Craig Badings, Partner at SenateSHJ, joins to share his insight on the critical interplay between lawyers and communicators in managing crises effectively. Drawing from extensive experience in crisis management spanning over three decades, he delves into the nuances of decision-making during crises and highlights the profound impact of public perception, authenticity, and transparency in shaping a company’s reputation.
How much does a crisis cost a company?
In my 35 years of dealing in issues and crisis management I have been asked this countless times. So, SenateSHJ decided to team up with some data scientists to shine a light on the some of the greatest business crises over the past 40 years.
The result, SenateSHJ’s Crisis Value Erosion Index analysed the financial impact of 30 notable business crises, including the 2010 BP Deepwater Horizon explosion and oil spill, the 2014 Malaysian Airlines MH370 flight disappearance and multiple Facebook privacy issues.
We used metrics such as share price drop, earnings per share drop, days to recovery to pre-crisis levels and trend-adjusted recovery to gain in-depth insights into how these crises impacted the companies involved.
The results in summary:
- 70% of companies experienced a drop in share price with an average drop of 19%
- On average, share value took 147 days to recover
- The mining and materials sector experienced the highest average share price drop (37.5 per cent)
- Crises involving environmental damage resulted in an average share price drop of 35.1 per cent – a greater drop than crises involving casualties which saw an average drop of 24.4 per cent.
Of the crises analysed, the greatest impact was BP in the wake of the Deepwater Horizon explosion and oil spill. BP’s share price more than halved and took more than three years to recover.
The financial cost of a crisis is overwhelmingly the biggest impact felt by business leaders and it can last years. However, we also know that companies with the right crisis preparation and management systems, tools and support teams in place, often respond quicker and place themselves in the best position to minimise the reputation damage.
It’s where the counsel of lawyers and crisis management communicators, have a role to play.
But how should these roles integrate and why do we hear so much about conflicting advice around disclosure, the apology, what to say, what not to say and when to communicate not to mention legal privilege.
History shows, that making the wrong decisions during a crisis often results in prolonging or exacerbating the effect of the crisis with repercussions sometimes lasting years.
From experience, communication and legal advice creates the best client outcome when it is considered, balanced and is in the best interests of the client’s reputation. Sometimes, this may mean moving away from a preconception that because it is legally right means it is the right or the best thing to do. Again, history shows this is often not the case.
Think of Rio Tinto and the Juukan caves, think Ardent Leisure and Dreamworld (they held a board meeting two days after the tragic accident and gave the CEO a bonus), then there are the numerous half-baked or insincere apologies offered by so many companies. Thomas Cook is a great example. Two young children died because of faulty heating while in Corfu on a Thomas Cook holiday (the company denied fault. The case dragged on for a decade before the new CEO offered a heartfelt apology after an inquest found the company had breached its duty of care), and the list goes on.
In his excellent paper, ‘Ten Things Law School Doesn’t Teach About Crisis Management’, Dr Tony Jaques, who is a regular writer and commentator on crisis management says: “While almost every crisis has a legal component, just about no crisis is every solely about legal considerations. The common denominator is nearly always reputational risk – be that financial or legal or brand or personal reputation. So just about every crisis demands an understanding of broad stakeholder expectations.”
For his last book, ‘Crisis Counsel: Navigating Legal and Communication Conflict’, Tony teamed up with us and some of our PROI partners to interview experienced crisis lawyers across the US, Canada, Britain, Australia and New Zealand. We wanted to know, among others, what lawyers think about who should lead a corporate crisis.
While this is the subject of an entire chapter in Tony’s book, I have attempted to summarise some of the key findings:
- Conflict between legal and communication advice is very real. Lawyers feel communicators are too willing to disclose information which may lead to liability or future litigation. When the lawyers were asked to identify the main strength they bring to a crisis, the most common response was not their legal expertise but instead their ability to be calm and predictable. They also noted they have a duty to integrity and truth and honestly representing the law.
- When asked to identify the main strength communicators bring to a crisis, they said our ability to develop succinct messages and our understanding of key stakeholders.
- Another perceived area of conflict was balancing speed and accuracy. Almost every lawyer emphasised the need for certainty before communicating in a crisis. However, the interviewees showed little appreciation that in a crisis, decisions must be made quickly on what is known at the time, which is typically incomplete.
- Despite these differences, the lawyers recognised the need to work collaboratively with communicators in a crisis in the best interests of the organisation. There was a genuine desire to work together and have an open discussion to gain consensus.
The simple fact is that communicators and lawyers think differently. Lawyers consider the legality of a planned response, while the crisis communicator thinks about public acceptability, authenticity, transparency and the resultant impact on short-, medium- and long-term reputation.
Lawyers generally want to say as little as possible to protect against potential liability while communicators typically want to say more to protect reputation through meeting the expectations of stakeholders and to be seen to be seen to be taking the right actions.
But we know from bitter experience that when a crisis hits facts and logic are always trumped by emotion and the way you make people feel through your words and your actions. And, an apology does not make you any more liable, on the contrary, a heartfelt, sincere apology can go a long way to diminishing the heat in a crisis.
Craig has 35 years’ experience advising major corporations and senior executives in Australia and South Africa on their reputation in good times and bad. Much of that time has been spent working in the trenches with boards, management teams and in-house communication teams assisting them with issues and crisis preparation and management, media coaching and media relations, communication strategy, social media strategy and thought leadership. This work has included a cross section of sectors such as: financial services, professional services, education, medical devices, property and construction, FMCG, telecoms, tech as well as various government sectors. Craig has coached thousands of executives in presentation, messaging and media performance. He is the author of two ebooks and two published books on thought leadership: #Thought Leadership Tweet — 140 Prompts for Designing and Executing an Effective Thought Leadership Campaign and Brand Stand: Seven Steps to Thought Leadership. Through this work he has evolved a bespoke thought leadership methodology which helps companies develop their point of view and take it to market. Outside of work Craig loves spending time on his surfski exploring Sydney’s beautiful coastline and inner harbour. You can connect with Craig via LinkedIn.
