Smoldering Vs. Sudden
Bottom line – Protecting your company’s valuation depends on how well you are prepared to face the court of public opinion. Crisis happens to everyone. The difference is those who are prepared to address smoldering issues proactively can prevent them from erupting. When done well, you can turn short-term adversity into long-term advantage.
Reputation leads to Trust and Trust leads to Valuation… And, Not All Currency is Financial.
Successful leaders and organizations understand the value of building, strengthening, and defending their reputation. Reputation is defined as: the beliefs or opinions that are generally held about someone or something. If we take a broader look at society, we believe that consumers are morally aligned with the brands they invest in and purchase from, more than they ever have before. In fact, 92% of millennials prefer to purchase from companies they feel are ethical….and 70% of them will pay more for products and services from socially responsible companies. So, the question is…what is the real value of investing in your reputation? Our answer, priceless. It is crucial to establish a business with a healthy foundation that embraces sound leadership, strategy, and communications tenants, and enables a transparent relationship with your workforce and consumer base. The court of public opinion is interested in who you are and what you have to say as a brand – especially when crisis occurs. Remember, the court of public opinion renders judgments much more quickly than any other ‘court.’ Not too long ago, Wells Fargo was leading the headlines for creating fraudulent savings and checking account on behalf of clients without their consent. What happened? Misreported sales numbers, billions in settlements, significant stock underperformance, and a change in leadership at the top. In a different but related event with Boeing, investigators found faulty 737 Max designs and training manuals which contributed to hundreds of deaths and grounding of hundreds of aircrafts. Once the news broke, their CEO was terminated and numerous layoffs occurred. The lawsuits began to pile in, $18 billion earnings loss (2019), and again a significant drop in the stock price. We tell every client, “reputation leads to trust, and trust leads to valuation – and remember, not all currency is financial” – because it’s the truth. By creating a strong relationship with your stakeholder base, and proactively telling your story, you can maintain a brand with a healthy reputation that is essential for success in today’s world.
The Power of Crisis Leadership
The importance and value of crisis leadership has perhaps never been more apparent than it has been in 2021. Companies across the globe have been bombarded by one societal crisis after another. Every time a leader delivers a message—be it at a board meeting, media interview, keynote, all-staff meeting, community event, or on a social platform—the reputational piggy bank realizes a light deposit or heavy withdrawal. During times of crisis, it is critical for leaders to think strategically about what the right message is and how it will resonate with many micro, diverse communities. Doing so will help assure the firm’s reputational and cash balances pay incremental dividends over time. On the other end of the spectrum, mishandled crises can cost leaders time, money, stakeholder confidence and their careers. Bottom line, you don’t spin your way through crisis, you lead your way through. Over the past decade, Fallston Group has had the privilege of advising leaders in the auditing, accounting, legal and professional consulting verticals, along with many public, private, government and nonprofit entities who are fighting for marketplace trust, and their futures. The key is to understand each organization’s navigational fix—where’d they like to be—and then chart the path forward using a deep well of instinct and experience. Crisis leadership is an art, not a science. It’s laden in nuance—a predictive mindset is not negotiable. The right messageSome firms are quick to put their CEO at the center of the management of their public response. In tandem, decisions need to be made rapidly to clarify who the public spokesperson will be, starting with initial response and continuing as the story evolves. Messaging decisions and options must be carefully considered every step of the way. Sometimes a simple statement strategically detailed makes sense, especially in cases that may involve legal pursuits. In other situations, it makes more sense to arm the media with more detail and perspective. Sometimes that involves taking responsibility and proactively addressing what steps the organization will take to move forward. Much like a sprinter’s start, effective crisis leadership is about quickly getting out of the starting block and saying the right things for the right reasons at the right time. Winning comes down to sustaining the intense messaging tempo and making the proper leadership, strategy, and operating decisions that turn adversity into advantage. Leading through crisisBelow are a few best practices to bear in mind from a crisis leadership standpoint: Never erode your integrity. There can be immense pressure to “make your organization look good.” Do not cave-in to others who would like you to lie, distort the truth, or leave vital facts behind which alter messaging and perception—this is tantamount to a lie. Once it’s lost, you will never fully restore your integrity. Be responsive. These days, many leaders seem less inclined to return a reporter’s call, or otherwise seek to delay the release of information. By sticking their heads in the sand and not responding, businesses make themselves irrelevant and ineffective. If you don’t tell your story, someone else will. When someone else tells your story, it certainly won’t be the story you want told. Know the facts: Too many professionals jump on camera or in front of an audience with no substantive information or an unwillingness to engage with questions. Not knowing the facts or relying on the “no comment” phrase is unacceptable. Know your position, know your craft: it’s your legacy. Be predictive. When preparing to deliver a message, be certain to plan for every question and eventuality. There is often a tendency for people to want to go on camera without fully preparing because they are used to speaking publicly or know the organization very well. Push back and demand ample preparation. Don’t wing it; prepare for every interview no matter how mundane or harmless it may seem. Build media relationships. You want to get the benefit of the doubt when journalists tell your story. It’s not about an unfair advantage, but simply balance. When managing the media, gather intelligence from reporters and news organizations—ask them what angle they plan to cover, who they are speaking with and what their position is. You’d be amazed at what they will tell you, particularly if there is an existing relationship or future mutual need. Video doesn’t tell the whole story. A video account of what happened does not factor many variables—what each party said, body language from all angles, and what transpired before and after the footage. In today’s digital world, more is recorded and shared than at any other point in history. The emergence of video has changed all professions, but treat video for what it is: another tool in the search for the truth. Practice, practice, practice. It is essential to practice interviewing and public speaking. Know yourself, know your audience. Seek advice from colleagues. Take a look at how others have responded during times of crisis and leverage their lessons learned to your advantage. Your colleagues, peers and competitors are invaluable pools of knowledge and can serve as the single most important case study resource. Think about what you don’t know yet. During a crisis, it often takes time to know the exact fact pattern that is developing. These events often have many related stakeholders, and other third parties, that may have relevant information. One should try to clearly understand what is known with certainty and what is still not completely clear. This perspective should inform your public statements with the goal of maintaining integrity and marketplace trust. There two benchmarks of success which allow leaders to quickly maintain control and weather the storm. First, they put their hand in the air and recognize they are in trouble. Second, they ask for help from their trusted circle. Recognition of trouble and decisiveness in action will preserve your reputation and help you turn short-term adversity into long-term advantage. Author: Robert Weinhold, Chief Executive
“No Comment”
We’ve all heard an interviewee answer a difficult question with “no comment”. The question is, what is the message received when using this phrase? Kathleen Cairns, Fallston Group’s Communications Strategist, shares her insights on how effective “no comment” really is.
Naomi Osaka – Authenticity
The French Open (FO) is one of the most prestigious Grand Slam tournaments on the ATP tour. The FO is played on clay courts, and players from all over the globe take great pride in participating. Serena Williams, Sofia Kenin, Novak Djokovic, Rafael Nadal, Roger Federer were participating, but where was Naomi Osaka a few weeks ago? Who is Naomi Osaka and why isn’t she continuing to participate in one of the most famous tournaments in the world? Naomi Osaka is the highest-paid female athlete in sports history. Osaka now dominates the WTA as she sits #2 in the world. She is well known for her flawless tennis play on court, but Osaka’s stance as a civil rights activist while discussing issues of racism, social consciousness and mental health has shaped her reputation. Osaka brands herself as an athlete who uses her platform and global following to deliver messages about her beliefs. Philosophically, she aligns closely with other athletes who vowed to do the same thing, including Lebron James, Colin Kaepernick and Megan Rapinoe. When the news broke that Osaka would not conduct any post-match interviews with the media to draw awareness to mental health, and more specifically mental health issues amongst athletes that are directly triggered by the media, it was nothing new. And the league knew they had to respond to enforce their rules and regulations. The WTA decided to fine Osaka $15,000 for not participating in the post-game interviews. Shortly thereafter, Osaka withdrew from the tournament and tweeted she was “taking some time away from the court now.” This created a wave of concern across the sports world and many athletes responded to Osaka with sympathy and support. Osaka did what many big brands often don’t do – embrace authenticity. Osaka may have lost money from not participating in the FO, but not all currency is financial – Osaka gained tremendous personal and professional reputational equity by taking this stance. Osaka made a very impactful decision that she did out of pure genuineness and passion. She stayed true to herself and her brand. Osaka’s mission to shed light on mental health amongst athletes enabled her to further establish her own identity; and, many prominent leaders commended for her braveness. Big brands like Adidas, Nike, Beats by Dre, GoDaddy, Nissan and others supported Osaka. They realized the importance of her authenticity and the issues at hand. We always tell our clients to be authentic and follow your North star – integrity is paramount. Corporate social responsibility is alive and well, this includes personal brands, like Osaka. Consumers want to align with brands with similar values. You can be certain the court of public opinion will vote with their voices, their feet, and their wallets. We commend Osaka for taking a bold, needed stance and hope that all involved with professional and amateur sports recognize the pressures athletes feel both on and off ‘the court.’ That said, recognizing is not enough. Those who support athletes at all levels must do everything possible to protect each athlete’s mental health. This includes managing the court of public opinion, whether on a television network or social media platform. For more information about managing the court of public opinion, contact Fallston Group at info@fallstongroup.com.
Turning Adversity into Advantage, Hon!
A Fallston Group Case Study. Cafe Hon has been a popular fixture on the 36th Street main drag in Baltimore’s kitschy Hampden neighborhood since its 1992 opening. With a two-story tall pink flamingo perched over its doorway, the restaurant is a local landmark. Owner Denise Whiting sells “Hon” t-shirts and other merchandise and founded an annual HONfest that attracts attendees from all over the Baltimore metro area to celebrate the neighborhood’s wonderful quirks and creativity. At the advice of her legal counsel to protect her business interests in opening a Hon-themed giftshop, in late 2010 Whiting trademarked the word “Hon.” The term of endearment has long had a close association with working-class Charm City and was even popularized in the 1988 John Waters film Hairspray as referring to a certain type of 1960s Baltimore woman with a beehive and cat-eye glasses. Because of these things, Whiting experienced an immediate backlash as soon as news of her new trademark spread. The Crisis: People Hated That Whiting Owned “Hon” Although her trademark did not preclude people from using “hon” in conversation, Whiting rapidly drew bad press from the free, tabloid-sized City Paper to the Baltimore Sun. The local community began to slander her name and boycott her restaurant and the HONfest. Protestors gathered outside Cafe Hon to hold signs reading “HONicide: Life on 36th Street” and “You Can’t Trademark Our Culture, Hon.” One former patron took to popping his head into the restaurant during business hours to scream, “NO ONE OWNS ‘HON’!” Even her fellow merchants on “The Avenue” turned against her over her acquisition of “Hon” rights. Meanwhile, Whiting’s business was suffering, and she had to withdraw tens of thousands of dollars from her own retirement account to make payroll. The intense personal and emotional toll these events took on Whiting cannot be quantified. No question, Whiting was an amazingly strong successful woman who was now challenged like she had never been before. The Solutions: How Fallston Group Helped Whiting Restore Her Brand Tell Your Story. Our mantra, “If you don’t tell your story, someone else will. And, when someone else tells your story, it certainly won’t be the story you want told.” To regain the local community’s trust, having consistent and transparent messages were crucial. Fallston Group helped Whiting gain confidence while developing a core messaging and media plan. This focused on message points that Whiting could embrace as her own when talking with reporters, fellow business owners and customers. We encouraged and coached her so she would have confidence in telling her story to those who had an interest. Critically important were the varying audiences, messages, timing, platforms utilized and adaptations. Deal Head-on with Obstacles to Business as Usual. Fallston Group counseled Whiting about obtaining a peace order or filing criminal charges against anyone who was shouting into her restaurant, harassing her patrons, and threatening violence. Although people threatened to boycott the summer’s HONfest, we encouraged Whiting to continue her annual tradition. In our view, bulling and violence is not for free and those who believe they can victimize should be held accountable. Whiting proceeded with business as usual which was key to her success. It’s easy to be influenced by detractors, but that’s what they want you to do – quit. Whiting did not. Be Realistic. The crisis was personally hard on Whiting, enough to jeopardize running her business and leading her life. Fallston Group helped her see that success should be measured by her continued ability to do what she had always done – own a well-run restaurant. This meant bringing people from negative to neutral about her and Cafe Hon rather than making them advocates out of the gate. To take the first step, we accompanied her to many meetings, including merchant association meetings attended by other business owners, managers, and elected officials. Remember, this was a game of chess, not checkers – a long-term strategy where victory results in one small move after another. Know Which Battles to Fight. Although Whiting was solidly equipped legally about how trademarking “Hon”was something any sound business would do to protect its brand, in the end Whiting would win in the court of law but not in the court of public opinion. If you lose the latter, you don’t have a business. Again, Fallston Group routinely encouraged Whiting to look at the big picture. So, when she was contacted by celebrity chef Gordon Ramsay’s Kitchen Nightmares show, Whiting was eager to appear on national TV to tell people she was sorry and relinquish the term “Hon.” We felt this was the perfect opportunity to make a bold move and change the rules of engagement – move from defense to offense. The Result: Returning “Hon” Back to Baltimore After shooting her Kitchen Nightmares episode, Chef Ramsay joined Whiting for a press conference at the sparkling, new Cafe Hon, renovated with even bolder, leopard-print decor than before. During the press event, a relieved and hopeful-sounding Whiting returned “Hon”to the city – she also communicated this via a local radio station. Later that evening, Denise got a good night’s sleep – the first time in a year. Today, more than a decade later and despite the pandemic, Whiting is still dishing up her Hon’s hot crab dip. As you can imagine, we’re huge Denise Whiting fans – she showed true character, compassion, and discipline while in the belly of the beast.
Crisis Chat: How to Use Soundbites to Deliver YOUR Message
Did you know the optimal soundbite for a media interview is between 5 and 10 seconds? In this Crisis Chat, Kathleen Cairns, Fallston Group’s Communications Strategists offers tips to help ensure the messages you want your audience to hear are the ones you deliver.
How to Be a Sound Leader During Difficult Times
As I approach four decades of leading organizations under challenging circumstances in numerous leadership positions, in both the private and public sector, I can assure you that challenges, obstacles, and difficult times are inevitable. Being a good leader during times of ‘smooth sailing’ is easy, but when a crisis occurs, that’s when your leadership skillsets are truly tested. Throughout my career, the leaders I have admired most acted similarly at all times; the point is, being a good leader requires a skillset of composure, preparation, adaptability, and optimism that are translatable from day-to-day tasks to an extraordinary crisis. I have never experienced a poor leader who suddenly becomes a good leader during crisis. This shared insight is because I firmly believe there is no substitute for building a solid leadership foundation that is the base of your organization. This consists of creating a valued-based culture, building personal and professional relationships with your employees, and instilling trust within your team. Quality leaders recognize employees as real people, creating strong relationships built on mutual gratitude and respect. These essential leadership qualities are central to communicating an issue to your employees and stakeholders with integrity, which will translate into how efficient your messages are received during a time of high-stress and urgency. During crises, messages need to be delivered in ways that are easy to understand, concisely outline of the options available to address the situation, and show self-awareness to express compassion for those impacted by the situation. Perception is reality, and how your employees perceive you daily will have a tremendous impact on how they respond to you during a critical time of need. Remember, your employees are your most valuable asset. Through my experiences, I have learned to look for leaders that have an enhanced self-awareness (often referred to as emotional intelligence) as a prerequisite to effective leadership; in essence, you must be able to see people and changing environments through different lenses. Through enhanced self-awareness, leaders can be more adaptive, resilient, and accepting of feedback, and be open to change. A mentor of mine frequently refers to these leadership qualities as the building of muscle memory. Why is building muscle memory crucial? Simply stated, a leader who fails to exercise these leadership characteristics and qualities routinely fails to exercise them when truly tested. Moreover, the development of muscle memory goes far beyond the leader learning these skills. It requires taking active responsibility for training staff as well. Organizations must develop these qualities and characteristics through your example, training and well-earned influence. When faced with falling short of stated goals or making mistakes along the way, I reflect on a watershed event early in my career. A compelling statement was made to me by a well-recognized leader after I made an unintentional error in a political setting of significant consequence. I was asked: “What did you learn today as a result of your experience?” After detailing my learned insight with great remorse, she stated: “Then you are more valuable to me and this organization today than you were yesterday.” These few but profound words of redemption have remained etched in my belief system, further emphasizing the role of good leaders in building muscle memory of what it means to be a good leader in difficult times.
Uh-oh…Hot Mic!
Have you ever said something you thought was confidential, but soon realized someone or some ‘thing’ overheard you? The inevitable answer is yes – we all have. However, the consequences of ‘sticking your foot in your mouth’ are much more severe today than they were years ago. Why? The answer is simple – technology. At Fallston Group we often tell our clients “anyone with an internet connection and recording device can wreak havoc on your brand.” This happens within seconds or minutes. The speed of information is faster now than ever before, and so are its verdicts – in other words, the court of public opinion is alive and well. But what’s different than the court of law, is the court of public opinion is judging not only current events but history within a modern, real-time context. Consumers feel empowered more than they ever have before, because of social media and other digital platforms. And not just to criticize and attack specific brands, but to generally share their opinions on brands, issues, events, etc. Consumers will vote with their heart, their wallet, their voice… and, we must adapt to today’s environment. A recent example is (now former) veteran NHL referee, Tim Peel, who ruined his reputation and career in a matter of seconds. Peel was being recorded during a National Hockey League regular-season game (as most professional referees, umpires, sports games, and even players usually are) and during the first several minutes of the game, Peel stated to another referee: “it wasn’t much, but I wanted to get a f***** penalty against Nashville early…” (Dedaj, 2021). Once the audio was analyzed by league executives, Peel was stripped of all his professional refereeing duties, but scrutiny didn’t stop there. When it comes to the court of public opinion, assumptions were quickly made, and questions were asked. People wondered, are his comments related to sports gambling? Is he a Red Wings fan (the opposing team)? Ultimately, what is his bias? Regardless of the ‘why,’ the awareness of his actions, words, and environment are the reasons his career is now tarnished, and reputation is ruined. This surely isn’t the first (or the last) time we have watched careers mushroom cloud within a matter of minutes. Always remember, when you’re with the news media, your mic is always ‘hot.’ In fact, with technology being as pervasive as it is today, it seems there is always a ‘hot’ mic or video wherever you go! Now, if you find yourself on the wrong end of a ‘hot’ mic, we’re often asked what to do, regardless of how devastating the recorded comments or actions are. We believe you start by embracing Dr. George Everly’s Resilient Moment Communications Model. The Model suggests that if you answer the following questions, the overwhelming majority of the questions people have, will be answered: What happened? What caused it? What are the effects? What is being done now? What needs to be done in the future? While telling your story using this framework won’t make the issue immediately go away, it will go a long way to articulate your position, whether the court of public opinion agrees with you or not. Bottom line remember you are always ‘HOT’!
Warning Signs for Company Insolvency and Bankruptcy
By Peter S. Goodman, Turnaround Expert The following is a list of indicators/ warning signs that your company may be insolvent and in need of restructuring its balance. Promptly forecasting or discovering these indicators is a critical management function that can mean the difference between a successful corporate financial restructuring versus financial failure. Upon discovery that your company may be in financial extremis, management must make sure they have the expertise on hand to deal with the problem. Generally, the C-Suite does not have the corporate expertise to address insolvency and thus turn to hiring outside turnaround experts. Turnaround experts may include the hiring of a corporate officer with expertise in financial turnarounds as well as a law firm and financial advisor that specialize in this area. If the company’s financial situation is severe, these professionals can assist with a turnaround plan that may include the filing of a bankruptcy petition under Chapter 11 of the United States Bankruptcy Code. A Chapter 11 petition allows for current management to continually operate the company in bankruptcy and automatically stays from collection all creditor claims. By staying all creditor enforcement actions, a Chapter 11 bankruptcy filing allows your company time to restructure its operations and exit bankruptcy under a payment plan approved by the Bankruptcy Court that binds all creditors. Indicator 1 – Your company is in breach or is expected to be in breach of financial covenants in credit agreements or other material contracts. Promptly discovering or forecasting the breach allows your company time to engage with its lender. Normally, the lender would like to avoid a borrower default/bankruptcy filing. Consequently, the borrower has some leverage to negotiate an interim waiver or standstill agreement with its lender. The interim standstill will give the parties time to negotiate a turnaround plan. Should these discussions fail, the filing of a chapter 11 petition in bankruptcy automatically stays the action of a lender to collect on its loan. Many of the indicators discussed below can also lead to a breach of the company’s financial covenants. Indicator 2 – Your company’s supply vendors require cash on delivery. If trade vendors suspect your company is insolvent, they can demand cash on delivery terms. COD demands can further exacerbate a company’s liquidity problems. If your company has an available line of credit it can offer letters of credit to important trade vendors. Discussions with the vendors, including discussions of possible turnaround plans may assist in providing terms other than cash on delivery, particularly if the vendor wants to preserve the business relationship or is concerned about a possible bankruptcy filing by the company. In the event your company files a chapter 11 petition, vendors that ship post- bankruptcy receive a priority claim that comes ahead of pre bankruptcy trade debt. Additionally, upon filing for Chapter 11 your company can request that the Bankruptcy Court authorize the payment of certain critical vendor’s pre-bankruptcy claims. Indicator 3 – Your company faces an impending judgment that the company cannot afford to pay. The filing of a chapter 11 petition in bankruptcy automatically stays the execution of the judgement and may allow for an appeal of the judgement without the requirement of filing a bond. As an alternative to filing for bankruptcy your company can seek to negotiate an agreement with the judgement creditor delaying the execution of the judgement. Indicator 4 – Your company has a negative valuation. While companies do not regularly conduct formal valuations of the corporate enterprise, if management suspects that the company may be insolvent it may be helpful to engage a valuation expert to perform either a formal or informal valuation so management can then assess its options while it still has time and liquidity. Indicator 5 – Your company faces significant financial exposure, e.g, the company is upside down on financial hedges or has other significant off-balance sheet financial liabilities. Companies frequently find themselves in trouble because of ill-timed or poorly designed hedging transactions. The filing of a Chapter 11 petition may not stay the liquidation of the financial hedges, but it may stay the enforcement of a resulting claim against your company. Indicator 6 – Loss of a major customer impacts your company’s ability to pay debts as they come due. The loss of a significant customer may adversely affect your company’s balance sheet and depending upon the significance of the resulting revenue loss can lead to bankruptcy/insolvency, The filing of a chapter 11 petition can buy time for your company to rebuild its customer base and reduce its overhead in the wake of the loss of the customer. Indicator 7 – Your company has negative cash flow beyond two or more consecutive quarters and insufficient financial reserves to cover the gap. A company cannot survive without cash and negative cash flow over several quarter can deplete reserves, breach loan covenants and lead to insolvency. The hiring of turnaround experts who can assess the reasons for the cash losses can assist in the turnaround process. If the loss of cash cannot be quickly addressed and the company’s financial reserves are nearing depletion the filing of a chapter 11 petition must be considered to buy time to properly address the company’s financial structure. Indicator 8 – Your company has dwindling cash reserves. Company’s that have no cash on hand make poor candidates in restructuring/bankruptcy cases. If reserves continue to be historically low and/or insufficient to continue operations bankruptcy or an out of court restructuring alternatives should be considered. The filing of a chapter 11 petition in anticipation of a successful restructuring requires the hiring of professionals e.g., lawyers and financial advisors, paying post-bankruptcy vendors, and other significant costs so having cash on hand at the time of a bankruptcy filing is critical. Indicator 9 – Your company has significant financial losses. Occasionally, a significant financial loss can lead to insolvency and a bankruptcy filing. The impact of the financial loss on the company’s solvency and ability to conduct operations should be immediately assessed
