Like an unstoppable freight train, the rate of hospital realignment in Massachusetts is racing forward. Some recent headlines:
* The state Public Health Council approved a change of ownership application making Jordan Hospital of Plymouth part of Beth Israel Deaconess Medical Center (BIDMC).
* Partners HealthCare System unveiled a regional strategy, acknowledging for the first time it has signed an agreement to acquire Hallmark Health in Medford and Melrose. Earlier in the year, it acquired Cooley Dickinson Hospital in Northampton, and is also waiting to hear if it can acquire South Shore Hospital.
* Tenet Healthcare’s purchase of for-profit Vanguard Health Systems means it will now control Saint Vincent Hospital in Worcester and the MetroWest Medical Center hospitals in Framingham and Natick.
* Winchester Hospital’s board signed a letter of intent to affiliate with Lahey Health, the parent organization of Lahey Clinic.
* BIDMC, Lahey Health, and Atrius Health, a Newton-based consortium of Harvard Vanguard Medical Associates and five other doctors groups, told employees they are in preliminary talks to form an alliance that could create one of the largest physician groups in Massachusetts.
The realignment statistics over the course of the past three years are staggering.
According to information compiled by the Massachusetts Hospital Association, between 2000 and 2013, there were 41 major actions among the state’s hospitals.
Their research shows 18 holding company affiliations, 14 acquisitions, 6 conversions, 2 contractual affiliations, and 1 full merger. In the last 10 years, the number swells to 147 actions.
On top of everything, hospitals have had to deal with the impact of the new Affordable Care Act, most often referred to as “Obamacare.” Now in the midst of an era of shrinking government reimbursement levels and mounting pressure to reduce prices for medical services, the state’s hospitals are showing financial strains.
As this dizzying pace of consolidation has consumed enormous amounts of senior management’s time, one of the most important elements of change – strategic communications – has been, in my view, woefully neglected.
Among the complaints I’ve been hearing: employees are uncertain about the long-term future of their jobs, pensions and benefits; community groups fear that consolidation will take away the “community feel” of the institutions they have supported for decades; patients are uncertain if they can continue to receive care in the community and not be shipped to larger hospitals that have been on merger and acquisition binges; benefactors are skeptical about the future of local foundations that were created to ensure that donations remain in the communities served by respective hospitals.
What can and should be done?
I suggest hospital boards and senior managers embark on a five-step process:
1. Core research. Hospitals need to conduct baseline research to determine, specifically, what concerns are top-of-mind among employees, patients, and key community leaders. Budgets permitting, focus groups should be included.
2. Situational reviews. With this research in hand, hospital CEOs should budget time with their boards to review the data and ensure that they remain market focused and relevant in an ever-changing healthcare delivery world. In fact, a board sub-committee on communications should be formed. Everyone in the room should agree on the “situation analysis.”
3. Plan development. The top communications officer at the hospital should develop a comprehensive strategic communications plan with clear objectives, strategies, key audiences, key messages, implementation tactics, timetables, and means of measurement. This is not a “publicity” effort, but a strategic document that gives voice to the institution’s business objectives.
4. Direct communication. At the outset of plan execution, the CEO and board should directly communicate with every household in the hospital’s service area. The expense is worth it. Mailing a letter or brochure to the homes of families in the community is a highly effective way of delivering an unfiltered message. In short, the information should cover where the hospital has been, where it is today, and where it’s going.
5. “Town Hall” meetings. Depending on the size of the individual hospital’s service area, open “town hall” meetings should be organized. If, for example, a hospital covers 12 towns, a meeting should be held in each community. The CEO and board chair should make a presentation and, once again, reinforce the messages that support and give voice to the business objectives.
6. Benchmarking and measurement. As part of Step 1 (Core Research), hospitals should include questions that focus on organizational perception by key audiences. The strategic communications plan should address which of these perceptions needs to be changed. After a year of plan execution, another survey should be conducted to measure what progress had been made. This is the only sure-fire way to know if the plan is working.
In the months and years ahead, we’re likely to see more Massachusetts hospital closures, mergers, acquisitions, alliances, partnerships and affiliations.
No matter what paths these institutions take, strategic communications planning and execution should be a top priority.
After all, if the people who work at, and are served by the hospital, don’t understand the story, how can these organizations continue to provide the services the community needs and remain economically viable.
# # #
Now that JPMorgan Chase is on the verge of reaching a $13 billion civil settlement over
the bank’s questionable mortgage practices leading up to the financial crisis,
the time has come for CEO Jamie Dimon to relinquish his role as chairman.
The total penalty, which would resolve an array of federal and state investigations,
includes $9 billion in fines and would very likely provide about $4 billion in
relief for struggling homeowners.
This latest news comes on the heels of the bank admitting wrongdoing to settle an
investigation into market manipulation involving the bank’s trading loss in the
so-called “London Whale” episode and pay a separate $100 million settlement.
Fighting hard to preserve his legacy, Dimon is attempting through negotiations with the
government to put an end to complex legal troubles that have engulfed his firm
since May 2012 when the bank announced a $2 billion trading loss (a figure that
eventually ballooned up to $6.2 billion).
In return, Mr. Dimon is looking for assurances that JPMorgan Chase would be protected from
future expensive litigation. Whether he gets it or not, I believe it’s a safe
bet to say that Dimon is no longer the king of banking on Wall Street.
Paying billions to the government will not get the bank completely out the woods.
Press reports have indicated that Attorney General Eric Holder will not give
the bank a non-prosecution agreement on the criminal side. That means the
Justice Department is free to continue its investigation of JP Morgan Chase, and
eventually prosecutors will have to decide whether or not to charge any
executives at the bank.
In the larger context, that is not good news for shareholders.
So far, likely due to an overall strong operational performance, Mr. Dimon has held
onto his main job as CEO and kept his chairmanship. However, there are some
rumblings from JPMorgan Chase-watchers that are speculating at some point he
will have to step down as chairman although he won strong shareholder support
on the issue this past May.
Other storm clouds are appearing on the horizon.
In a recent note after the D.C. meeting, John McDonald, analyst at Bernstein Research,
pointed to “reputational damage that could impact both the bank’s business
prospects and stock valuation.”
His worst-case estimate of the bank’s legal exposure is $31 billion, or around $10
billion more than the bank has set aside. That could be $31 billion the bank
won’t have to use for all sorts of initiatives such as lending, hiring, branch
expansion, and a return to shareholders in the form of dividends.
If these estimates are close to accurate, why should Dimon remain as CEO and chairman?
Even before the trading loss, the bank was in the spotlight over a series of mortgage
backed securities issued between 2005 and 2007 and accusations it manipulated
energy markets in California and Michigan.
On the numbers front, a loss was reported in the third quarter as a litany of legal
and regulatory problems forced the bank to disburse more than $9.2 billion in
litigation-related fees. Despite Dimon’s apparent cult personality of Wall
Street, that’s a hit to the bottom line that should concern the board and every
For the quarter, the financial services giant posted a loss of $380 million, or 17
cents per share, compared with net income of $5.71 billion, or $1.40 per share,
a year earlier. It was the first quarterly loss since Dimon became CEO.
So far, the impact on shareholders equity has been minimal, which may explain in part why
Dimon continues to hold both positions. At this writing, the stock was hovering
around $54 a share, close to the 52-week high of $56.93 and up 23% for the year.
Last November, the stock traded as low as $38.83.
No Longer a “Tempest in a Teapot”
While praised for stepping up and taking responsibility for the massive trading loss,
things have gone downhill from there. At first, when rumors hit Wall Street,
Dimon said it was a “tempest in a teapot.”
Dimon’s reputation was further sullied in May 2013 when a report by the U.S. Senate’s
Permanent Subcommittee on Investigations found that the bank’s top risk manager
had called warnings about the trading loss “garbage.”
For CEOs, producing revenue growth and profits are typically at the top of the list, but
increasingly risk management is gaining importance. Maybe that’s why Dimon
wrote, in a September 2013 memo to employees, that the bank had increased
spending on internal controls by about $1 billion this year and dedicated more
than $750 million to address concerns from regulators. Dimon also stated that some 5,000 employees have been assigned to compliance activities.
Functions Should be Separate
In my view, given what’s happened at the bank, Dimon simply does not deserve both titles. As
outstanding as he is, he has demonstrated that he cannot effectively manage all
aspects of an enterprise as large as JPMorgan Chase.
Even if the bank was squeaky clean, a case can be made that it’s about accountability. The
operator (CEO) should be running the business and the board should essentially
oversee all activities (including risk management).
While there is uncertainty about whether a final deal will be made with the government and
what that deal will ultimately cost, changes on the board are likely, and there
will be a new board chair of JPMorgan Chase.
As time has proven, no one is irreplaceable or larger than the enterprise they
represent…not even Jamie Dimon.
# # #
Region’s Big Banks Still Haven’t Figured Out High Quality Customer Service
Now comes the news that three large regional banks in the Boston market ranked among the
10 worst in the nation in terms of complaints.
According to the US Public Interest Research Group, Boston-based Sovereign Bank has the
second most complaints, while RBS Citizens Bank of Providence ranked number
four, and TD Bank, whose US operations are headquartered in Portland, Maine,
US PIRG, considered a reliable research organization, released its rankings after
analyzing complaints filed with the US Consumer Finance Protection Bureau and is
readily available through the agency’s new database.
Most often, banking customers had problems with checking accounts, penalties for low
balances, and disputed ATM transactions and debit card fees.
These are failing grades for major banking institutions that have the financial and human resources available to keep customers satisfied.
The complaint numbers also present a strange paradox in that major banks continue to spend
millions on marketing activities (including expensive TV campaigns) and
millions opening new retail locations in the Metro Boston region.
With today’s sophisticated tracking and monitoring technology, as well as training
regiments available for employees, why are there so many complaints?
My hunch is this is a case of perception versus reality because the banks make assertions
and claims in their marketing narratives that are not fully meeting customer
needs. Big banks consistently over promise and under deliver.
A number of years ago, a senior bank executive was quoted in a national business
publication as saying, “B” level service is good enough.
Based on this most recent study, it appears that banks made a strategic business
decision that B level service is good enough despite nagging and long-standing
The large number of customer complaints is also juxtaposed against a new wave of spending
on brick-and-mortar branches. While customers conduct basic banking (such as
withdrawals and deposits) via ATM machines, most banks believe that fancy
branches are an important access point to move customers into more profitable
services such as wealth management, personal banking, and other products and
services they offer.
A great example can be found at the Bank of America branch in Boston’s Back Bay. Bank
employees walk around carrying tablet computers to immediately pull up customer
accounts and suggest new services.
Building new branch space is an expensive proposition that costs hundreds of thousands
of dollars per site. One wonders why the banks don’t spend some of that money
on systems and training employees to significantly reduce the number of customer
Suburban Banks Pose a Threat
Some irony can also be found in that large banks – the ones with all the complaints – have
seemingly been able to retain their market share in Massachusetts.
According to publicly available data on the Federal Deposit Insurance Corporation
website, Bank of America remains in the top spot with a 25% market share, while
RBS Citizens is second at 12% and Sovereign Bank third with 7%.
My view is that a good portion of this market share comes as a result of sheer size, not
great service. It stands to reason that if a bank has the capital to “put a
branch on every corner” it will attract more customers. Even though big banks
cut back on their number of branches after consolidation in the 1990s and
2000s, they still have the wherewithal to maintain multiple locations.
Another factor that plays into the equation is the complexity of switching accounts.
Big banks know this full well and impress on current customers that moving
their accounts might be more trouble than it’s worth.
Boston, in particular, is now experiencing more interest from a different breed: suburban
According to a recent report in the Boston Globe, banks based in Metro Boston such as Hingham, Wellesley, and Hanover are opening branches in the city. A good example is the
new Wellesley Bank branch opening in the Financial District.
Within the past two years, the Globe reported, five suburban banks have launched operations in Boston and at least one more is planned for October.
Some of this expansion is likely due to population growth in the city (now at 635,000
people) as banks try to lure the business of young workers attracted by
thriving industries such as biotechnology.
However, one can also conclude that certain customers with complaints will make the move
and switch accounts. This is where the opportunity lies for the smaller banks
hoping to capture new market share and take market share from larger
As technology levels the playing field and suburban banks have more storefronts in
the city, larger banks face their biggest challenge to date in keeping customers who have complaints or just don’t like doing business with large institutions.
It’s also likely that some resentment continues to exist among customers who are upset
that the government (the taxpayers) bailed out big banks, only to have the same banks regain profitability at the taxpayers’ expense. In many cases, to clean up their balance sheets, the banks initiated foreclosure proceedings on millions of those same taxpayers who funded the bailout.
One thing is certain: there are plenty of smaller banks just waiting to seize the
opportunity to service unhappy customers.
Joe M. Grillo, partner, contributed to this blog.
# # #
Tips for Developing a Crisis Communications Management Plan
When a crisis hits, senior executives are consumed with managing the minute-by-minute, day-by-day responsibilities of getting the crisis and communications under control.
From board briefings, employee meetings, customer outreach, social media postings, news media interviews, notification of regulators, the time constraints are significant.
Typically, the first step is to develop a holding statement to address immediate inquiries, such as those from the news media. This acknowledges the issue and avoids a communications void that allows speculation on the matter.
In the absence of an existing plan, the individual or institution that is impacted must rapidly develop a comprehensive, strategic crisis communications management plan.
This plan, which acts as a road map to deal with events that will unfold over a period of weeks, months, or even years, is critical to maintaining consistent communications, keeping messaging on track, protecting reputations, and setting the stage for remedial action.
A good crisis communications management plan should contain at least the following elements:
Situation Analysis. The situation analysis sets the stage for how the crisis will be managed. It must contain all relevant information. In short, get the facts about what happened on paper and make sure everyone agrees on what the situation analysis states.
Communications Goals and Objectives. In crisis situations, the goals are to demonstrate that senior management is responding swiftly and decisively, and protecting the company’s brand and/or individual’s reputation to prevent loss of current and future business. In the case of publicly traded firms, preventing loss of shareholder value is paramount.
Communications Strategies. People involved in a crisis often confuse goals, objectives and strategies. A goal or objective is the end result you’re trying to achieve, while a strategy details how you’re going to get there. When organizations in crisis don’t have a strategy, the crisis manages them instead of it being the other way around.
Key Audiences. It is not just the news media. Typically, there a wide range of internal and external audiences, among them the board, employees and their families, customers, distributors, suppliers, business partners, local and state and federal officials, regulators, business leaders in the community, vendors, etc. List them and agree on key audiences.
Key Messages/Talking Points. When a crisis happens, using key messages, or talking points as they are often called, is one way to communicate during a crisis. Also, remember: speaking with “one voice” is a critical component of crisis management.
Crisis Scenarios Going Forward. In most cases, companies need to develop “issue scenarios.” Typically, this is a series of possible or probable outcomes that could happen as events unfold. With each outcome, there will be a different action and/or reaction indicated by the organization in crisis. You need to prepare for all of them.
Issue Q&A. As soon as a crisis erupts, senior management, legal counsel, and inside and outside communications executives should develop a list of questions that could surface from key audiences. They need to be the 10 (or more) of the toughest questions that could be asked.
Social Media Considerations. The dramatic rise of social media has substantially diminished response times for managing a crisis. What took days now requires real-time responses within hours and, depending on the nature of the social media attack, even minutes. Make sure the company has fact based information before responding or issuing a statement online or on a mobile device.
Chronology of Events. Develop a simple table. This is another critical component of the crisis management plan because, over time, people forget what happened. Keeping a detailed chronological record demonstrates “best practice” management.
Communications Protocol and Media Log. A crisis management plan must have an airtight communications protocol in place. In short, what happens when the news media calls? Another key component of the plan is a print, broadcast and social media log. The log tracks who is calling, when they called, what media organization they represent and what kind of information they are seeking.
Communications Team Contact List. The communications team contact list is a compilation of all the people involved in managing the crisis. The list will likely include all the contact information (including cell numbers, home numbers, and email addresses) for the president, CEO, chairman of the board, chief operating officer, chief financial officer, chief communications officer, chief social media officer, vice president of marketing, in-house legal counsel, outside legal counsel, inside PR, outside communications consultants, security officer, and other key contacts as appropriate.
Crisis Briefing Book. Create and maintain an up-to-date repository containing crisis communications plans, all work product connected with the crisis, copies of news media coverage, social media commentary and other feedback. Whenever possible, save links electronically to videos of any news broadcasts and/or interviews so you can access and analyze them as necessary after the items have run. There should also be a section on social media that collects Twitter and Facebook posts, blog posts, etc.
Remedial Communications Recommendations. All crises share one characteristic: They have a beginning and an end. There are times when the end may not be in sight, but eventually the crisis ends. Even as an organization puts together a crisis management plan, concurrently a task force should be formed to immediately begin addressing remedial organizational and policy recommendations. Identifying the issues and factors that led to the crisis occurring is a good place to start.
In summary, the best way to manage a crisis is to have a crisis communications contingency plan in place ahead of time. If that’s not possible, these tips can help structure the plan that will be developed and implemented to manage the situation.
More information on crisis communications management can be found on Nicolazzo & Associates’ website.
Richard E. Nicolazzo, managing partner, contributed to this blog.
Obama’s Syrian Intervention Strategy Flies in the Face of Public Opinion
As Abraham Lincoln said in his timeless quote, “In this age, in this country, public sentiment is everything. With it, nothing can fail; against it, nothing can succeed.”
Keeping that profound quote in mind, President Obama’s proposed strategy of intervening in the Syrian conflict could be one of the biggest public policy mistakes a president has made in US history.
America is now a war weary country with no appetite for conflict in a foreign land, particularly the Middle East. Haven’t we learned our lessons from Iraq and Afghanistan?
An attack on Syria could be unlike anything that has come before – an intervention inside the territory of a sovereign country without its consent, without a self-defense rationale, without Congressional or United Nations authorization, or the full participation of NATO.
What has happened to our Democratic principles centered around public opinion?
According to a new Gallup survey, taking military action against the Syrian government for its suspected use of chemical weapons would be among the lowest of any intervention Gallup has asked about in the past 20 years.
The poll showed only 36% of Americans favor military action. The majority – 51% --oppose such action, while 13% are unsure. By contrast, in 2003, 59% of Americans favored intervention in Iraq.
Another poll, conducted by the Pew Research Center, found just 29% of Americans supported intervention. This reflects the nation’s disdain for continued involvement in this volatile part of the world.
As Congress weighs whether to authorize the President’s plan for airstrikes, lawmakers on
Capitol Hill have begun to identify the biggest obstacle of all: their constituents.
“What I’m hearing back home is about 100% no,” said Rep. Carol Shea-Porter (D-NH). Rep.
John Culberson (R-Texas), said, “My phone calls, emails, and faxes are running 96% no. I’ve never encountered an issue where you had 96% agreement…our phones are ringing off the wall.”
Rep. Alan Grayson (D-Florida) told reporters last week, “The House doesn’t want it, the American people don’t want it. People here (in the House) listen to their constituents.”
Oddly enough, even the President himself recognizes that Americans are “war weary.” Obama said, “There is a certain weariness, given Afghanistan. There is a certain suspicion of any military action post-Iraq.”
Despite what Americans think, Obama and Secretary of State John F. Kerry remain on the
offensive, trading jabs with Syrian President Bashar al-Assad. Obama is even conducting an unprecedented six network interviews on the eve of a speech to Americans. Meanwhile, Congress will be back in session and will deal with what is clearly one of the most complex foreign policy matters to ever come before it.
As the rhetoric intensified, Kerry issued another strong challenge to Assad to turn over his chemical weapon stockpile to avoid a US-led attack. Not to be outdone, Assad granted an interview to CBS News and issued a warning of his own, saying the United States should “expect every action” if it attacks Syria.
The use of chemical weapons on its own people is an outrageous act by a repressive regime. Surely, no sane person would condone killing 1,400 people with gas, among them 426 children.
With the Iraq war behind it and military involvement in Afghanistan winding down, the US
needs to move to a diplomatic stance where it is no longer the world’s conscience or policemen.
In my view, the President may have put himself in an untenable position. He may be making
the mistake of being arrogant and presumptive in assuming the country will blindly follow him into yet another overseas military action. Clearly, his legacy as our President is in question.
What the President should do is listen to the people he represents, build public support for that position and then develop public policy.
No one said it better than Abraham Lincoln.
# # #
USING SOCIAL MEDIA IN A CRISIS: PROCEED WITH CAUTION
Let’s face it. When it comes to communications, the buzzword of all buzzwords is social media.
In terms of sheer users, the numbers are staggering: Facebook, 1.15 billion; LinkedIn, 225
million; Twitter, 500 million; YouTube, 1 billion; and Pinterest, 48 million – and these are just a tiny sampling.
While some, particularly those selling social media services, like to think this still-evolving technology is the be-all-end-all, it may not be the case when it comes to crisis communications management.
More than half of 300 respondents in a new Pricewaterhouse Coopers (PwC) survey said they
do not use social media as a crisis communications management resource. This is an important reflection of the uncertainty and lack of awareness surrounding this useful Internet-based technology.
Phil Sampson, a principal at PwC’s risk assurance unit, stated companies are still weighing possible risks and legal considerations when using social media platforms.
In a PwC survey results press release, Sampson said, “…Companies are not seeing how it (social media) can be used to help expedite communications during a crisis. The majority is still hesitant about using social media as a crisis management tool.”
The survey went on to say that only eight percent of respondents said social media has
become an “enabler” for their organization to identify and respond to crisis events.
Contrast these numbers to usage of social media for general business purposes and sales
lead development. According to a recent Fox Business survey, 97 percent of business owners said they are using social media channels, including YouTube, Pinterest, Twitter, Facebook and Instagram, to market their products and services. As an example of increased use of social media, HubSpot, an inbound marketing firm based in Cambridge, Mass., says 84 percent of B2B companies use social media on a daily basis.
PwC is advising its clients to first look at ways to use social media to reach employees, third parties, customers and other stakeholders, while subsequently looking more closely at crisis and risk scenarios to weigh whether the medium can be effectively utilized with internal and external audiences.
Interestingly, the PwC survey was released shortly before an unemployed Palestinian researcher hacked into Mark Zuckerberg’s Facebook page to notify his security team about a
In another hacking case earlier this year, The Onion, with five million followers, had its Twitter account hacked by the Syrian Electronic Army. The group posted several anti-Israeli messages. Twitter also suffered back-to-back hackings in mid-August when @BurgerKing and @Jeep were compromised.
Proceed with Caution
While the PwC report is only one study, I believe it has significant validity due to the methodology used and general sophistication of PwC clients. When it comes to communicating in an actual crisis, the use of social media needs to be carefully weighed.
One way to evaluate the use of social media is to think about three levels of crises.
Level I. This is the least serious situation. It might involve minor exposure from business flare-ups such as complaints about poor customer service, minor civil litigation, website outages, personnel issues, and related matters that don’t reach larger, more influential constituencies. In these instances, there is likely no need to respond via social media. However, a response is needed, most likely by email, phone calls, face-to-face meetings, employee/departmental conferences, or other effective means of communications within the organization.
Level II. This occurs when a problem crosses the line into mainstream social media and impacts an individual or a company’s identity and reputation. A relevant example is what happened when two rogue Domino’s Pizza employees posted a revolting YouTube video that went viral. Domino’s had no choice but to respond via social media channels because that’s where the crisis was most publicly disseminated and got beyond the control of traditional crisis
Level III. In this case, the very existence of an enterprise is threatened. A good example is what happened to Montreal, Maine & Atlantic Railway. On July 6, 2013, a 73-car train crashed near the center of a small town in Canada sending a wall of flames 12 stories high and incinerating buildings. Forty-seven were left dead. In early August, the company was forced to file for bankruptcy because of potential liability from the crash. If the company ever hopes to restore its reputation, it will need social media to somehow salvage the damage, in addition to utilizing every other crisis communications strategy they have in their company playbook.
For businesses, the inherent problem with social media is that they are relying on expanding
communications channels on what are basically consumer platforms with a high risk of cyber intrusion. In some crises, it may be better to use the company’s secure email system, personal phone calls, the company website, and even letters in the mail.
But when a crisis goes viral, due to channels beyond a company’s immediate control, management needs to be able to react and mitigate at a moment’s notice. With social media so ubiquitous and influential, organizations may need to reevaluate how and when they use this medium in a crisis.
In the final analysis, businesses should take whatever steps are necessary to maintain the institution’s brand, integrity of its management, and products/services.
Remember, social media is unforgiving. Once the message is on social media platforms,
it’s virtually irretrievable!
Richard E. Nicolazzo, managing partner at Nicolazzo & Associates, contributed to this blog.
Outside Crisis Communications Counsel
Is Often the Best Option
Senior managers, boards of directors, general counsels, outside legal resources, and a host of other executives who are charged with the financial responsibility for the success of their organizations are now, more than ever, calling on outside crisis communications counseling firms to manage serious communications issues.
The discipline of crisis communications management is no longer a catch-phrase for a bunch of bow-tied PR guys, or “spin doctors” who hastily get called into the CEO’s office to make a serious problem disappear. It doesn’t work that way. In fact, I cringe when someone mentions the word “spin”.
After years of serious study by well-trained professionals, leading academics, and hundreds of cases of trial-by-fire, the art of crisis communications management has evolved into a highly skilled profession that can legitimately be counted among the critical services provided by outside counseling firms.
In recent years, the most dramatic change in the practice of crisis communications management has been fueled by a world that demands honesty, transparency, and integrity from the businesses, politicians, and institutions that serve it.
It is a huge mistake for any organization to underestimate the public’s perception and intelligence. As so many have discovered the hard way, people are much smarter and more well-informed than they are given credit for. They can sense disingenuous behavior a mile away and will react accordingly.
Years ago, it was not uncommon to pick up a paper, read a magazine, or see someone on television saying “no comment”. Historically, many senior executives actually felt the crisis would blow over or fade from people’s memories if ignored. In today’s world, the practice of stonewalling and hiding behind a problem is long gone. In my view, which is shared by many experts in the field, the public simply won’t stand for the “no comment” routine. It never worked.
How we receive and process information has also impacted the “no comment” scenario. Since Ted Turner’s CNN went on the air in 1980, the 24-hour-news-cycle has become an integral part of our daily lives.
In a world engulfed in instant communication via email, cable TV, online news services, Facebook, Twitter, YouTube, and a host of other instantaneous information sources, virtually every organization needs to identify its three or four worst nightmares and be equipped to address them.
Increasingly, senior management must fully understand the consequences of not learning how to anticipate, prepare for, and manage a crisis effectively.
As much as we would like to believe that “reality” is “reality,” in practical terms this is not always the case. Whether we like it or not, “perception” often becomes “reality.” Institutions usually have only one chance to successfully survive a crisis. The business and political landscapes are littered with casualties who weren’t forthcoming and ultimately paid the price.
The axiom is simple: It’s not a question of “if” a crisis will occur, but “when”. Those who prepare will be in the best position to weather the storm. Those who ignore the need for planning, preparation, and solid execution risk the threat of damaging their corporate reputations, brands, and -- if the organizations are publicly traded -- substantially diminishing enterprise and brand value. They may not survive, which is exactly what happened to Arthur Andersen.
As the complexity of managing a crisis has grown, outside counselors have become indispensable. Here are a few reasons why it makes sense to look outside when a crisis erupts:
- Objectivity. When it comes to looking at a serious crisis from all angles, nothing beats objectivity. Although senior managers know their organizations inside and out, they can always benefit from an independent perspective. Highly-trained outside counselors are not hesitant to “tell it like it is”.
- Specialization. As the practice of crisis communications management has matured, specialization has followed. For example, today it’s easy to find an outside crisis counselor who has in-depth experience in healthcare. The same can be said for financial services, aviation, education, technology, pharmaceuticals, manufacturing, and most other fields.
- Dedicated Focus. When a company is dealing with a crisis, the people who run the institution have to manage the day-to-day, hour-by-hour functions. A complex crisis, such as a major drug recall, can quickly overwhelm senior management and become a distraction. An outside counseling team can provide a well-conceived plan to track the crisis 24/7 and work with management to communicate appropriately.
- News Media Interaction. Communications staffs at companies have little or no experience dealing with news media in a crisis. In many cases, aggressive reporters can be downright hostile when hunting down the facts of a story. Crisis teams at outside firms likely have years of experience dealing with the press. At many firms, including Nicolazzo & Associates, some counselors are former journalists. Outside teams also provide a buffer between the press and in-house communications staffs who must deal with the media on a wide range of general issues.
- Seeing the Big Picture. Keep in mind, a crisis is not just about the news media. The media is just one spoke on the communications wheel. There are many other constituencies that matter – employees, stockholders, regulators, business partners, political leaders, vendors, etc. An outside perspective is critical when addressing these various audiences.
- Creativity. Some crises linger and cause ongoing disruptions within an organization. Employees who live and breathe the environment everyday may well have trouble seeing the bigger picture. Outside counselors can brainstorm strategies and approaches that are outside the box.
Calling in outside communications counsel undoubtedly varies from crisis to crisis. However, as the business world becomes increasingly specialized and information is transmitted at lightning speed, going this route has become the norm for many for-profit as well as non-profit organizations.
Senior executives would be well served to remember that it’s not the crisis itself, but how it’s managed that usually determines the outcome.
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CRYSTAL BALL GAZING: WHAT DOES JOHN HENRY HAVE UP HIS SLEEVE FOR BOSTON GLOBE’S FUTURE?
Now that the New York Times decided to sell the Boston Globe to John Henry for $70 million, one cannot help but wonder what the paper and its properties will look like a year or five years from now.
Because Henry is principal owner of the Boston Red Sox, much has been said and written about potential conflicts of interest in sports coverage. My hunch is that the “business of the business” will come way before that.
In purchasing the Globe, Henry owns a paper with an average daily print circulation of 172,048, according to the Alliance for Audited Media. To go along with that, the Globe has some 30,000 subscribers to “TheBostonGlobe.com,” the digital entity behind the so-called pay wall.
While the paid digital subscriber base is growing, it’s a long, long way from where it likely needs to be. It wasn’t that long ago that the Globe had a daily circulation of 300,000 and a Sunday circulation of more than a half million. The decline in circulation (and revenue) at the Globe has been staggering, just like other major metro papers across the U.S.
Interestingly, in one of the few substantive statements Henry has said about the Globe, he told editor Brian McGrory “he wants to boost revenues rather than slash costs.” That is certainly a change from the way the N.Y. Times handled things in the past few years as it offered staff buyouts, closed news bureaus and succeeded in obtaining major concessions from the unions.
Growing revenue won’t be easy. As print circulation declines, ad rate increases become nearly impossible. Revenue from digital subscriptions is said to be about $3 million. Theoretically, if Henry can invest in marketing efforts that double digital subscribers, he can raise digital ad rates and capture more revenue. Given the modest success most metro papers have had with digital subscriptions, Henry is going to develop creative ways to address the digital subscription market.
If digital is the future, Henry might need to consider shutting down Boston.com, which remains free. While there is significant editorial content behind the BostonGlobe.com pay wall, how many people are really willing to pay for the entire paper when there’s plenty of news streaming on Boston.com for free?
Real Estate Play
While Henry has intimated he doesn’t want to slash costs, he can make some major moves with the Globe’s real estate to raise revenue that could be re-invested into the editorial product. No doubt, the 17 acres the Globe owns on Morrissey Boulevard along the Southeast Expressway is worth millions if sold outright…and likely millions more if it’s developed and leased. The site even offers water views!
One doesn’t have to look far to find precedent.
The Boston Herald moved its operations to South Boston last year and the property is now under development as the “Ink Block.” The Globe, which still has major printing operations, will still need significant space but presses can run anywhere. In the digital age, pages are simply transmitted over the Internet or private networks to the pressroom.
And then Henry has to decide out what to do with the Worcester Telegram & Gazette and its website, the Globe’s direct mail business and a 49 percent interest in the free Metro Boston newspaper. There is already speculation the Worcester property will be put on the market in the short term. Who would buy it is another question. My view is Henry keeps the direct mail business and holds onto Metro Boston for a while. These are assets that can be more easily
tied into his Boston business interests.
On the business side of things, I would expect more cross-marketing between Henry’s sprawling sports empire that includes the Red Sox and New England Sports Network, as well as the Liverpool soccer club and Roush Fenway Racing, a NASCAR team. Previously, Henry had to rely on editorial coverage for those entities or pay for ads. Now, by owning everything, the number and types of sales promotions are endless.
For example, if Henry wants to quickly boost the digital subscriber base, he could offer free tickets to Red Sox games and NASCAR racing in nearby New Hampshire. Keep in mind that by acquiring the Globe, he captures a treasure chest of data and demographics on Globe subscribers and their reading and buying habits. Having made a fortune by crunching numbers and scouring reams of data, this goldmine of information is right up his alley.
Editorial Tinkering Not Recommended
Tinkering with the Globe editorial coverage, which has generated the most attention so far, is a losing proposition for Henry. Trying to influence news coverage, especially in the short-term, would only alienate an audience that is already shaky about paying for any kind of news in a world filled with free information.
It’s no secret that Henry has been unhappy with some of the Globe coverage of the Red Sox, in particular columns and commentary by veteran sportswriter Dan Shaughnessy. Imagine what the reaction would be if Henry tried to stifle Shaughnessy’s stories in any shape or manner. I have no doubt readers would cancel their subscriptions.
Henry’s outspokenness about the Globe sports coverage could even hurt him in the short run. Who’s to say that independent-minded sportswriters like Shaughnessy, Nick Cafardo and Bob Ryan won’t quit once the deal is finalized and go to work for competitors. That way, there can be no question about behind-the-scene influences on their opinions. I’m sure major network broadcast stations along with media outlets like the Herald, WEEI, and 98.5 the Sports Hub would jump at the chance to sign these talents.
A more likely scenario is that Henry deals with a problem retrospectively. For example, what if the Globe runs a critical story on the team like the one it did in 2011 when it found out that pitchers enjoyed beer and fried chicken in the clubhouse while their teammates were still on the field? Or the paper runs an investigative piece like the one on former manager Terry Francona’s use of prescription medicine?
For public consumption, everyone involved in this deal will talk openly about the so-called “separation of church and state” between the newsroom and business side of the paper. Editor McGrory has already gone on record as pledging that sports coverage will not change under the new ownership.
However, is that a reflection of the real world? Does anyone really believe that the owner of a newspaper would not speak with the publisher about an issue? Or that a publisher would not speak to the editor? The “Fourth Estate” likes to pride itself in independence, but in today’s economy, business is business.
Another critical issue for Henry will be news leaks. In this town, there is plenty of precedent for leaks coming out of the Red Sox organization and other sports teams. What would Henry do if someone on his team leaked a story to the Herald or a radio or TV station? How would he react to being beaten on his own story?
Recent history suggests cross-ownership of media companies and sports teams has not been a major issue. The Tribune Co., publisher of the Tribune newspaper in Chicago, bought the Chicago Cubs in 1981 and held the team for three decades. Media magnate Rupert Murdoch’s Fox Entertainment Group once owned the Los Angeles Dodgers. In truth, not much happened.
Boston, however, always seems to be different. Sports in Boston involves large egos, turf battles, sharp arrows, and downright nastiness.
Need for Communications Plan
Press reports have indicated the deal will close in 30 to 60 days. Immediately, Henry needs to develop a strategic communications plan and strategy to “give voice” to his vision to all internal and external audiences. As a sophisticated businessman, Henry needs to be strategic and thoughtful about how he positions himself and the Globe in a larger context. He must pay the same attention and detail to communications as working the numbers.
Internally, he needs to address the toughest questions head-on with an employee base that is likely nervous. Will there be layoffs? Will (as rumored) the news operation be cut further? Will he be seeking more concessions from the unions? Will he sell the real estate and move the paper? What are his specific plans to “grow” the business? What is his time frame for growth?How will he stop circulation declines that have approached 10 percent per year?
Externally, the same issues will exist, but more importantly will be the thrust of editorial coverage, philosophy and ideology of the paper. Will the paper continue to help the community focus on important social, economic and political issues that can (or will) impact Boston and the New England region? Will it continue to give political candidates a forum to address issues of concern? Will it give readers a stronger voice in determining relevant news coverage? Will it expand editorial coverage any time soon?
My sense is that running a metro daily in the digital age is a lot harder than it looks. Only time will tell if John Henry has the business acumen and long-range vision to stop the bleeding at the Globe and turn lots of red ink into a “new age” publishing powerhouse.
He’ll need more than luck.
Joe M. Grillo, partner at Nicolazzo & Associates, contributed to this blog.
The Role of Crisis Communications in Business Litigation
They occur hundreds of times each day across the vast landscape of industries in the U.S and abroad. Their subjects span the gamut: from wrongful termination, to theft of trade secrets, to patent infringement, to whistleblower lawsuits, to tortious interference, to negligence, to restraint of free trade, to liable.
Seemingly with no bounds, they are filed in state courts, superior courts, and U.S. federal courts. Plaintiffs and defendants come from companies of all shapes and sizes; from small businesses to the nation’s largest corporations. They do, however, all have one thing in common: one side pitted against the other in a dispute that is not easily settled.
In the vast majority of cases, complaints are public for anyone to view either online or by access to court services. While civil litigation does not garner as much attention as criminal cases, communications professionals need to be particularly aware of the consequences that can occur.
One of the most frequent cases involves what can be classified as “ambush litigation.”
Take, for example, the case of an executive vice president who is forced out of a company because he has become aware of sexual improprieties between a company’s chief executive officer and an administrative assistant.
The dismissed executive hires a highly regarded lawyer and prepares a civil complaint for wrongful termination. As part of a deliberate strategy, the plaintiff’s lawyer retains a public relations firm with solid business media relationships. As soon as the lawsuit is filed, the PR firm tips off the journalist. Just to make things easy for the reporter, the PR firm emails a copy of the complaint minutes after it is filed.
The next thing that happens is the company’s corporate communications department gets a call
to comment on a story that is about to be posted online. Talk about an unexpected surprise!
Another strategy is to prepare a complaint and develop an accompanying press release to be distributed electronically moments after the lawsuit is filed. A favorite tactic is pay for distribution on the PR Newswire or BusinessWire. This ensures that the subject matter, for example a patent infringement lawsuit, gets swept into every possible electronic database. If the defendant is a company that is publicly-traded, the press release will come up anytime someone clicks on the stock ticker.
Rules of the Road
So how should plaintiffs and defendants in civil litigation manage crisis communications? The answer, while not simple, lies in the business strategy and goals of the respective organization.
If a plaintiff believes that attention in the news media will aid its case or hasten a settlement, there may be a case for pro-active communication of the lawsuit. On other occasions, a plaintiff may file litigation intended to stir things up behind the scenes and not garner any media attention.
Whether on the side of the plaintiff or defendant, here’s a checklist of items to consider before going “on the record”:
- Will the brand, product integrity, or reputation of management be tarnished as a result of litigation?
- Will commenting on pending litigation harden the other side and drag out the complaint even longer than anticipated?
- Will commenting on pending litigation harden the other side and drag out the complaint even longer than anticipated?
- Does the litigation contain factual errors, misleading information, or misrepresentations that should be corrected?
- Are the allegations in the lawsuit so outrageous that not responding would damage the defendant’s reputation?
- Are the monetary damages being sought so high that a “no comment” would seem defensive?
- Will the lawsuit directly damage customer relations?
- Will commenting on the record jeopardize the company’s contractual obligations with its insurance carrier?
- If the organization has a general counsel, what is his/her particular style in terms of commenting on litigation?
These and other factors unique to certain companies should be factored into the discussion about what communications actions are taken in business litigation.
This is one area of crisis management where one size does not fit all. At the end of the day, sound business judgment coupled with a communications/legal strategy will carry the day.
Richard E. Nicolazzo, managing partner, contributed to this blog.
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Patriots Game Plan for Hernandez Firestorm Worked (Almost)
New England Patriots coach Bill Belichick, a man under the microscope in the aftermath of
the sensational murder case involving former Pats player Aaron Hernandez, gets
an A rating for the way he managed his first press conference of the season.
Facing more than 100 reporters, Belichick, known for being stoic and aloof, opened up and
took charge of the situation. Instead of talking about Xs and Os, he addressed
the Hernandez controversy head on.
Taking a page from the “crisis communications playbook,” Belichick stepped up and took
responsibility (not blame), saying, “As coach of the team, I’m primarily
responsible for the people that we bring into the football operations.”
Appearing emotional, contrite, accountable and fairly descriptive, the coach read from
prepared remarks, another time-tested technique in a crisis. Rather than trying
to “wing it,” Belichick was able to deliver his key messages in a compelling
manner before local, regional, national, and international news media.
When a tragedy occurs, expressing concern is critical. Belichick said, “It’s a sad
day, really a sad day, on so many levels. Our thoughts and prayers are with the
family of the victim. I send my sympathy really to everyone who has been
He also reinforced the organization’s quick action once Hernandez was taken into
custody. Although Belichick was out of the country at the time, it was clear
that he had conferred with ownership, commenting, “After consultation with
ownership, we acted swiftly and decisively.”
Providing more information than anticipated, the coach also admitted some poor judgment
may have crept into the way the Patriots acquire talent. “Obviously, this
process (drafting and trading players) is far from perfect, but it’s one we’ve
used from 2000 until today. Personally, I’m challenged by the decisions that
affect the team on a daily basis, and I’m not perfect on that, either…”
Being careful not to get caught in criminal proceedings in the case against Hernandez
(and likely to continue for months), Belichick said, “I know there are lots of
questions…I’m not trying to make the story disappear, but I respect the
judicial process and have been advised not to comment on ongoing legal
In any crisis, certain goals are universal. Belichick achieved most of them by:
- Taking control of the message before it controlled him
- Ensuring timely and accurate information to all key audiences
- Doing what he could to maintain the organization’s brand and management integrity
- Reinforcing leadership qualities in a time of major stress
- Admitting that some operational vulnerabilities existed
- Reducing the risk of misinformation being communicated with ad hoc, unscripted comments
- Displaying humanity
A day after the coach’s press conference, six Patriots players, led by Tom Brady, spoke to
the media and reinforced the key messages that had previously been delivered by
management. Said Brady, “Certainly it’s a very tragic thing that happened,
someone loses their life…”
Defensive lineman Vince Wilfork, another team captain, added, “Your first thoughts are
with the victim’s family. You’re dealing with a human being.”
Since Hernandez was arrested on June 26, the entire Patriots organization has been
barraged with negative publicity. As many sportswriters have pointed out, it’s
about as bad as it can get for a professional sports team.
In my view, for the most part the Patriots have adroitly managed a difficult situation.
Misstep by Owner
The only misstep so far by the Patriots may have been on July 9th when owner Robert Kraft
called three sportswriters into his office and held an impromptu discussion (no
cameras, microphones, or digital recorders).
Saying “I’ve been duped,” Kraft told reporters how he felt about Hernandez signing a
contract extension last August and professing to have changed because of the
influence of the “Patriot Way.” Hernandez had also told Kraft he wanted to be a
role model for the Hispanic community and insisted on making a $50,000 donation
to the Myra H. Kraft Giving Back Fund to show his appreciation.
Choosing to go the “off the cuff” route in his comments, in my view, Kraft created a sound
bite that casts a negative light on the organization. He might have been better
served by scripting his remarks, as Belichick did, and issue a statement to the
news media. I’m hard pressed to believe that the Patriots’ PR team would have
approved the “I’ve been duped” remark.
For the moment, a dark shadow hangs over the Patriots training camp. However, by
stepping up proactively the organization is doing its best to “break the frame”
of the story and move forward.
Time will tell how things turn out.
Joe M. Grillo, partner, contributed to this blog.
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