In January, an explosion at Houston-based Watson Grinding and Manufacturing killed two workers as well as a local resident, injured nearly two dozen other people and damaged 450 nearby structures, mostly homes. That same day company CEO John Watson told a local television reporter, “I will repair all the damaged homes... my insurance company will.”
Hours later, Mr. Watson reversed course, saying, “To correct comments I made earlier today, no claims process has been established at this time. Who is at fault and who will pay for damages cannot be determined at this early stage.”
Just weeks later, Mr. Watson’s company filed for bankruptcy and dismissed 80 employees. Some would opine Mr. Watson’s remarks prove saying nothing in a crisis is the best defense. After decades of research and dealings with manufacturers, we believe just the opposite.
There are few industries as vulnerable to crises as manufacturing. For instance, in January, a worker was killed by an industrial press at a Woodburn, Indiana, BF Goodrich tire plant. After the death, WTPA-TV reported state records showed two other incidents for serious safety violations at the plant. The victim’s family and the United Steelworkers Local offered statements to WTPA-TV; missing was a statement by BF Goodrich.
Bungled pronouncements or no comment prove ignorance of an unassailable fact: All companies are in a state of pre-crisis. If manufacturers accept that fact, they can begin preparing. That preparation can lead to deftly handled communication from the outset of a crisis. The message all concerned will hear is that the company wants to get to the truth of what happened, which can put it in a better position when it comes to damages if a crisis leads to litigation.
Bring Authority and Authenticity
For Watson Grinding and Manufacturing, the company was right to speak. Had it prepared in advance for responding to an explosion (not an unimaginable event for a manufacturing facility), the executive team could have crafted a statement signaling leadership and compassion, yet waiting to accept fault before all the facts were known. It’s the difference between acknowledging responsibility to act and accepting blame for all that’s occurred. For example, sometimes other parties are involved who share responsibility for making things right.
In our research, we’ve learned juries behave largely like the public. Both juries and the public want corporations to act like a friendly and approachable human being—to not only apologize and really mean it, but to have ways to handle incoming communications and interact with the community to address their concerns.
When a manufacturer faces a crisis, the public wants to hear the company say, “We’re working to understand what happened here and will stay on this matter until it’s fixed. We care about what’s happened to our employees and their relatives, our customers and our community.” In Mr. Watson’s case, his follow-up statement could have softened the backpedal by including a demonstration of compassion, such as starting an emergency fund to help those affected by the crisis. Had his company been better prepared, such an action could have been part of his initial response.
Genuine Contrition Resonates
Several years ago, we did a study of punitive damages for an industrial company that had contaminated the environment with a chemical; it was the classic definition of a major crisis. We began testing a variety of messages to mitigate the potential for runaway damages awarded by a jury. One message suggested that greatly penalizing the company would so hurt the company’s operations that it would have to pull up stakes and leave the community. Our test jurors perceived that as a threat and were angered by this message. Another message articulated how punishing the company would punish shareholders. The test jury didn’t care. What our test group found compelling was the CEO saying, “We are truly sorry for what’s happened to this community. What happened here also happened to us, our workers, our equipment, our reputation.”
Legal experts and pundits estimated the company would suffer billions of dollars in damages. We predicted that delivering a message of genuine contrition would reduce that jury damage award by 50%. The company delivered that message, and in the end the jury awarded damages of several billion dollars less than expected.
In pre-crisis mode, manufacturing leaders must outline the range of possible scenarios that could befall their company. By thinking through crisis scenarios and preparing preliminary materials, management teams can best respond to a coming crisis.
Companies that successfully navigate a crisis – meaning they diffuse tension, mitigate damages and preserve valuation – have these things in common:
1. Long before a crisis, they established a formal crisis plan, including designating specific members of a team to spearhead a response. The team has a crisis leader who vets anything said publicly. The team members know the business lines, and several are effective communicators. Some members already have relationships with journalists and social media influencers, which speeds up a response.
2. They regularly brainstorm about new, perceived threats. For example, as cyberattacks have increased, crisis-savvy planners might imagine data-breaching scenarios that affect operations, customers or employees. Once framed, they test messages.
3. They practice what they’ve planned, at least annually. In today’s social media world, a manufacturer’s first response determines the course of a crisis. Companies that drill avoid chaos; they don’t waste time scrambling to assemble a team, figuring out a crisis protocol or crafting a response without guidance.
When manufacturers get high marks for handling a crisis, it’s because they found a way to meet the concerns of stakeholders. The online mobs that typically fuel a crisis are seeking justice. For executives to protect their company’s reputation, customer relationships, valuation and employees, the words they use in a crisis have to show the company will: seek truth; find the cause; and take tangible steps to ensure the situation won’t happen again.
Sean Murphy co-leads the crisis and litigation communications practice for Texas-based Courtroom Sciences, Inc. and George Speckart, Ph.D. is the firm’s director of research and consulting, where he oversees the design and implementation of psychological research for corporate clients facing imminent litigation with significant exposure.
