Bernstein Crisis Management. Crisis response, prevention, planning, and training.

Crisis Manager Internet Newsletter about Crisis Management

© 2000 Jonathan Bernstein

Editor's Note: There's a theme to this issue -- rumor prevention and management. Effective crisis management requires an understanding that perception IS reality and failure to realize this tenet can have disastrous consequences, as in the case history, below. In the world of Internet- and email-based information dissemination, anticipating and having a response mechanism for rumors is more important than at any time in the history of public communication.

The origins of this newsletter's subscribers reflect, I believe, an awareness of the need to deal with such issues on a global basis. While the majority are U.S.-based, after only two issues there are also subscribers from 19 other countries, plus American military public information officers worldwide. I am gratified that you find this publication valuable and encourage contributions and comments from all.


In the absence of communication, rumor and innuendo fill the void.


Rumor Control

There are many methods of effective rumor control, although none are perfect. Hence, I advocate use of multiple rumor control tactics within any organization to optimize the chances that rumors will be caught and addressed early on, before they've done too much damage. Make them available to all important audiences. The rumor control techniques below are some of the best I know of, but I very much welcome reader submissions of other tactics which I will report, with appropriate credits, in a future issue.

  1. Rumor Hotlines -- People like to have both anonymous and "for the record" means of reporting/asking about rumors. Provide voicemail, fax numbers and website-based forms for reporting rumors, with personal identification optional if the individual wants a personal response. Publicize the availability of these numbers. In the publicity, inform those who retain anonymity how they will receive their answers,such as via organizational newsletters, bulletin boards, or Web pages.
  2. Rumor Control Officers (RCO's) -- There are people in any organization with whom employees (or others close to the company) are more comfortable speaking. Sometimes blue collar workers prefer to speak to someone closer to their "rank" and ditto for others. An astute Human Resources director knows who these people are -- make them your Rumor Control Officers and inform your audiences that if they hear what they think could be a damaging rumor, the RCO's will confidentially hear them out and have the authority to research the facts and get back to them.
  3. Rumor Back-Tracking -- Ask those reporting rumors to provide the source of the rumor if they are comfortable doing so, then go to the source with a gentle, non-punitive inquiry and give that person the facts. Ask the source to give the facts to whomever he or she may have told the rumor. Find out where he/she got the information. Continue to backtrack and repeat the process until you've reached the original source or the "trail is cold." Every rumor-spreader CAN become a fact-spreader if you enlist their cooperation.


A Crisis Management Case History:
Ignoring Wall Street Rumors

Per reader suggestions, I'm going to periodically use case histories of organizations which, in my opinion, badly botched the task of crisis communications. Some companies learn from such mistakes -- if they survive.


Stodgy Savings was a 50-year-old financial institution traded on the New York Stock Exchange. It had never had a significant crisis and had survived the Resolution Trust Corporation's purge of the U.S. savings and loan industry. Its stock was usually perceived as a solid, conservative "buy" based on consistent and predictable earnings. Its only internal public relations professional was focused on product promotion and investor relations was handled strictly by the CFO and CEO.

[The Crisis]

On a Monday afternoon, Stodgy's stock, then listed at $80 per share, begins to slip significantly, and by end of day was down to $70. There had been no company news to explain the slip and competitors' stock was doing well. After the market closed that day, when Stodgy's CFO was asked for a comment by a Wall Street Journal reporter, his response was, "We don't comment on stock price fluctuations."

On Tuesday, the slip continued, with the stock down to $65 and concerned analysts and investors swamping Stodgy's phone lines. The CFO and others stuck to their "no comment" position. Internally, they debated saying more but felt that their reputation and history would be sufficient to restore investor confidence.

On Wednesday afternoon, with the stock down to $55, a Crisis Manager was called in. He quickly determined that:

  • The company had no idea why the sell-off started, nor had they made any attempt to find out why.
  • There was, in fact, absolutely no business-based reason for lack of investor confidence.

The Crisis Manager suggested that Stodgy's CFO and CEO ask analysts following the company -- the ones they had been essentially ignoring -- what "the word was on The Street." The Crisis Manager concurrently made his own confidential inquiries with Wall Street sources. Both investigations revealed that:

  • A rumor started, on Monday, that a prominent analyst had recommended "sell" on Stodgy's stock.
  • Concurrently, for reasons having NOTHING to do with lack of confidence or any rumor, one institution sold off a large block of Stodgy stock.
  • Other leading investors and investment advisors, monitoring the usual sources of Wall Street facts and rumors (note -- this situation occurred before the Internet was much of a factor in communications; today, rumor-spreading would have been far worse), saw the large block sell-off, heard the "sell" rumor, and assumed that they were related. The absence of communication by Stodgy acted to confirm their suspicions. The sell-off started in earnest.
  • The analyst who allegedly had recommended "sell" claimed he hadn't done so, although there was hearsay that he'd made such a recommendation verbally, albeit not in a formal report.

Perception had, indeed, become reality.

By then it was late Thursday afternoon. The stock was down to $45. Company management finally agreed to start presenting information to assuage the fears of investors. Overnight, a fact sheet highlighting the company's fiscal and management strengths was created and used by company executives to start calling analysts, major investors and media who followed the stock. Plans for future written communication and investment community meetings were initiated.

By Friday, the stock leveled out at $40 and climbed back up to $50 by the end of the following week, but too much damage had been done. The stock never recovered to its previous levels during the subsequent two years, after which Stodgy was acquired by a larger firm, for a value well below what it would have sold for earlier. During the weeks after the sell-off, investors and analysts told company representatives, "Why didn't you call back? Why didn't you comment? When you didn't say anything, we were sure something was wrong!" There were hundreds of expressions of disappointment and betrayal, of trust broken, irrevocably.


The bottom line -- it's reasonable and probably legally prudent to have a policy of not commenting on minor stock price fluctuations, but to have no flexibility in a communications policy invites disaster. And to under-estimate the power of rumors virtually GUARANTEES disaster.

If you found the above case history useful, you might also want to read the article "Making a Crisis Worse -- The Biggest Mistakes in Crisis Communications,".


Q: What do you do if you don't know the answer to a rumor at the time it's reported?

CM: (1) Don't give an answer you're not sure of because it's likely to backfire on you later. (2) Give an honest and concerned response, e.g., "I don't have the answer to that but I can sure understand why you'd want to know. Let me check out the facts and get back to you very soon. (3) Get back to the rumor source within 24 hours with at least an interim answer, even if it's only "we're still checking on it." (4) If you think the source would be receptive (a case by case judgement call), remind him/her that, at the moment, the information is only a rumor and should be confirmed or disproven before it's communicated further. Not those exact words, necessarily, but whatever is appropriate to communicate a sense that the source should be prudent.

Q: You note that a company has to be prepared, has to have a written plan, etc. But, speaking as an in-house PR person, how do I get them to take this stuff seriously? How do I get them to authorize the resources necessary to plan and rehearse for crises?

CM: There have been MANY times when in-house PR people I know have made excellent recommendations regarding crisis communications policies, only to have them largely ignored until they provided external support for their opinions. Often, in-house PR contacts seem to be perceived, by management, "only" as specialists in product/service promotion and, therefore people who don't necessarily understand crisis management. An often-inaccurate assumption, but it happens. When, however, the in-house PR person offers EXTERNAL evidence for his/her opinions, it can often move things along. Frankly, with apologies if this sounds self-serving, that's one of the reasons this newsletter was created -- to increase the awareness of those who don't fully understand the concepts and practices of professional crisis management. Case histories, in particular, have a gut-level impact on those wise enough to see themselves in the examples given. Incorporating relatively low-cost "crisis management orientation" sessions into a routine organizational management training agenda, using outside "experts" as trainers, is another effective technique. The bottom line is that some corporate cultures, like in this issue's case history, just hate the idea of bad news and won't prepare for it until it's too late. At least 90% of the crisis communications plans for which I've been contracted were created AFTER the client had suffered from a nasty crisis or two without such a plan in place.


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Articles in "Crisis Manager" were, unless otherwise noted, written and copyrighted by Jonathan Bernstein. Permission to reprint will usually be granted for no charge. Write to