Why no news is bad news for UK Companies (Feb-09)

Why No News Is Bad News For UK Companies

Crisis Communication: The Importance of Proactive Approach

All too often businesses think that to get through a crisis the best option is to keep their head below the parapet. Recent times have shown us that even if companies could once get away with this, they certainly can’t anymore.

A Lesson from Barclays

On January 26, Barclays wrote an open letter to investors to convince them that their business was in comparatively good health and in fact was about to announce positive results. This unusual step is not often seen in the City, where investors normally have to sit patiently until the company’s formal results announcement. When CEO John Varley and Chairman Marcus Agius wrote “In view of the events in the banking sector last week, we have decided to communicate now with employees, customers, clients and shareholders,” what they were most mindful of was the devastating impact of rumour and market supposition. Rumours that Barclays were in serious trouble caused their share price to drop by almost 50%, so Varley and Agius had two choices: sit tight and wait for the rumours to die down and the market to recover or be pro-active and actually communicate with their investors. Such large organisations are often reluctant to behave in a different way than they are used to, so we can surmise that it took some persuasion inside the bank to convince them that this was the right course of action. They were right; rumours of a government bail-out were squashed, the shares rose 73% on the day and haven’t fallen below those levels since.

The Role of Communication During Crisis

In a recent article about handling communications in the current crisis in Corp Comms magazine, one PR executive stated: “If nobody from the company talks and clarifies the situation then it allows rumours to take hold, and staff, customers and shareholders will find it hard to believe you when you finally make a statement. They will believe the rumours and speculation more than the facts.”
This seems like good common sense, perhaps even rather obvious, but in reality managers find it hard to apply that sense to themselves. Many companies think they can still batten down the hatches during a crisis, do little or no communication and still weather the storm. In these markets, all journalists assume the falling tide is lowering all the ships, but companies who can generate some positive newsflow – or even stanch the flow of supposition and rumour, like Barclays, are rewarded. It might even be painful – for example, BP announcing record profits but seeing their share price slide as they warned about Q4 and the carry-over of worsening conditions into the new financial year. But again, there is an upside – in BP’s case, making sure their position is known to fend off the spectre of windfall taxes or even consumer boycotts in the face of what might be seen as obscene profits.

Strategies for Effective Crisis Communication

So if communicating is the key to handling crisis, how should companies go about it? In the same Corp Comms article PHA Media’s Phil Hall is quoted as saying: “The communications team must be allowed to sit at the top table…And where possible companies must agree a consistent strategy and spokesman.” Again this seems obvious, but many companies still struggle to include the comms function in the highest-level meetings and we still see the wrong people, or the right people who have the wrong information or message, speaking to the media during crisis situations.

The lessons we are learning at the moment, sadly mostly from organisations who handle their communications less well than Barclays, ought to lead to more transparency in the industry as companies communicate more and PRs are given the chance to do the job for which they were hired (to give stakeholders the right message, from the right people, at the right time).

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