Wednesday, May 16, 2012

The Wrong Expectation of Crisis Communications

A lot of people (me included) spend time judging the performance of corporate folks mired in a crisis. It's a very tactical type of analysis that help us better prepare our clients in case something terrible happens to them. The better and harder we train, the better we will respond is the thinking.

What's bugging me is that the word "better" seems to be synonymous with "perfect". You will never be prefect when communicating in a crisis.

Reuters Photo via Politico
Let's take the current fiasco engulfing J.P. Morgan Chase and its CEO Jamie Dimon. The short story is that the bank made some trades to protect itself from other trades. It didn't work out and the bank lost about $2.3 billion so far. More losses are coming, but the bank expects to be profitable for the quarter and for the year. J.P. Morgan Chase has plenty of money left. No bailout required.

Here's what J.P. Morgan did, best as I can piece together.
  • Denounced the trades by the trader known as the "London Whale" as a "tempest in a teapot" when disclosed by the Wall Street Journal in April.
  • Disclosed to the government and in a conference call to investors that the trades were a mistake and that the bank had lost more than $2 billion.
  • Apologized to investors at the company's annual meeting and called the trade "flawed, complex, poorly conceived, poorly vetted and poorly executed. This should never have happened. I can't justify it. Unfortunately, these mistakes were self-inflicted."
  • Announced management changes that cost three high-ranking J.P. Morgan executives their jobs.
I think J.P. Morgan has responded as well as it could to this crisis. I'm sure Mr. Dimon would like back his comment about the trades being a "tempest in a teapot". Once the magnitude of the problem became evident, J.P. Morgan's choices became both limited and poor. A crisis always means you are choosing between lousy options.

For example, on May 10, JP Morgan's choices were simple: disclose the trading losses or not. There is a right choice there, but it's not a great choice, as you have to tell the world and your investors that your bank has lost more than $2 billion dollars in a matter of days.

Even when you respond as well as you can, the bottom line is that you are still communicating in a hostile environment about an adverse event. I say hostile environment because people pile on in a crisis. Just look at the calls for banking reform by politicians of every stripe. JP Morgan's misfortune isn't a real event for them, it's a poster child for their own agenda.

As counselors during a crisis, we have to make sure that we set the expectations properly. All crisis communications are done in a negative environment. You can't be perfect. I've anchored about 3,000 live newscasts in my life and I've never been perfect. I had one newscast where I mispronounced my own name.

If you want perfection, perhaps you could board the Pequod and help Captain Ahab search for his version of the London Whale.

For the rest of us? Let's just strive to be better.

Bill Salvin

13 comments:

  1. Luis Araujo (via LinkedIn)May 17, 2012 at 9:55 AM

    Yes, perfect really isn't an option, especially when you are communicating negative things. I think one thing that execs need to be aware of is that your company's name WILL be in the media and people WILL have bad things to say about you. You can also be sure of another thing: While you are dealing with your own crisis, the next big story is already brewing in some other part of the city, country, planet. So you have to trust yourself and your readiness and confront your moment in glare of those bright, oh so hot lights.

    ReplyDelete
  2. Hi Luis and thanks for reading. You're exactly right that if you just hold it together, do the best you can, someone or something will get the media's attention and you will get back to a more normal pace of things. It doesn't mean the crisis is over for key stakeholders, but at least it lowers the temperature a bit and you can make more progress.

    ReplyDelete
  3. Kathy Means (via LinkedIn)May 17, 2012 at 10:12 AM

    So true, Bill. I agree there would be a desire to recall the tempest remark. It ties in to another crisis communications issue: The rest of the world likely won't understand your context as you try to explain. Though $2 billion (this morning $3 billion, is not a big number for the company, it is a huge number for everyone else. Look at the frenzy over lottery wins that top $100 million. In crisis communications, you have to be able to quicklydescribe your context in a way that others understand without being condescending. or trivializing what, to others, seems to be a big deal.

    ReplyDelete
  4. Hi Kathy, great insight. The desire to minimize is strong in a crisis, we all want the news to be good and the ending to be happy. But getting the context right, as you suggest, is the way to go. It can be a bit like threading a needle but it is very much worth the effort. Thanks for reading!

    ReplyDelete
  5. I've been on a kick against 'perfection' lately - and our wild expectations of such. Yes brands often make mistakes during a crisis and no, nothing will be perfect. Mistakes happen, will always happen; and they will happen in the public eye, a public that unrealistically expects perfection.

    You are choosing between lousy options - you are absolutely right. And when brands consistently choose poorly but stay that course in spite of negative feedback, it can make a bad situation even worse. Again, you're right - it's time to let go of the idea of being 'perfect' or getting it 'right' - focus on doing better, doing the best you can under the circumstances. FWIW.

    ReplyDelete
  6. the best sentence in this analysis is the sentence:

    "A crisis always means you are choosing between lousy options."
    Indeed. But: Media storming always ends when nothing more is to report. As a consequence one should put all relevant information on the table asap. The main problem here is that most corporations have difficulties to find out what really happened because the involved people are fearful to be fired. And then mostly the truth comes in pieces on the table and this turns out to feed the crisis.
    Bruno from Germany

    ReplyDelete
  7. Rick Amme (via LinkedIn)May 19, 2012 at 4:58 PM

    I appreciate the mentioning of choosing between lousy options. I find that's where most of the decision-making agony is.

    ReplyDelete
  8. Anna Koshnicharova-Ivanova (via LinkedIn)May 19, 2012 at 4:59 PM

    Thank you for this publication!
    p.s. nicely said: "A crisis always means you are choosing between lousy options."

    ReplyDelete
  9. Thank you for reading and taking the time to comment Ralf-Dieter. You're right, the media storm does eventually pass. That's why your focus must not only be on transparency and speed, but also on those impacted by the crisis. The people impacted will, over the long term have more impact on your company's reputation than the media. Glad you liked the post.

    ReplyDelete
  10. Anna and Rick, thank you both for reading and for leaving your comments. The light bulb that goes on when people realize they have poor options from which to choose is fascinating to me. Once they have that realization they can start to be really effective crisis communicators. Thanks again.

    ReplyDelete
  11. Great stuff! As my view on crisis management tends to be theoretical (with the reference to it being one of the 6 components of an effective communications strategy, the 'crisis mode plan", posted on my blog), the practical example given of J.P. Morgan was an eye-opener as to what happens when a crisis breaks. There are no perfect solutions once the deed has been done and actions taken thereafter are often about damage control.

    However it would help, I would imagine, if an organisation, as part of its policy, has an established communications strategy with the "crisis mode plan" inherent in its formulation. That would guide it through uncertain waters whenever a crisis erupts in the future.

    ReplyDelete
  12. Matthew Wisla (via LinkedIn)June 3, 2012 at 12:12 PM

    Inside the bank they probably understood almost immediately who the key audiences were for them in this one. I agree they were quick and strategic in addressing their shareholders, the government and the media with effective initiatives and messaging. Perhaps they could have done better. After all, you never know what the consequences would have been for actions you didn’t take. But it seems they navigated well enough.

    For what it's worth, The CEO’s choice of words did catch my attention when he seemed to be repeating characterizations like “stupid” “really terrible” etc. when describing their decision making. Maybe he was trying to get in front of the way they anticipated bloggers and other critics in the digital world would be talking.

    ReplyDelete
  13. Thanks for the comment, Matthew. There's always lots of ways to say things right. The most important thing is that the words are authentic coming from the speaker. In this case, I think they were authentic. If someone else said them, it probably wouldn't work as well.

    ReplyDelete