Crisis, Crisis Everywhere and Not Enough Drops of Ink

As I sat down to write this column, I was astounded at the difference in the climate: It's not just our troops who are in crisis mode. A year ago I was wondering where all the
crises had gone and struggled to come up with good examples. But lately, it's been nearly impossible to narrow my choices. We've had the Olympics. Interesting, but there are only
so many Olympic crises stories you can write (isn't that a sad statement?). Plus, there are the Defense Department's Office of Strategic Propaganda (oh sorry I mean Influence),
Enron - and that's just the major headlines. One thing you can say about these times is there are a plethora of "opportunities" to learn from mistakes, which is why we picked
Global Crossing and Tyco* to study. Both were victims of the intense scrutiny to which all public companies are being subjected in the wake of Enron. Tyco seems to have
turned its press and its stock price around. Global Crossing hasn't budged from its bargain basement value in over a month. What's the difference, we asked?

Granted, Global Crossing actually filed for bankruptcy, while Tyco was merely short of cash. In real terms, there probably isn't all that much difference. However, Global
Crossing came across in the media as unapologetic and aloof, hiding behind the stance that "everything we did was in line with U.S. accounting rule." Where was his PR person to
ask the obvious question: If everything was done in accordance with the rules, why was the SEC launching an investigation?

At least Tyco's CEO Dennis Kozlowski said the words I've been dying to hear from the vast majority of CEOs we've covered in this column: "I guess we haven't paid enough
attention to PR." I wanted to run down the road and give him a hug for finally acknowledging what we've all known to be true for years. Tyco has its operational headquarters in
Exeter, N.H., 10 miles from where I'm writing this. Interestingly enough, while Kozlowski may have shunned PR, he and his fellow execs at Tyco weren't shy about community
relations. He and his company are almost as notable philanthropists on the seacoast of New Hampshire as Enron was in Texas. While that won him a lot of community support, it
didn't help him with the media. Just after the Enron and Global Crossing debacle, questions were raised about Tyco's accounting practices. It wasn't the first time the SEC had
probed Tyco's ledgers. But as they had last summer, federal investigators gave Tyco a clean bill of health. Nonetheless, the media had what it needed for a full-time feeding
frenzy. Rather than shut the door in its face, Kozlowski insisted on leaving it wide open. He is now doing weekly conference calls and deluging the media with information. As a
result, the stock is slowly recovering, despite (or because of) news of layoffs and sell-offs.

Ironically, each company's woes can be traced to one individual. For Global Crossing, it was Roy Olofson, the former VP for finance who was laid off and made his charges of
accounting misdeeds at the same time he was seeking a multi-million dollar settlement for wrongful termination. For Tyco, long-time critic David Tice has been hammering at the
company for years and arguably is biased since his company Prudent Bear fund is shorting the stock, betting that it will fall. That's the second lesson of the month. Never forget
that everything in life and in business comes down to individuals.

(Katie Paine is President of KDPaine & Partners, which provides measurement consulting services. Email: [email protected])

*In the interest of full disclosure, I own Tyco stock.

Global Crossing
Criteria	Grade	Comments	Advice
Extent of coverage	F	When your market is international, and your business is linking the continents, it's pretty hard to escape worldwide attention when you announce that you're filing for bankruptcy.	Many multinational companies ignore or temporarily forget about foreign media at their peril. As they say, bad news will have traveled around the world twice before good news gets out of bed. In today's world, expect worldwide crisis coverage and if it doesn't happen, take the weekend off.
Effectiveness of spokespeople	D	Most of the quotes were from analysts, who were just aching to have an opinion. On most issues, Global Crossing's spokespeople were silent	Never, ever let other people get control of your messaging
Communication of key messages	D	If their message was "We were in compliance with the law," it wasn't well communicated at all, since every thought leader seemed to contradict them.	The most important key to success in a crisis is to craft a credible message and stick to it. Without it, you have no idea what will end up in print.
Management of negative messages	F	Without strong management of their messages, the thought leaders could essentially say what they liked, and what they liked to do was compare Global Crossing to Enron and worse.	Know who the thought leaders are at all times, well in advance of a crisis. Keep them informed, hear them out, and get them to at least give you the benefit of the doubt. Don't leave them to form (and tell the world) their own opinions.
Impact on investors	F	Seeking bankruptcy protection is bound to impact shareholders most of all, and the fact that the stock hasn't moved from the bottom of the market is a good indication that the investors remain doubtful of a recovery.	Bad financial news is never easy to communicate to investors, and under the circumstances there may not have been any better way to handle the situation. But denying wrongdoing, and impugning one's credibility are the worst things you can do in a crisis.
Impact on customers	F	Global Crossing's customers want reliable service for the long-haul, and shaky financials are not a way to guarantee long-term service.	See statement above. Credibility is your most critical asset in a crisis, and if you blow it with a stupid or dissembling comment, you may never get it back - with investors, customers or employees.
Impact on employees	F	It was a disgruntled employee who blew the whistle in the first place, which sends a very bad message to all other employees. Unfortunately, coming so closely on the heels of the Enron debacle, it will be hard to reassure employees that there is a future with the company.	Remember that all employees are your ambassadors and your spokespeople whether you like it or not.
Overall score	F	If it's possible to make a bad situation worse, Global Crossing did it.	In order to maintain credibility and work your way out of a crisis, it is critical to be as open and honest as you can.

Tyco
Criteria	Grade	Comments	Advice
Extent of coverage	C	Tyco's huge appetite for acquisitions means that it now has a ton of "local" papers, guaranteeing that not only was its crisis a big financial story, but it made headlines in small papers everywhere.	Don't forget local papers in towns where you may have acquired companies. Local reporters are as ambitious if not more so than big city reporters, and I know when I was one, I dreamed of the perfect scoop, garnered from some disgruntled employees in the local Irish pub, that would get me that dream byline in The Wall Street Journal.
Effectiveness of spokespeople	B	By admitting that they had done a poor job of communicating, Kozlowski and his cohorts went a long way to ensuring their credibility. Most of the time, Tyco's spokespeople were on message.	A really good spokesperson is critical in a crisis. Clearly Tyco's Maryanne Kane was the designated hitter for Kozlowski, and she did an admirable job of sticking to her story. Beware, however, of overuse. The press quickly tires of hearing the same lines and seeing the same face, unless that face occasionally gives them some juicy tidbits or makes them laugh.
Communication of key messages	B	Thanks to Kozlowski's pithy quotes, Tyco communicated key messages in a remarkable percentage of its coverage.	Keep your CEO to a sound bite, and you'll get your messages across.
Containment of negative messages	D	The problem was that long-time Tyco-basher David Tice was a major "thought leader" during this crisis, and was there to remind everyone of Tyco's previous brush with the SEC.	One measure of success in a crisis is how few times past transgressions get mentioned. It's a phenomenon you probably can't avoid, but make sure you get the facts out first: Don't wait for reporters to discover them.
Impact on customers	B	Again, Kozlowski's quotes were key. By reinforcing the notion that unlike Enron, Tyco "made things" and would keep on making them, he simultaneously reassured both customers and investors.	The best reassurance a customer can have is the truth from the CEO of the company. If they can believe the CEO, they'll have faith in the product.
Impact on investors	B	See above. Tyco not only rectified its previous lack of communications, but took immediate action to cut costs and bring the company back to financial strength.	Actions speak louder than words, and investors can be very hard of hearing. Doing something dramatic, like forcing thousands of layoffs, is frequently the only way to reassure investors.
Impact on employees	C-	The problem is that in order to cut costs, Tyco had to lay off thousands of workers. While many of them had expected some consolidation, the toll it took on communities was very high. Tyco could have done a better job preparing local communities for the layoffs.	The biggest impact of a crisis is frequently on the local communities. Focus on employee and community relations and chances are you'll weather the storm. Tyco's extensive prior involvement in the local communities probably helped it avoid some negative effects. However, after being a major philanthropist it's hard to cut back. Aid to the recently unemployed to find jobs and get training is a good place to start.
Overall	B+	Kozlowski must have been reading PR NEWS. He not only promised to communicate more, he delivered on his promise, took action to solve the problems and was rewarded by a slowly rising stock price.	Fast action to fix problems is your best weapon in a crisis. While Tyco did make the mistake of blaming a "media frenzy" for the crisis, the company took it upon itself to fix the problem. The best measure of success is how quickly the crisis goes away, and for Tyco, it's already disappearing from all but the local papers - yet another reason to work on community relations before investor relations.