In managing crises, CEOs must lead the way

HEAD ABOVE WATER: Aram Garabedian, co-managing partner of the Warwick Mall, in the shopping center's food court. In 2010, massive flooding pushed 5 feet of water into the mall. / PBN PHOTO/MICHAEL PERSSON
HEAD ABOVE WATER: Aram Garabedian, co-managing partner of the Warwick Mall, in the shopping center's food court. In 2010, massive flooding pushed 5 feet of water into the mall. / PBN PHOTO/MICHAEL PERSSON

One of Aram G. Garabedian’s earliest memories is from 1938, when he was just three years old. His mother took him along on a shopping trip to Providence, and an unexpected hurricane caused a historic downtown flood. For a time, they were trapped on the second floor of a department store.
What he remembers most is his mother’s determination to get him home, a trip that included a rescue by firefighters in a rowboat and a long drive on streets strewn with fallen trees and other storm debris.
The memory of her actions helped him overcome another natural disaster decades later in his life, the 2010 flood that pushed 5 feet of water into the Warwick Mall. It was the type of crisis that CEOs and other corporate leaders often have little direct training for but must rely on their own experiences and leadership skills to manage.
“What you’ve been through in life prepares you to handle the next thing that comes,” said Garabedian, a co-manager of the mall and president of Bliss Properties, which owns the building. “My experience helped me come up with a system I call ‘S.R.A.’ That stands for ‘situation requiring adjustment.’ It’s a way to put things in perspective.
“Cancer, that’s a problem, but anything less serious is a situation. You can adjust it,” he said. “We had no injuries and no deaths at the mall, so it was a situation [to which] we could adjust.”
In just two months some stores at the Warwick Mall were back in business. In October 2010, there was a grand reopening, with more than 50 retailers back in operation. And since then, Garabedian has been held up as an example of how CEOs and other corporate leaders should respond to disaster.
Few CEOs can match Garabedian’s resume when it comes to hands-on leadership; he’s been an Army officer, a high school football coach, and vice president for sales at the Nature’s Bounty when the now-billion-dollar vitamin company was just getting off the ground. Nonetheless, they can learn from his successful efforts at crisis management, especially when it comes to public relations.
Immediately after water receded at the mall, Garabedian put up signs around the property with the motto ‘Count on us,’ a message to the community, his tenants, and those workers who suddenly found themselves unemployed. He also set up a headquarters in a mall store, a Halloween shop. The backdrop of hanging trick-or-treat costumes re-enforced the sense of candor at his regular press conferences. “We had a thousand people who were out of a job, and in the middle of a bad economy,” he recalled. “That’s a good reason to keep a close relationship with the media.”
Experts agree that’s one of the most important lessons in crisis management, because after death and injury, the damage to a company’s reputation can be the worst thing that happens. In an age ruled by media, a poor public-relations response to a situation – be it a natural disaster, a product recall, workplace violence, or the arrest of a high-level executive – can add to the devastation.
“Keeping people informed is one of the key things to any good crisis-management plan,” said Gregg Perry, president of The Perry Group, a Providence public-relations firm that specializes in reputation management and strategic communication. “How you communicate can really have an impact on your brand and reputation. At the Warwick Mall, they kept the community informed about the entire process. They gave a timetable and laid out a roadmap as to what people could expect.”
The CEO “has to be the voice of the organization,” added Michael Roberto, a professor of management at Bryant University in Smithfield. “It can’t be a public-relations person. And he has to be as transparent as possible. They don’t have to admit legal liability, but they must appear to be empathetic with those who are affected. You have to lay out the process of the investigation, and how you’re going to fix things.”
That includes ensuring that employees at every level know about the company’s response plan.
“Announce to employees every day what’s happening, and that you’re trying to do the right thing,” advised Simon Moore, an associate professor in the Department of Information Design and Corporate Communication at Bentley University in Waltham, Mass. “Your employees are your first audience, and they have their own audience, their families, their friends. They may even have their own blogs. Give constant updates to your employees, and make sure you give them material to talk about. They’re ambassadors for the company.”
As Perry noted, “Problems could trickle down. If you’re a retailer, for instance, you have many employees who interact with the public. People could be asking questions while they’re in your store. [Employees] should be able to answer.”
Preparing for disasters in advance should also be a key priority. A company should have a committee ready to respond, including department heads, public-relations people and a legal team. And from time to time, they should discuss what they can do to protect the company reputation when adversity strikes. Perry cites the recent scandal at Pennsylvania State University as an example of what can happen when such precautions are ignored. The negative headlines erupted last fall, when police arrested a former member of the football coaching staff for allegedly molesting young boys over a 15-year period. Claims that the school had turned a blind eye to the abuse sparked a loud public outcry and eventually led to the firings of the late longtime coach Joe Paterno and university President Graham Spanier.
“The leadership on campus had to know something was brewing for some time,” Perry said. “Yet steps weren’t taken to mitigate the damage with the public, with students, the faculty, donors and other stakeholders. They failed to communicate what they were doing to handle the allegations.”
Added Roberto, “Simulate crises before they happen. Practice with your management team what you’ll do when, say, a product recall happens.”
Moore uses four words to wrap up the basics of crisis management: suspend – as in stop what has gone wrong – investigate, report and act.
He cites Canada’s Maple Leaf Foods as a company that successfully followed that game plan. In 2008 a widespread outbreak of listeria resulted in 22 deaths. The company began a voluntary recall before the outbreak was linked to their plant. Soon after, CEO Michael McCain announced the illness had been linked to the company and apologized. The company then launched a massive cleaning operation and new training programs for employees.
“They followed the best rule of crisis management: Let actions do your talking for you,” said Moore. “They began to rebuild their brand immediately. They told the public [about] the steps they were taking to prevent similar problems. They went beyond what the regulations required. You rebuild by being seen as part of the solution, not the problem. They began lobbying for tougher standards, and made themselves an industry leader in that field.”
In the age of the Internet, cable TV, and the 24-hour news cycle, stories about CEOs who ignore those rules are commonplace.
Experts point to the BP undersea drilling accident of 2010, when oil gushed into the Gulf of Mexico for months, causing extensive damage to marine and wildlife habitats and for a time shutting down tourism and fishing in the Gulf states. The company initially downplayed the incident, calling the spill “relatively tiny” and the environmental damage “very modest.” At one press conference CEO Tony Hayward told reporters “You know, I’d like my life back.” Recalled Moore: “He said he was tired.” “But it’s not a time to talk about yourself. You have to be seen as thinking of other people. It’s not about you.”
Another example: the 1996 TWA crash on Long Island, which killed 230 people. The company had an engineer talk to reporters, a huge misstep. “He was not a natural communicator,” Moore said.
A more recent example is the flap involving the Susan G. Komen Foundation For the Cure, an organization that raises funds to combat breast cancer. Earlier this year, the organization announced it would cut off funding for mammogram testing at Planned Parenthood clinics, a move meant to placate anti-abortion activists. The effort backfired, with critics charging Komen had put politics ahead of women’s health. After a torrent of public outcry, the organization reversed its position, and Vice President Karen Handel resigned.
Sometimes the CEO himself can be the crisis. In 1996 that happened at Astra USA, the Massachusetts branch of an international pharmaceutical company. Top executive Lars Bildman reportedly behaved like a martinet, even banning family photos from cubicles. Eventually employees rebelled, leaking tales of sexual harassment and other abuses to Business Week magazine. In the end, Bildman found himself out of a job and facing lawsuits from both the company and employees.
“A bad day at the office happens more often than a major crisis,” Moore said. “In that case, a crisis can emerge from a company’s internal culture. Whether it stays within or ripples out depends on the CEO.”
Roberto points out there’s often little workers can do about the top boss who treats every problem like a crisis. “There are some CEOs who almost like to start fires,” he said. “If you’re at a more senior level, you might suggest some alternative. Beyond that the best you can do is try to shelter your people, rather than shout ‘fire’ to the rest of the organization. You can be a buffer between [the CEO] and your own people so they can keep doing their work as much as possible.
“If you’re a lower-level employee, it’s difficult to do anything,” he acknowledged. “Leaking to the media that employees don’t agree with the CEO might only make things worse.” •

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