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Communicating in a Business Crisis: Part 2
By George Merlis Tuesday, August 18, 2009

Last time we asked whether or not your business needs a crisis communications plan. On the assumption you are reading this post because you answered “yes,” to the question, here are some tips for you and your spokespersons.

Assign your spokesperson or spokespersons in advance: Often, when a crisis breaks, you see multiple personalities jostling for the media spotlight, trying to manage the crisis communications. This is counterproductive; it sends a message that nobody is in charge. Also, it’s imperative that everyone in the organization knows who the proper spokespersons are and refers reporters to those spokespersons. If your people don’t know who to refer the media to, you’ll face a flood tide of speculative answers from your own employees, most of whom will have only a partial picture of the crisis. Also, the fewer the spokespersons and the higher their rank, the better the plan.

Keep your spokespersons in the loop: Your crisis communications plan must include mechanisms for keeping spokespersons in the information flow. They cannot address public concerns if they don’t know what’s going on themselves. Never withhold information from your spokespersons because you want it withheld from the public. If that information gets out and the spokesperson did not know about it, he loses all credibility with the media.

Once you have your spokesperson or spokespersons, here are some tips for how they should communicate in a crisis.

Stay out in front: Late messages are as bad as mixed messages. If your spokespersons don’t get out and address the crisis quickly, other “experts,” many of them self-appointed and ill-informed, will assume the mantle of authority. After the 9/11 attacks, Americans wondered if they should buy gas masks. It took the federal government three weeks to come up with the recommendation not to buy them. During these weeks, self-appointed terrorism experts filled the 24-hour news channels, warning of chemical weapons and frightening the public into depleting Army/Navy stores and online military surplus companies of every gas mask in stock. If you don’t respond in a timely manner, someone else will, and it may prove hard to wrest back control of crisis communications once that horse is out of the barn.

Tone: Your spokespersons needs to exhibit empathy, not paternalism. People resent being talked down to, even in extremely dire crises. Another form of paternalism is withholding bad news from the public for fear it will panic or react badly. Eventually the information is going to come out and once it does, your credibility will be in shambles.  The public can handle bad news if you present it in a mature, factual, respectful way. A series of 55 focus groups conducted across the country by the Centers for Disease Control and five universities found that uncertainty is more difficult to deal with than bad news and that any information is empowering in a crisis.

Speculation: The media will invite you and your spokespersons to speculate on the progress and outcome of the crisis. Decline the invitation.  Speculation is dangerous. If you are wrong, you damage your credibility.

Swat rumors promptly: A rumor left standing becomes a fact in short order. While this is an extreme example and unlikely to be duplicated in the world of business, it is instructive: There were rumors of mass assaults in the Superdome in the aftermath of Hurricane Katrina. It didn’t happen, but authorities failed to refute the rumors in a timely manner and to this day many people still believe and repeat the stories.

Don’t answer what you can’t answer. Do answer what you can answer: “I don’t know. We’re working on it,” is a perfectly valid answer, especially if followed by a description of what steps are being taken. On the other hand, you can’t manage a crisis by withholding information. As Shakespeare wrote in The Merchant of Venice, “Truth will out.”  When it does, your credibility plummets and you find yourself managing both a crisis and a credibility gap.  But what about information you really can’t share? Respectfully, tell the media that you are withholding some information and why you are withholding it. If you have no results to report, talk about the process that will lead to results. The public wants to know something is being done, even if it hasn’t yet borne fruit.

The bottom line: candor: Candor is the most important tool for the crisis communicator. It served Johnson & Johnson well in the 1982 Tylenol poisoning crisis. J&J’s handling of the crisis is cited in every crisis management text written in the last three decades. And from a business point of view, candor worked extremely well because within months of the emergency, Tylenol regained its position as the country’s top-selling over-the-counter pain relief medication.

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Book Review: Hey Whipple, Squeeze this
By Jake Cornelius Thursday, August 13, 2009

The August 2nd episode of BBC's popular automotive show "Top Gear" included a segment in which two of the show's hosts were assigned the job of creating an advertisement for a new car. Hilarious mayhem ensued. The car they had to create the ad for was the new VW Scirocco TDI, a diesel version of the sporty hatchback that won "Top Gear's" car of the year award. (Sorry America, VW has no plans to sell the Scirocco in the US). The hosts, James and Jeremy, concluded that the car was indeed sporty, handled great, and got around really well. Plus, it got 55 mpg! Fantastic! Unfortunately, the engine was a real dog. The power band was too small and the gearbox didn't match well with it. Their conclusion after driving it was that it was "a great car ruined by a canal boat motor. Never buy it." Now they had to create a TV spot for it.

So how do you create an advertisement, and what is the advertising business like? Luke Sullivan's Hey Whipple, Squeeze This gives a humorous inside look at the industry and how to create a great ad. The title comes from Sullivan's years of despising Charmin's lovable Mr. Whipple. He was featured in 504 different Charmin ads from 1964 to 1990 and, after knocking Scott Tissue paper out of the no. 1 spot, kept Charmin the market leader. Yet, he was irritating, wasn't he? Compare him to all the great VW adds we've seen over the last 4 decades. Those are witty, fun, unobtrusive, and best of all, memorable. Neither campaign changed drastically over time, and neither needed to because they were effective. The difference is in how they got consumers to remember the product. Sullivan gives many fine examples of print and television ads that ran over the last 40 years and explains what made them work. He also describes his years in the business and what it was like working with so many other creative people all bouncing ideas off each other. He tells about some truly awful (unnamed) clients and the things they want an ad to do and some of the great clients that would grab an idea with gusto and run with it. Some people get it, some don't. One of the things I really liked about the book is how much of Sullivan's advice about both the idea of advertising and the business of advertising relate to any other business and even the way we live. We all like to smile and feel good about ourselves: That's what an ad should do, and it's something we can do at a personal level. The consumer isn't stupid: An ad shouldn't be demeaning towards anyone and neither should we as individuals or business people. Know what you're talking about: Obviously.

I really enjoyed this book and I got a lot out of it. I took several graphic design courses in college and this book helped me (belatedly) figure out what I did wrong and how I could have made my work better. It also would have helped James and Jeremy. After numerous attempts that had me rolling on the floor laughing, they almost created some decent work. It was an ad for a VW, but it sure wasn't a VW ad.

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Communicating in a Business Crisis: Part I
By George Merlis Wednesday, August 12, 2009

Does every business need a crisis communications plan? No, but a surprising number of businesses -- even small businesses -- do need such a plan.  Crises vary in degree, intensity, and effect on the public. A company’s bankruptcy is a tragedy, one that  deeply affects employees, customers, and stockholders. It might even have a ripple economic effect on a community or a region. The effects of such a crisis, while severe to those involved, are limited insofar as the affected population. A swarm of tornadoes that level a town is a contained crisis. While the entire country will feel deep sympathy for the townspeople, the threat and effects will be largely regional. The 9/11 terrorist attacks and the subsequent anthrax mailings had far wider ripples.  In the first, the American mainland suffered 3,000 killed in its first significant foreign attack since the War of 1812, and the threat of further terrorist strikes frightened millions. After the anthrax-tainted letters began showing up the previously benign mail slot in every American home suddenly became the potential portal for a deadly disease.

So do you need a crisis communications plan? Ask yourself two questions:
What’s the worst crisis that can befall my business (or area of responsibility)?
How widespread will the effect of that worst-case scenario be?

In my case, the worse case scenario I can conceive of for Experience Media Consulting, my media and presentation training business, is my clients suddenly abandoning me. Since the effect of that crisis would be extremely limited -- a severe economic blow to me as an individual -- I don’t need a crisis communications plan that goes beyond telling my wife and my accountant what has happened.

But for many entrepreneurs, a crisis communications plan is essential because they have far more stakeholders. Now understand that you can’t have a crisis communications plan until you first have a crisis management plan. If your not managing the crisis, then you don’t have a whole lot to communicate; certainly, “We’re ad-libbing our way through this problem,” is a less than positive response to media inquiries in a crisis.

Preparing a crisis management plan is outside my area of expertise, but I do know with certainty that the time to plan for crisis management is in advance and that every conceivable department or individual involved in the crisis response must be involved in the planning. Now a key to your crisis management plan’s success will be communication, because most crises, unlike my personal dire scenario, require some public response and unless there are adequate communications, the public won’t know if it has a role to play.

Let’s look at the three most basic facts stakeholders want to know about any crisis, no matter how limited it is in scope:

1.    How dangerous is this situation to me and to my family’s physical and/or economic health?
2.    If there is a direct physical and/or economic risk, what individual actions should I take to mitigate risks?
3.    What steps are you, the responders, taking to mitigate the situation and to insure it does not happen again?

In crises ranging from a tainted product reaching the marketplace and a horrific workplace shooting all the way down to the drying up of a small consultancy’s client base, stakeholders want these questions answered. Obviously, the tainted product or the gunman in the workplace require far greater outreach than the small business failing. In the former crises there are so many stakeholders that the three questions must be answered via the mass media. In the latter, you could handle the chore with a few phone calls and/or e-mails. (If you’re telling your spouse your business went bust, I suggest doing that face-to-face, rather than by e-mail, unless you want your marriage to go bust along with the business.)

Next time: Your crisis spokespersons: What they must communicate to the stakeholders and how they should communicate it through the media.

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Tips for Becoming a Better Entrepreneur
By Carleigh Lowe Tuesday, August 11, 2009

Neil Patel is the founder of two successful internet companies and has years of experience as an entrepreneur. Recently, on his blog Quick Sprout he posted a great list filled with insightful lessons he has learned along the way. Check out the post 53 Ways to Become a Better Entrepreneur. Below is an excerpt:

Here are 53 things to keep in mind if you want to be a better entrepreneur:

  1. Don’t let emotions cloud your decisions.
  2. Accept criticism, no matter who gives it to you.
  3. Never stop networking.
  4. Learn from your own mistakes.
  5. Learn from other people's mistakes.
  6. Around every corner lies an opportunity for you to sell something.
  7. Don’t get too greedy…pigs get fat and hogs get slaughtered.
  8. Try not to mix your family life with your business life.
  9. No matter how successful you are, you shouldn’t stop learning.
  10. Spending money on good lawyers and accountants will save you more money in the long run.
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Venture Capital News
By Brett Melson Friday, August 7, 2009

Since our last post on the state of the venture capital market, the industry has seen even more bad news emerge. A July 1 report issued by VentureSource, a research company focused on the venture capital industry, showed that liquidity in venture capital investments for the second quarter of 2009 fell 57% when compared to the same period last year. The report called the quarter “one of the worst for venture capital-backed liquidity since the doldrums of early 2003.” The entrepreneurial spirit, however, abhors a perceived piling-on of pessimism, and is, by nature, guardedly optimistic; this optimism is reflected in a survey of sentiment among venture capital professionals released on July 9 which showed, despite the gloomy figures for the quarter, a marked increase in confidence among industry figures. The survey noted that while the effects of the financial market disruption on the venture industry will linger for some time, most [venture capitalists] observed an increasingly determined and talented pool of entrepreneurs and a continuing march of innovation.” Similarly, Scott Austin, the author of the Wall Street Journal’s Venture Capital Dispatch, declared the second quarter figures released by Venture Source a “healthy surprise.” While he noted the dramatic (and not entirely unexpected) decline in liquidity for venture capital investments, he believed the numbers evidenced that “investors are putting money to work in health care, with big gains [in terms of investment] occurring across the board in biopharmaceuticals, medical devices, health care services and medical software and information services.” (http://blogs.wsj.com/venturecapital/2009/07/15/expect-a-healthy-surprise-in-2q-venture-funding-report/)

Venture capital managers are not only contending with difficult market conditions; they are also facing the possibility of increased regulation.  Legislation that would require venture capital management firms to register as investment advisers with the Securities and Exchange Commission is gaining momentum in Congress. Among other things, this would subject managers to extensive recordkeeping requirements, requirements governing the manner in which investor assets are custodied, restrictions on managers’ ability to receive performance-based compensation from a fund (such as the “carried interest” allocation customary in the venture capital context) and periodic examination by the SEC staff. Although primarily targeted at hedge fund managers, the investment adviser registration requirements currently supported by the SEC and the Treasury Department would include managers to venture capital and private equity funds within its scope.

Industry professionals as well as representatives from the National Venture Capital Association (or NVCA), the venture capital industry’s main trade association, have appeared before Congressional committees and government agencies argue that venture capital managers should be excluded from the scope of the legislation. These professionals and representatives argue that the potential failure of a large venture fund does not pose the same systemic risk to the U.S. economy as that of a major hedge fund, given that venture funds are not leveraged like hedge funds. In addition, they argue that the activities of venture funds make them less likely or able to engage in the misdeeds Congress seeks to prevent, since venture funds do not “short” stock, do not engage in short-term trading and do not purchase or sell publicly-traded securities that would be most subject to manipulation. As a result, the venture capital industry believes that SEC oversight of venture fund managers is unnecessary, and the resulting burden upon an industry essential to the American economy would outweigh the potential benefits gained or harms prevented. Stay tuned for more to come!

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