by Betsy Atkins
Board Director, SunPower Corporation
When a major company combines extensive disaster management expertise with a world-class board of directors, what happens when a crisis strikes? Try asking BP. Although the company’s Gulf Coast oil spill debacle now makes BP seem like the butt of crisis management jokes, just a year ago any corporate observer would anticipate the best from this massive multinational’s board and management. Certainly the BP directors, with their global vitae and savvy, would insist that a company facing huge potential environmental exposures should have immediate plans to both prevent and manage a disaster. The board’s fundamental risk management duties alone should see to that.
But no such sound crisis response plan was found at BP. Even in a sector where the company was most vulnerable to a disaster, a major oil spill, essential crisis planning was lax. In congressional hearings on the BP Gulf Coast disaster, U.S. Representative Ed Markey noted that BP’s emergency oil spill plan was a near-duplicate of ineffective, boilerplate plans from several other petro companies — right down to a telephone number for an expert who’d died years earlier.
Taking Center Stage
Yet no board of directors should feel smug about how well their company has prepared for a crisis. As a member of many boards, from startups to major public companies, I’ve seen wide variation in how well management plans to cope with a crisis. Worse, there are too many boards which never even ask about crisis plans. They have never properly considered and weighed the risks the company faces, much less how to respond.
This won’t do anymore. Increasingly, the media, shareholders, regulators, and the wider public expect that a crisis should bring out the best in a corporation. The company’s leaders should take center stage to prove themselves competent, in charge, concerned, and working effectively towards resolution. Further, “company leaders” today will include your board of directors. While BP CEO Tony Hayward was blasted for his public fumbles in dealing with the oil spill, the BP board (especially chairman Carl-Henric Svanberg) drew massive negative attention for their cluelessness. Solid crisis management planning can literally save your companies at such moments.
Crisis plans have several major elements, but the main two are internal and external. The internal crisis plans (what to do if the CEO dies, if your plant or product causes serious harm, if the company faces a major legal action, etc.) focus on technical, operational elements. Reviewing these is obviously a board duty. But then there is the external crisis management plan, dealing with investors, the media, and regulators, as well as company employees, suppliers, and the overall public. Here the board not only has an oversight duty, but, in today’s corporate climate, a tactical, even personal, responsibility. While BP directors were probably wise not to head to Louisiana and offer to roll up their sleeves, they did have an important public role in the external crisis management. Their failure should serve as your example.
No doubt even a good crisis plan will not cover every contingency. The analogy of the “black swan,” an event that is both dramatic and rare, has been much used since the financial crisis of 2008. Some business catastrophes, such as that facing BP, the Three-Mile Island nuclear leak, and the Union Carbide Bhopal chemical disaster, all combined one-in-a-million worst cases to occur. But “best practice” crisis management planning nurtures the resources, thinking and corporate muscles needed to respond to any crisis. As Dwight Eisenhower observed, “I have always found that plans are useless — but planning is indispensable.”
I serve as a director with SunPower Corporation, a world leader in solar energy technology. The governance practices at SunPower have impressed me since I joined their board, and one aspect is their crisis management planning. Some crisis plans consist of a handful of clichés and a page of phone numbers (half of them no longer working). Not SunPower’s plan. It’s a 119-page document prepared by SunPower staff with assistance from Ogilvy PR, and breaks down who needs to do what for any company crisis. While this plan may sound lengthy, it’s more of a guidebook, allowing anyone in company management or the board to look at the index and immediately “know their role.”
The SunPower Crisis plan, and the process used in shaping it, offers good ideas for all company leaders who realize that it’s time to step up and create a workable crisis management plan. Here are five lessons that we learned in the process.
1. First is the most obvious, but essential — will your board and management make crafting a crisis response plan a priority? Will the funding and time be allotted, and management graded on effective completion?
This leads to various “first questions” your crisis plan must answer. What are the most likely crisis scenarios your company will face, based on its industry, size, location, structure, vulnerabilities, etc.? The SunPower plan lists three tiers of crisis; emergency (dangerous, life-threatening situations), serious (threats to the company’s operations or credibility), and newsworthy (some event, typically financial, that casts the company in a bad light). Thirteen examples, from a major plant catastrophe, to legal problems, to natural disasters, are offered.
Don’t underestimate the practical efforts required to design a sound plan. Ingrid Ekstrom, corporate communications director for SunPower, led development of our crisis plan, and notes, “expect many rounds of internal review and approvals. Our plan was reviewed by representatives from several key areas of the company such as manufacturing and legal, as well as senior executives, requiring hours of coordination for the comments and reviews.”
2. Does your plan designate outreach roles and messages for specific audiences (major investors, employees, the media, your relevant regulators, stock exchanges, local communities)? Who is to be the company’s primary spokesman? Who is to be informed of what, when? What are the primary messages you’ll need to deliver (continuity… public safety… maintaining shareholder value…)?
At SunPower, the crisis plan designates a three-person “Core Planning Team,” with a further 32 top execs, department heads and board members as implementation and contact resources. Teams, checklists and sample “fill in the specifics” messages are included. One outstanding element of the plan is the extensive list of contacts included as appendices. This includes all the key crisis team members, as well as the company contact resources. It says a lot about how serious SunPower takes its crisis planning that even CEO Tom Werner lists his home and personal cell telephone numbers.
3. Does your plan consider various “scenario” options? Sure, it’s standard procedure to designate your CEO as the primary spokesman. But what if the “crisis” facing your company is the sudden death of the CEO… or even the CEO’s arrest or indictment? Too many corporations have been caught short when a “that will never happen to us” situation… happens. Make sure that your crisis communication plan builds in a “deep bench” of talent who will know their roles and messages if suddenly thrust into the spotlight. As important as designating who is the spokesperson, is a well understood policy of who is not to talk to the press for the company. A strong policy of confidentiality is important.
4. Does the company have a pre-existing relationship with a proven crisis management publicity firm? At SunPower, we worked with the pro PR firm Ogilvy to craft our plan, and would be able to quickly tap their skills if demanded by an emergency.
Ability to view your company, its audiences, and communications challenges from the outside are further reasons why it can be wise to work with an outside counselor. Ingrid Ekstrom says, “Ogilvy helped us in framing the document and figuring out scenarios. We had tried a couple of different approaches on crisis management planning before, but using outside resources proved very helpful.”
5. Finally, does your board of directors realize that its role in crisis management is subtly different from that of management? The tactical issues of working the problems at hand may overwhelm managers, or lead them to public statements that focus on legal, technical issues rather than those really concerning those outside the company. Remember how much technobabble BP was offering in the summer of 2010, when we all really just wanted to know when they were going to get the hole plugged?
More importantly, the board of directors has a fiduciary duty to protect the company’s shareholder value and the public value of its brand. Managers have these duties too, of course… but sometimes crisis response may tempt managers to focus first on protecting managers.
One last point for any crisis management plan — realize that your plan is never truly “completed.” Remember Rep. Markey’s comment above on the stale data in BP’s emergency plan? It’s easy to develop a document, and then forget about it while your company’s people, contacts, strategy and exposures continue to evolve. “We include contact info for everyone, including top investors and the media,” says Ekstrom. “Keeping your plan data updated is crucial.”
Betsy Atkins is an entrepreneur who has co-founded several high-tech and consumer companies and served as CEO and board member. She also has been an active independent director for the past 20 years, and is currently serving on three public company boards. She can be contacted at email@example.com.