In Case of Emergency

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

By Daniel Tynan

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 simplestep, explains John Laye, an adjunct instructor at FEMA'sEmergency 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 vitalasset," Laye says. "The next step is to prepare employeesby 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 toprepare themselves and their families for potential disasters, andto set up emergency response teams of four or five employees--atleast one team for every floor of the building the companyoccupies--trained in CPR, first aid, basic firefighting andevacuation procedures. Much of this information and training isavailable for free from the American Red Cross and local firedepartments, Laye adds.

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

Laye recommends running practice drills twice a year--more oftenif your business has a high turnover rate--to improve youremergency response teams' ability to go it alone if you arecaught in a natural disaster. "In an earthquake or tornado,this practice really pays off because the fire department isn'tcoming," says Laye. "They're going to day-carecenters, nursing homes and hospitals, not individualbusinesses."

Business Second

Once you've figured out how to keep your people safe,you'll need to make sure your business survives as well. Thatmeans implementing a plan that addresses your key businessfunctions, who's responsible for them, and what equipment orservices 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 buildingis wrapped in yellow caution tape and you can't getin,'" says Laye. "Ask them 'Who are your keypeople, and what do they need to keep the businessrunning?'" Laye adds that key employees aren't alwaysthe top executives; at insurance companies, for example, some ofthe most important people work in the mailroom.

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

"Most crises don't come out of the blue," explainsBlythe. "They're predictable. You can sit down and writeout 80 percent of the things that are likely to happen based onyour business. If you run a retail operation with cash registers,you've got to think about armed robberies. If you're an oilcompany, 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 employeesafety, the crisis team deals with the aftermath of the event--howto keep the business going and back to normal as quickly aspossible.

Larger organizations should create many recovery teams builtaround job functions--one for management, another foradministration, and so on for each department, says Roger Peters,managing director of consulting firm RSM McGladrey Inc.'s business continuityplanning services, in Saint Paul, Minnesota. Each team shoulddocument the company's operating procedures and every personhave a backup trained to take over in case he or she isincapacitated, Peters adds. Coordination across departments isessential and must be in place prior to a disaster to besuccessful.

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

Communication, Always

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

This can be as simple as a pre-recorded message on a toll-freenumber that tells people not to show up that day, or as complex asan automated system that calls members of a facility'semergency crew and asks a series of questions to evaluate theirfitness for duty (such as "Have you consumed drugs or alcoholin the past six hours?").

Most entrepreneurial companies can set up a calling tree whereeach officer calls two employees, who in turn call two more people,and so on down the line. Large or geographically dispersedcorporations turn to automated solutions from companies such asDialogicCommunications Corp., which can contact thousands of employeesin the span of a few minutes. "After 9/11, our systems handled106,000 outgoing calls, starting 15 minutes after the first planehit," says Gene Kirby, president and CEO of the Franklin,Tennessee, firm, which caters heavily to the financial servicesindustry. Clients can call in to activate the system remotely,record a message, and have it sent to everyone or to select groupsof employees.

But employees are just one audience. Businesses also need toassure customers, suppliers, shareholders and the local communitythat the company is intact and the situation is in hand.

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

When the Oak Tree Farm Dairy in Huntington, New York, burnt tothe ground in October 1997, it called on Epoch 5 to handlepost-disaster communications. On the dairy's behalf, the firmsent letters to customers the next morning assuring them their milkwould still be delivered (Oak Tree had made arrangements with anout-of-state bottler in case of such a disaster). Epoch 5 also madepresentations to local civic organizations about Oak Tree'srebuilding plans, took out a full-page newspaper ad thanking thefirefighters, and delivered flowers to neighbors whose lawns weretorn up by fire trucks. By August 1998, when Oak Tree finally beganbuilding its new facility, its business had increased by 10percent.

Heaviside advises formulating a communications plan that laysout who's responsible for talking to the various parties, withtalking points for each person. That way, company lawyers canreview the comments ahead of time and avoid statements that couldcome back to bite them in a lawsuit.

Despite its importance, a good communications plan is one areaeven otherwise well-prepared companies often overlook. "Mostorganizations have some sort of operational crisis plan, but themajority do not have any communications plan," notes LarrySmith, president of the Institute for Crisis Management in Louisville,Kentucky. Without an effective way to communicate yourcompany's response to the crisis, "you can do everythingright and not get credit for it, and you might just as well havedone everything wrong."

Lessons to be Learned

When it comes to virtually any disaster, you can't rely onUncle Sam--or anyone else--to step in and fix it, as Lehrer ofLeros 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 timeyou fill out the applications and get the money, you're out ofbusiness."

Even when you don't have a crisis plan in place, actingquickly and decisively can make all the difference. "Thelonger a crisis goes on, the more damage it does and the harder itis to overcome," says Smith. "The quicker a companybegins to respond to crisis, the quicker it's over and the lessdamage it will do."

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


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

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