Learning lessons from BP’s mistakes

AND relax. At long last the great BP oil spill disaster of 2010 appears to be over. Black stuff is no longer leaking into the Gulf of Mexico, killing everything in its path. Brown stuff is no longer being power-hosed at Tony Hayward, the hapless CEO whose poor media performances enraged Americans and helped halve the firm’s share-price. So what lessons can be learnt from this sorry tale? And how can you put them to use? Here are five things you can take from the BP fiasco.

1. Reputational damage has a clear financial implication. Just look at BP’s share price, which is now just half what it was at before the Deepwater Horizon rig exploded. So says Gus Sellitto of crisis-management specialist City PR firm Byfield, who points out that in this world of blogs, 24-hour news and a more sophisticated financial press, stories can easily spiral out of control. This means that firms must have a joined-up response to crises. “Lawyers and risk-management departments and PRs should all work together,” he says. A company line is vital. Even if your company isn’t going to cause an oil-slick, other things can also damage reputation. For example, false claims of sexual or race discrimination. These days people are far more likely to go to the press. Be prepared. If not, it could cost you money.

2. Internal communication matters. Kathryn Adamson of Gardant Communications, another City PR firm that specialises in crisis management. “People generally panic and don’t know what to say to staff so the default becomes radio silence. This is always a big mistake. Whatever level of the company you work at you should have a message, and you must communicate it to those who work for you. Middle management are front line with staff and they need to know what they can say and when they need to refer to the senior management for comment.” She also points out that people must understand when and if they should speak to the media. There must be rules of engagement, or somebody might speak out of turn and even if they mean well, that can be disastrous. All this tells us that…

3. Employees matter. Directors might get obsessed with headlines, but far more damage can be done by those who work for you. “Employees are potentially your best ambassadors and they will have friends and family asking them what is going on; it is imperative that they know what to say,” says Adamson. The granny who decides to sell her shares because her son who works for the company is bad-mouthing it might seem like an irrelevance, but a thousand of them are not. Executives often neglect to look inwards. “Sometimes we go in to companies and ask what they have said to their employees, shareholders and clients and they say they haven’t thought about it,” says Gus Sellitto. “You should share as much information with them as you are legally allowed to.”

4. Planning for disaster is essential. So says Gill Ringland of crisis management consultancy SAMI and the co-author of Beyond Crisis: Achieving Renewal in a Turbulent World. As head of corporate strategy at technology firm ICL, she worked out a contingency plan for the eventuality that an earthquake would hit the factory in Japan that supplied vital parts. The company worked out a draft contract with an alternative supplier and checked that their parts were compatible. And when an earthquake did hit, six months later, ICL’s revenues were undamaged. The whole process “only took two or three days,” she says, and a potential disaster was averted. Of course, the worst disasters are black swans – events that nobody predicted. But you should work out the chain of command and think about the best person to deal with different types of crisis. In the case of BP, it should have been obvious that the very British Tony Hayward was not the man to deal with the US media, says Ringland. Somebody with a better grasp of the country and its culture should have been the face of the company.

5. You have to understand your company to understand your own job. “Although your job is to keep one part of the company running, you should understand which other parts of the company you rely on,” Ringland says. Know where the problems might come from. The best way to work this out is to have a dry-run. Ringland talks about a City firm that simulated a bomb going off in the Square Mile. All the contingencies went well – except that the telecoms manager had been under such cost pressure that he had cut the capacity of the network so much that only 30 of the 600 staff could actually get on-line remotely. “Some things only come out when you practise them,” she says. Disasters will always happen in business. Whatever you are the CEO or the post-boy, minimising their impact is part of your job.