NFIB

A Crisis Waiting to Happen?
08/ 07/ 2002

by Ivan Sylvester

You can't anticipate every crisis, as the events of September 11 made all too clear. But even if you can't predict extreme external or internal events, you can keep them from sinking your company. It's the failure to have a plan in place that often causes problems to be mismanaged into crisis, according to Jeffrey Caponigro, author of The Crisis Counselor (Contemporary Books, $16.95).

"Small businesses are more vulnerable to crises than big companies because they don't have the resources to catch some of the warning signs," Caponigro says. "They don't have a big PR department or other people on staff to help them in dealing with the media when problems do come up. And they typically have less margin of error if they do make a mistake."

For example, a flood can wipe out a mom-and-pop restaurant owner. For a large chain, the natural disaster would only close one location.

According to research company Gartner Inc., two out of five small businesses that experience a disaster will go out of business within five years of the event.

"The prevention of a crisis is always far less costly than a crisis itself," Caponigro says. That's because in addition to any physical cleanup, businesses must deal with the emotional and psychological cleanup, such as repairing a damaged reputation, diminished customer loyalty and quelling increased suspicion. "The organization that can avoid the big mistake is the one that will thrive over the long haul."

Think You're Safe?

Here are the top 15 crises that can happen in any business:

1. Employee layoffs
2. Lawsuits
3. Poor financial performance
4. Discrimination or harassment claims
5. Negative media coverage
6. Damaging rumors
7. Product defects
8. Violent threats or actions by a current or former employee
9. On-the-job accidents
10. Sudden death of a senior executive
11. Loss of significant business from one customer
12. Government probe or fine
13. Damage caused by a storm
14. Boycott or strike
15. Technology failure

(Source: Jeffrey Caponigro)

7 Steps to Prepare for and Manage Crises:

1. Identify your business's vulnerabilities. Get input from employees on your company's weaknesses.
2. Keep the vulnerabilities from turning into crises by keeping communication lines open and empowering employees to fix smaller problems.
3. Have plans in place to move quickly if a crisis occurs.
4. React quickly when a crisis does occur.
5. Communicate to those important to your business what went wrong, and get their feedback.
6. Closely monitor and evaluate your crisis work.
7. Crisis or not, conduct ongoing public relations efforts to build up your company's goodwill.

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This article originally appeared in the August/September 2002 issue of MyBusiness magazine.

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