§ Subscribe

Alternatives

Enter your email address to receive blog updates by email:

Delivered by FeedBurner

§ Podcast

• For Immediate Release
  A weekly podcast for professional communicators from Shel Holtz, ABC and Neville Hobson, ABC.
  Podcast Feed
  Vote for FIR

---

§ PR Search

---

§ Places

• Shel's link blog
• Blogs I read
• Holtz Communication + Technology
• IABC
• Ragan Communications
• Society for New Communications Research

---

§ Dead Trees

• Tactical Transparency
  
  by Shel Holtz and John C. Havens
  
  
  
  
• How to Do Everything with Podcasting
  
  by Shel Holtz with Neville Hobson
  
  
  
  
• Blogging for Business
  
  by Shel Holtz and Ted Demopoulos
  
  
  
  
• Corporate Conversations
  
  by Shel Holtz
  
  
  
  
• Public Relations on the Net
  
  by Shel Holtz
  
  
  
  

---

§ License

This work is licensed under a Creative Commons License.

Wednesday, June 03, 2009

“Deny-delay-defend” crisis strategy isn’t sound just because it comes from the legal department

In the countless battles between communicators and corporate attorneys over what to say in response to reputation-threatening situations, the lawyers’ advice to say nothing (or little) usually prevails.

The result is often disastrous for the organization, but CEOs and senior leaders presume that mitigation of legal risk is of paramount concern. Industry pundits often agree, arguing that corporations are legal entities, requiring leaders to sweep legal concerns under the rug.

There is no need to characterize this situation as a battle between PR and Legal, however. The fact is that, viewed strictly through the legal prism, the counsel coming from corporate attorneys is frequently bad legal advice. The reasons bad advice comes from the general counsel’s office:

• In a crisis, lawyers are no less inclined to jerk their knees and make bad decisions than any other unprepared member of senior management
• Law schools do a lousy job of equipping their graduates to address the long-term consequences of short-sighted legal counsel

Still, bad legal advice is followed with barely a thought simply because it’s coming from a lawyer who has a seat at the management table. In far too many organizations, management does not share that same level of built-in trust with its top communicators.

Bad advice

The typical advice from legal counsel—silence or something close to it—is usually designed to minimize the risk of judgments awarded to plaintiffs in lawsuits filed in the wake of whatever situation prompted the statement in the first place. That same silence, however, is construed as guilt by a risk-averse public, which can have consequences far more dire than a large judgment. Stakeholders are inclined teo assume the worst about companies in a crisis, so they lose confidence when they resort to typical non-responses.

This isn’t opinion. In a study conducted 12 years ago, the year-end closing stock prices of companies that experienced crises were compared. Those that responded well saw their share value 4%, then rebound and remain 7% above their pre-crisis close, while those responded badly (that is, did what their lawyers told them to do) experienced initial declines of 10% with share prices remaining down, closing the year 15% below pre-crisis levels. That’s a 22% difference in year-end share value between companies that responded honestly and candidly versus those lawyered up over the possibility of lawsuits.

(The Oxford Executive Research Briefing that reported these findings is detailed in this Wharton Leadership Digest, a PDF file.)

Another study, this one from the Stanford Graduate School of Business, found that companies taking responsibility in a crisis outperformed those that blamed someone else by 14-19%.

Expressing regret, apologizing, and acknowldging blame (if there’s blame to acknowledge) do more than help a company’s reputation, though. They actually produce better legal results. While this flies in the face of conventional wisdom—that same conventional wisdom that drives CEOs to buy into the say-nothing strategy promoted by their attorneys—just isn’t supported by the facts. Just ask Jim Golden.

Golden served as general counsel for a company in the trucking industry, a litigation-prone business if ever there was one. He practiced what he calls the “deny-delay-defend” approach to crises, but has since concluded tehat the legal results are far better if companies embrace the responses so often advanced by their PR advisers. Golden, now a negotiation counsel for a Tennessee law firm, says that doing the right thing and telling the truth results in fewer cases going to trial and smaller judgments from those cases that do make it to the inside of a courtroom.

In those cases that do go to trial, Golden says, juries believe that justice has already been done and see no bad guys in the case; there’s nothing left to be proven in court. Golden’s clients that have taken this approach have had their insurance premiums reduced by up to 30%.

This isn’t just Golden’s experience. A study of doctors accused of malpractice found that those who apologized for the outcome (without necessary taking blame) experienced fewer trials and lower settlements. That’s counterintuitive to the legal advice most doctors get, to keep their mouths shut so the lawyers can deal with it in court.

Blame law schools

Golden—who recently participated in an FIR Live discussion on lawyers and communicators—blamed law schools for the deny-delay-defend tactic. Corporate counsels, Golden says, “don’t know their options” because law schools aren’t presenting them. Mid-career attorneys, however, are increasingly seeking training on just those options, with bar associations and litigation departments bring the training in-house.

In the meantime, communicators can do a better job of making the case against deny-delay-defend by pointing out that there are more options than saying nothing (what the lawyers prefer) and self-destructive blathering (what the lawyers fear). According to Fred Garcia, founder and president of crisis management firm LOGOS Consulting Group—and another guest on the recent FIR Live—there’s a lot of room to maneuver in between those two extremes.

It would help, though, if the top communicator’s views were held in the same regard as the top legal counsel. A Financial Post article suggests that’s not the case, with communications relegated to middle management where they don’t have leadership’s ear:

Whether it is due to arrogance, entitlement or a sense of invulnerability among senior executives, as one expert suggests, the reality is that many kings of the corporate world no longer put communications at the top of their agenda. Such isolation has made them more vulnerable to crisis.

It is this inattention to the reputational issues at the heart of communications’ agenda that has led (at least in part) to “the AIG spa scandal, the car manufacturers’ jet debacle and the bonus blowup,” the Post article concludes.

We in communications have been talking about that seat at the management table for at least as long as I’ve been in the profession—more than 30 years. The obvious approach to securing that seat is to prove the bottom-line value of our counsel. But I’m curious: What’s your approach to being taken as seriously as the lawyers in your organization?