9 million in 2002.

Another reason for Leros' rebound: "Some of our competition disappeared after 9/11," Lehrer says. "The ones who were already on shaky ground just faded away."

The fact that Leros had any disaster plan at all puts it ahead of most companies. According to an August 2002 study by the American Management Association, more than half the corporations surveyed had no crisis-management plans in place. And the smaller the business, the less likely it is to be prepared. Analyst firm Gartner Inc. reports that less than 10 percent of small and midsized businesses have plans in place to manage crises and ensure business continuity, and that 40 percent of companies hit by a disaster will go belly up within five years.

"Small companies often spend more time planning their company picnics than for an event that could put them out of business," explains Katherine Heaviside, principal of Epoch 5, a Huntington, New York, public relations firm that specializes in crisis communications.

The reason? Many entrepreneurs believe that preparing for disaster is too expensive or time-consuming. But that's not necessarily true, say crisis-management experts. The most important steps for surviving a crisis cost little or nothing. Being unprepared, however, can be the costliest strategy of all.

People First

Every effective disaster-recovery program begins with a simple step, explains John Laye, an adjunct instructor at FEMA's Emergency Management Institute and author of Avoiding Disaster: How to Keep Your Business Going When Catastrophe Strikes. "You need to recognize that your employees are your most vital asset," Laye says. "The next step is to prepare employees by saying 'We want to protect your paycheck and our business, and [we] need you to be involved.'"

He urges companies to hold seminars for employees on how to prepare themselves and their families for potential disasters, and to set up emergency response teams of four or five employees--at least one team for every floor of the building the company occupies--trained in CPR, first aid, basic firefighting and evacuation procedures. Much of this information and training is available for free from the American Red Cross and local fire departments, Laye adds.

And while the fire department is training your personnel in CPR, ask them to visit your office and assess potential hazards and evacuation routes. Then invite the police to come by and evaluate your company's physical security. This has two added benefits: If you ever have a real emergency, firefighters and police will be familiar with the layout of your building; they'll also know the team leaders to contact when they need briefing.

Laye recommends running practice drills twice a year--more often if your business has a high turnover rate--to improve your emergency response teams' ability to go it alone if you are caught in a natural disaster. "In an earthquake or tornado, this practice really pays off because the fire department isn't coming," says Laye. "They're going to day-care centers, nursing homes and hospitals, not individual businesses."

Business Second

Once you've figured out how to keep your people safe, you'll need to make sure your business survives as well. That means implementing a plan that addresses your key business functions, who's responsible for them, and what equipment or services you'll need to keep running.

"Gather your managers in some quiet place and say 'OK, you come to work one morning and, for whatever reason, the building is wrapped in yellow caution tape and you can't get in,'" says Laye. "Ask them 'Who are your key people, and what do they need to keep the business running?'" Laye adds that key employees aren't always the top executives; at insurance companies, for example, some of the most important people work in the mailroom.

The next step? Ask your managers to predict what could go wrong and how the company should respond in each case, says Bruce Blythe, CEO of Crisis Management International in Atlanta and author of Blindsided: A Manager's Guide to Catastrophic Incidents in the Workplace.

"Most crises don't come out of the blue," explains Blythe. "They're predictable. You can sit down and write out 80 percent of the things that are likely to happen based on your business. If you run a retail operation with cash registers, you've got to think about armed robberies. If you're an oil company, you need to worry about spills or helicopters going down. With chemical companies, it's explosions."

After the initial meetings, establish a crisis-management team, selecting members with expertise in all areas of the company. Unlike the emergency response teams, which serve to ensure employee safety, the crisis team deals with the aftermath of the event--how to keep the business going and back to normal as quickly as possible.

Larger organizations should create many recovery teams built around job functions--one for management, another for administration, and so on for each department, says Roger Peters, managing director of consulting firm RSM McGladrey Inc.'s business continuity planning services, in Saint Paul, Minnesota. Each team should document the company's operating procedures and every person have a backup trained to take over in case he or she is incapacitated, Peters adds. Coordination across departments is essential and must be in place prior to a disaster to be successful.

"Small businesses typically run lean," says Peters. "There's not a lot of backup or duplication. They need to look at things like cross-training, having their people learn other skills or identify procedures so they can step into someone else's shoes."

Communication, Always

After a disaster strikes, the crisis team's first job is communication--especially spreading the word to employees about the event and how the company plans to deal with it.

This can be as simple as a pre-recorded message on a toll-free number that tells people not to show up that day, or as complex as an automated system that calls members of a facility's emergency crew and asks a series of questions to evaluate their fitness for duty (such as "Have you consumed drugs or alcohol in the past six hours?").

Most entrepreneurial companies can set up a calling tree where each officer calls two employees, who in turn call two more people, and so on down the line. Large or geographically dispersed corporations turn to automated solutions from companies such as Dialogic Communications Corp., which can contact thousands of employees in the span of a few minutes. "After 9/11, our systems handled 106,000 outgoing calls, starting 15 minutes after the first plane hit," says Gene Kirby, president and CEO of the Franklin, Tennessee, firm, which caters heavily to the financial services industry. Clients can call in to activate the system remotely, record a message, and have it sent to everyone or to select groups of employees.

But employees are just one audience. Businesses also need to assure customers, suppliers, shareholders and the local community that the company is intact and the situation is in hand.

"The first 48 hours of a crisis are critical, and misinformation fills a vacuum," says Epoch 5's Heaviside. "If a crisis hits and employees are not prepared, a lot of misinformation can get out there and really damage a company."

When the Oak Tree Farm Dairy in Huntington, New York, burnt to the ground in October 1997, it called on Epoch 5 to handle post-disaster communications. On the dairy's behalf, the firm sent letters to customers the next morning assuring them their milk would still be delivered (Oak Tree had made arrangements with an out-of-state bottler in case of such a disaster). Epoch 5 also made presentations to local civic organizations about Oak Tree's rebuilding plans, took out a full-page newspaper ad thanking the firefighters, and delivered flowers to neighbors whose lawns were torn up by fire trucks. By August 1998, when Oak Tree finally began building its new facility, its business had increased by 10 percent.

Heaviside advises formulating a communications plan that lays out who's responsible for talking to the various parties, with talking points for each person. That way, company lawyers can review the comments ahead of time and avoid statements that could come back to bite them in a lawsuit.

Despite its importance, a good communications plan is one area even otherwise well-prepared companies often overlook. "Most organizations have some sort of operational crisis plan, but the majority do not have any communications plan," notes Larry Smith, president of the Institute for Crisis Management in Louisville, Kentucky. Without an effective way to communicate your company's response to the crisis, "you can do everything right and not get credit for it, and you might just as well have done everything wrong."

Lessons to be Learned

When it comes to virtually any disaster, you can't rely on Uncle Sam--or anyone else--to step in and fix it, as Lehrer of Leros Point to Point quickly found out.

"County and state officials were sympathetic to our woes, but they couldn't help us," Lehrer says. "By the time you fill out the applications and get the money, you're out of business."

Even when you don't have a crisis plan in place, acting quickly and decisively can make all the difference. "The longer a crisis goes on, the more damage it does and the harder it is to overcome," says Smith. "The quicker a company begins to respond to crisis, the quicker it's over and the less damage it will do."

But the most important part of surviving any kind of disaster is to make it a "rehearsed event," says Laye. Create a plan, then practice it until you have your response down cold. "If you're prepared for it, if your management team considers it a rehearsed event, then it doesn't have to be a catastrophe," explains Laye. "Getting started is tough, but the payoff is magnificent because there's no way to prevent these things. Anyone who gives that serious thought will be starting tonight."

Daniel Tynan is a freelance writer living in Wilmington, North Carolina.