Anders blog

Crisis management puts huge strains on firms, CEOs

Crisis management expert Caroline Sapriel has plenty of experience of the colossal pressure on corporate chiefs such as Tokyo Electric's Masataka Shimizu, hospitalized as his firm battles nuclear catastrophe.

Firms such as airlines, oil majors and utilities may sometimes run scenario-based exercises, hold discussions and hire outside consultants such as her to brace for disaster. But when it strikes, she says corporate structures and personnel are often by their very nature still brutally unprepared.

As the stock price nosedives and media bays for blood, managers themselves are often simply in shock as they face the reality of potential deaths and difficult decisions. Part of her role is supporting them through those strains, she says.

"Executives aren't military commanders," Sapriel told Reuters from the Brussels headquarters of her crisis management consultancy CS&A. "They're not trained for crisis management. The whole style of management these days is often do things by consensus. That simply doesn't work in a crisis. It's much more about command and control. The strains are enormous."

Preparation is key, she says, but many companies are simply not willing to be honest in advance about what might go wrong.

Tokyo Electric Power Co (9501.T) -- known as TEPCO-- said on Wednesday that chairman Tsunehisa Katsumata would take over operations from president and CEO Shimizu, barely seen since the quake and tsunami that crippled its plant. It said Shimizu had been taken to hospital suffering from high blood pressure.

Crisis managers say TEPCO is facing one of the most challenging forms of corporate disaster -- potentially open- ended and endangering health and human life. As oil giant BP (BP.L) found in last year's Gulf of Mexico oil spill, that can be a very uncomfortable place to be.

Governments, policymakers, regulators and other officials may also be feeling the heat -- and taking in out on the firm. A "good crisis" might sometimes be the making of a politician, but in the corporate world managers know there is little upside to being the face of an industrial disaster.

"The first thing you often find is that... not a single senior member of a company is willing to talk directly to the media for fear of being the one to take the fall for the crisis," said U.S.-based crisis consultant Eric Dezenhall.

"In some companies, the key to becoming CEO is to avoid being blamed for any particular debacle and people know that."

DISASTER CLICHES

With BP in the Gulf of Mexico, Sapriel said too much pressure was put on CEO Tony Hayward who also became the media point man and something of a hate figure in the U.S. Ultimately, he resigned after a string of gaffes that included being photographed going sailing at the height of the crisis.

"You do need the man at the top to make some statements to show he's in charge and he cares -- he can't disappear altogether -- but if they are out front every day they are going to start to make mistakes," she said.

At the same time as having to handle relations with the media, and populations and politicians, firms themselves may still be struggling to get a handleon what has happened.

"Everyone in these crises conform to certain cliches -- the company tends to try and want to make things look better than they are, and the media... portray a massive conspiracy," Dezenhall said. "What is usually really happening is that the company itself doesn't know what the hell is going on."

Insiders admit that attempting a cover-up can sometimes look appealing -- but ultimately can do more harm than good. BP was also criticized for initially underestimating the volume of oil released into the Gulf, perhaps a sign of wishful thinking.

"OPENNESS ONLY WAY"

"The key thing is to be upfront and keep a good flow of information," said Mark Pursey, a former spokesman for UK mobile phone operator Vodafone and now head of PR firm BTP Advisers.

"There is a temptation to present the best case scenario but you can get caught out if things get worse. With BP, I think there was a pressure not just to soothe the worries of people in the Gulf of Mexico but also very anxious investors."

Fellow PR adviser and political lobbyist Kevin Craig, managing director of London-based PLMR, is even more emphatic.

"Openness is the only way," he said. "Anything else -- be it a denial or repetition of myths -- will only make the problem worse in the long-term."

As often, in Japan one of the criticisms of both government and company has been one of perceived mixed messages. Officials said Tokyo residents should avoid giving tap water to infants because of radiation levels, then reversed that the next day. There have also been conflicting messages on radiation levels.

"With Japan, they probably should have been more open earlier," said Sapriel. "One of the general patterns with crises is that they get worse before they get better -- but companies can often be in denial about that. It's hard to be forthcoming when there is little reassuring to say."

Amid all the attention, however, U.S.-based Dezenhall says firms and managers must not lose sight of the fact that their true priority is fixing the problem, not managing the media.

"Everyone talked of the BP oil spill as a PR crisis -- but it wasn't PR that was the root of it," he said. "Once they stopped the well leaking, the crisis turned...If the company sees the crisis as being fundamentally about PR, it's unlikely they've got the diagnosis correct."