Category Archives: Crisis Communications
As a professional with extensive experience in international mergers and acquisitions, I often hear that mergers and acquisitions rarely live up to the original intent behind the deal. Bain & Company recently published a report of their findings from research they conducted on M&A activity from 2000 to 2010, and they found that companies that pursued mergers and acquisitions as part of their growth strategy outpaced the growth of companies that did not. Most interestingly, companies with more aggressive M&A strategies outperformed companies with moderate M&A activity.
Negative sentiment toward M&A is largely framed by the big failures – like the AOL and Time Warner merger, the largest merger in corporate history. (At the time of that merger, I was working with Vodafone, based in the U.K., on their hostile bid for Mannesmann in Germany, an acquisition also discussed as the largest merger on record. With AOL Time Warner’s friendly announcement, the Vodafone Mannesmann merger which followed soon thereafter became the largest hostile bid on record.) The reasons for failed mergers are many, but in my experience, successful integration of the merged companies poses one of the greatest obstacles to success.
Companies generally do a very good job of defining the rationale for an M&A deal and conducting the required due diligence to ensure the right fit. Unfortunately, after investing substantial money, time, and energy into making the deal happen, management teams often fail to plan adequately for assimilating the two corporate cultures into a new cohesive unit. Constructive integration is doable, and management teams can plan ahead for a successful M&A outcome:
1) Assign a dedicated team focused exclusively on the tasks following the announcement. As an extension of the due diligence team and within the dictates of regulatory guidelines related to the industry and the specific transaction, this integration team should be appointed as soon as management begins its due diligence so that the team has ample time to develop a comprehensive integration plan. You might think this timing is premature given that so many deals don’t make it through the due-diligence process. But companies lose valuable time and momentum when they wait until the closing of the deal. One critical mistake in the integration process: management teams spend too much time trying to find the answers to very important questions after the deal is signed when they should be executing decisions made far in advance.
2) Define how the merged company will look in six months and in one year, and then develop the action plan that will get you there. Companies have very specific objectives with each merger or acquisition. Make sure the merged company stays true to those objectives, and consider the impact those objectives will have on every business unit, employee, and customer, and be aware of the changes that will have to occur to reach the six-month and one-year corporate vision.
3) Test the action plan to ensure that it matches the original rationale and objectives of the merger. Make sure you consider all scenarios and outcomes. Integration teams can reduce the risk of failure when they identify the pitfalls before they happen.
4) Consider your audiences. Employees, customers, and business partners have firm loyalties, and a merged company must develop strategies to win these individuals and groups over to a new corporate culture and brand.
5) Develop effective messaging. Just because you understand the rationale of the merger doesn’t mean everyone else does. Each audience has unique motivators that bring them to the brand. Some of these motivators are rational and some are emotional. Effective messaging will be consistent across all groups, but it will also be specific to address the motivators of each group.
Change is hard. Even though the benefits of the merger or acquisition are real, employees will have adjustments to make and new relationships to build. Customers may be asked to embrace a new, or at least modified, brand despite the fact that they love the old one. Business partners may question their relevance in the newly merged entity. These are just some of the audiences. Integration strategy plans for all these scenarios – and many more! It is about more than announcing the deal in an email. A successful integration plan brings people together as a team to appreciate the value of the newly merged or acquired company.
M&A can bring dynamic opportunities to a company: expanded markets, diverse customers, innovative technologies, and new products. Companies need not fear M&A activity as long as management understands the merger is not completed with the announcement or closing of the deal. The real work has just begun. With appropriate advance planning and timely implementation of the integration plan, companies can improve their competitive strength with sales growth, profit growth, and shareholder value.
I’ve always been a fan of the television medical drama “Grey’s Anatomy,” a show that follows the fictional lives of surgical interns and residents as they evolve into expert physicians at a Seattle hospital. Even in the seasons when the writers seemed to be on an extended vacation (season four), the show’s complex characters and medical challenges have continued to hold my interest.
Usually, when the show’s medical content strays from reality, I don’t let it bother me. After all, it’s fiction. But a few weeks ago, “Grey’s” ventured into hospital crisis communications – or rather, a fictionalized version of it – and I couldn’t keep myself from feeling agitated.
Here’s the short version: The hospital discovers that one of its surgeons has unknowingly passed a fatal infection to several patients. The Center for Disease Control and Prevention has investigators on site who pinpoint the source of the problem and provide oversight for eradicating the issue. One hospital leader suggests putting out a press release explaining why the CDC is in town, but his colleagues nix the idea. Viewers are left to believe the hospital sits on its hands in terms of communications (and does a bad job of dodging patient questions) until it simply issues a press release after the crisis is over. And by “issuing a press release” I mean handing it to a young patient who wants to be a journalist so she can scoop the other media in town.
Are you ripping your hair out yet? The show completely ignores the communications steps that a hospital should, and hopefully would, take during such a crisis. In fact, nobody even seems that concerned with developing a crisis communications plan to answer questions from patients, staff and the general public. There’s no talk of how the news could negatively impact the hospital’s reputation and admissions if it isn’t handled properly. Who knows what was in that press release handed over with such nonchalance, but I guess the hospital thinks it says enough to avoid the likely storm of negative press and frightened calls from patients.
Of course, as anyone who has ever seen public relations portrayed in mainstream media knows, it’s highly unlikely that a medical drama would take the time to give crisis communications the airtime it could consume. But it made me wonder why, if it was going to get such flippant treatment, was communication strategy mentioned at all.
You may not be a “Grey’s” fan, but I know you know what I’m talking about. What is your favorite – or least favorite – television portrayal of public relations?
While walking by a Lululemon Athletica Inc. store in Nashville last week, I noticed the words “The Great American Yoga Pant Crisis” across the store front window. Thank goodness we survived the controversy, but will the company?
Since Lululemon last month announced a recall of women’s black Luon yoga pants due to sheerness and issued a warning of a yoga pants shortage, there has been a steady media buzz on the story from parodies on late night talk shows to social media. News outlets around the globe seem unable to resist the temptation to make a pun in the headlines.
All jokes aside, the recall amounts to 17 percent of all women’s pants sold in Lululemon stores and the company adjusted their first quarter revenue projections down between $333 million to $343 million from previous expected revenues between $350 million to $355 million. With competitors such as Nike and Under Armour trying to woo customers through aggressive campaigns, the quality control issue at Lululemon is a serious one.
Last week, the company announced its chief product officer was stepping down, and they instituted new senior level capabilities in quality, raw materials and production. These actions are positive steps to remedy the situation and avoid a repeat in the future that will go a long way to ensure consumer and shareholder confidence. Consider the following tips to successfully navigate a PR crisis:
Take responsibility. In the case of Lululemon, the company initially stated quality problems were due to an overseas supplier. The company later accepted partial responsibility and said its testing protocols were incomplete and the fabric used in the pants was “on the low end of Lululemon’s tolerance scale” Accepting responsibility for the lapse in quality was the right move to help restore trust in the company’s leadership and products.
Act swiftly. Once you know the facts on the issue, scope and potential impact on the company, develop a communications action plan and follow it through. It’s critical to have the necessary tools in place to effectively communicate to both internal and external audiences. These tools should include key messages, FAQs, media response statements, social media responses and internal communications such as a letter to employees so everyone is informed and empowered to communicate to key stakeholders as appropriate.
Respect customers. Customers are more powerful than ever, taking to social networks to rave about their favorite brands and rant about them when they make a mistake. In light of the yoga pants issue, Lululemon pulled products from store shelves and offered refunds to customers. The refund policy initially drew some criticism but was clarified and ultimately a successful strategy to repair customer relationships and get beyond the controversy.
Lululemon may have taken a few hits when the story broke but as long as the company continues to focus on improving its production processes they should be able to weather this storm with their reputation and loyal customers intact.
What do you think? How did Lululemon handle the PR crisis? What impact will it have on the company?
Every consumer brand dreams of a high-profile mention that suddenly propels its product it into the national spotlight. Right? Well, maybe. What if the attention comes in a politically-charged environment?
That’s the situation in which Ohio Art, creator of Etch A Sketch, recently found itself. And the way the company responded is an excellent example of “grace under pressure” and great marketing.
Etch A Sketch’s moment in the spotlight came as the result of a comment made by an advisor to Republican presidential candidate Mitt Romney. In describing his candidate’s political positions, the aide said, “Well, I think you hit a reset button for the fall campaign. Everything changes. It’s almost like an Etch A Sketch. You kind of shake it up and restart it all over again.”
The comment went viral and Ohio Art found itself with a potential opportunity or PR nightmare on its hands, depending on how you look at it. To its immense credit, the company made the most of its unintended moment of fame without weighing into a politically charged debate or alienating Americans of either the Republican or Democratic political parties.
Thus was born the Shake It Up, America website. The home page states:
We stand firmly behind our proclamation that “We have a left knob and a right knob for each political party.” And “…when both work together, we can do loop de loops.” We’re especially serious about the loop do loops part. We call on you to shake it up, America! Exercise your freedom of self-expression by voting on Election Day, and drawing on your Etch A Sketch every day. Our political neutrality is unflappable. And our stance on self-expression is unshakable.”
A new ad campaign released in conjunction with the website featured headlines like:
“We have a left knob and a right knob for each political party.”
“Etch A Sketch is a lot like politics – there’s a lot of gray area.”
“Politically, we lean right down the middle. Which way do you lean?”
Each ad ends with the same statement at the bottom: “Etch A Sketch is proud to be part of the national debate.”
But wait, it gets better! Now you can not only purchase Etch A Sketch with its traditional red frame, soon you can buy a blue or flag-themed version of the toy.
It’s a real pleasure to see how this iconic American brand took the high road, encouraged citizens to exercise their right to vote and turned an opportunity into a playful and notable campaign. And I know which color Etch A Sketch I’m ordering. How about you?
Today, companies can be widely dispersed. Employees may live in different cities or countries from where the organizations are centrally located. Younger generations may request working from home or the local coffee shop, saying they feel more comfortable and inspired outside of an office setting. Some companies may not even have an office, but a team of mobile employees collaborating through various new technologies. So what happens when an important discussion needs to take place between members of an organization who are not located in the same area? Well, you have the next best thing: a virtual meeting.
There are MANY services available to conduct virtual meetings; from highly robust and paid services to free and simple ones. Recently updated, the Google+ platform allows for online video conferencing which it calls “Hangouts.” Other major services include GoToMeeting and Cisco’s WebEx. And did you know Facebook also allows for video chats between friends?
Facebook video conferencing is actually powered by one of our favorite services that we highly recommend, Skype. Skype can be used for free video conferencing directly with another Skype user, including online messaging and file sending. We recommend Skype to clients as a way to conduct meetings between organizational employees when not located in close enough proximity. If you haven’t tried it out already and would like to, Skype requires a quick set-up process before online communication can begin. To make it easy for you, we’ve created a How to Set Up Skype video below that will walk you through the process.
What services do you like using for virtual meetings? Please let us know your recommendations in the comments below!
I was interested in the crisis communications response of Costa Cruises, its parent Carnival Corporation, and the cruise industry overall to the wreck of the Costa Concordia even before the latest gaffe. In a stunning new development this week, Costa Cruises offered passengers of the doomed Concordia’s January 13 sailing a 30 percent discount on their next cruise. Tasteless falls hopelessly short of properly characterizing this offer, made shortly after a 13th victim was recovered from the vessel and with 19 passengers still missing.
Even before this development, which should feed satirists and late night comedians for days, I was underwhelmed by the company’s response. Nowhere on the Carnival Cruise website will you find reference to the incident, and only by digging into the Carnival Corporation Investor Relations page will you do so. The Costa Cruise website, in contrast, does feature YouTube video excerpts from a press conference with its CEO that took place three days after the incident. However, the CEO’s delivery of remarks read in English, obviously not his first language as he pronounces lawsuit “law-sweet,” does not impart the level of personal warmth, engagement and concern that such situations demand. Still, it was a real person – at last – as for the first day and a half, Costa and Carnival communicated only through news releases. In contrast, Carnival received substantial praise for its handling of a November 2010 fire on the Carnival Splendor that left 4,500 passengers and crew stranded adrift for days. I doubt similar praise will follow this incident, despite the nifty 30 percent discount offer.
As for the industry, the Cruise Lines International Association expressed its condolences in the second-to-last sentence of a three-paragraph statement issued three days after the incident. The sentence before that statement reads: “Accidents such as this one are an extremely rare occurrence in the cruise industry, and cruising continues to be one of the safest means of travel among all types of vacationing.” I do think they might have managed to get to the condolences a bit quicker.
In Italy, Gianni Scerni, president of RINA, which is a classification organization that issues certificates of seaworthiness for vessels, including the Concordia, resigned surprisingly within hours of publication of an article in which he criticized Costa management. Scerni reportedly expressed doubt that Costa was unaware of the routine and very dangerous practice of “saluting” the island of Giglio by passing close to it, despite such incidents having been captured on YouTube and statements made by the ship’s second officer that the salute occurred “fairly often.” This dismissal could certainly be perceived, correctly or incorrectly, as the industry closing ranks to protect its own at the expense of a clear airing of the facts in this tragic story.
In the end, the cruise industry – including Costa and Carnival – are not likely to suffer much from this incident, despite the pictures that will remain in file footage and our mind’s eyes for years to come. It’s reported that just days after the accident, cruise bookings actually increased as savvy cruise regulars began seizing the opportunity to take advantage of discounts and specials being offered by nervous cruise lines.
What are your perceptions of the handling of this crisis by the cruise lines and the industry? Do you feel their crisis communication response to the Costa Concordia incident has been adequate?
If you’ve talked to an active Netflix user lately or kept up with the latest social media headlines, you’ve probably learned that Netflix customers aren’t too happy. Netflix, which has offered a simple DVD movie rental and streaming package for years, recently decided to separate these two services and raise the prices of each. Netflix will become a streaming only company, while a new company called Qwikster will offer DVD rental.
Reed Hastings, the Co-Founder and CEO of Netflix, explains the need for specialization as the reason for the split in his recent apology email sent to Netflix customers. Hastings states that DVD and streaming services are different services with different cost structures that need to be marketed separately and grown independently.
Why are Netflix customers so upset? Hastings announced these service and price changes through press releases instead of addressing customers directly. Hastings acknowledged his mistake and apologized to Netflix customers in an email in which he said, “I messed up. I owe you an explanation.” But of course, a lot of damage had already been done.
So what can businesses learn from Hastings’ mistake? Always communicate major changes in your business with your audience directly. Customers will appreciate hearing about changes or mistakes from you instead of the media. And if your business does make a mistake, apologize publicly and directly. Though Netflix customers are still not thrilled with the separation of the DVD and streaming services, Hastings has done a good job of admitting his mistake, apologizing to Netflix customers and explaining the situation. But, as Hastings has learned, it is better to announce your changes to customers beforehand, avoiding - or at least limiting – the need for crisis communications.
What is your take on the Netflix split? Would customers have received news of the division and price hike better if they had heard from Hastings first? Do you think Hastings was effective in apologizing to customers? Would you have handled the situation differently?