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The myth of full disclosure: a look at organizational communications during crises
Business Horizons, July-August, 1994 by Jeffrey Kaufmann, Idalene F. Kesner, Thomas Lee Hazen
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When the unexpected happens, be sure to apply the cardinal rule of crisis communications: "Tell it all and tell it fast."
(Dilenschneider and Hyde 1985)
Communicating with the public is perhaps one of the most difficult tasks of executives today. Yet at no time is this task more challenging than during crisis situations. Executives whose organizations face crises typically receive two very different pieces of advice. On the one hand, many advisors encourage using extreme caution in speaking out publicly about a crisis. Many lawyers, for example, advise their clients to avoid unnecessary public statements. In some cases, executives are encouraged to avoid public statements altogether. On the other hand, many academics and public relations consultants suggest that when responding to crises, executives should make full and immediate disclosures about the circumstances surrounding the events.
Which of these two positions is correct? Should corporate executives reveal all details of crisis situations? Or, in the early stages of crises, should they avoid public statements altogether? If avoidance is the right answer, how long should they maintain such a stance? When is the right time to address crises publicly? How and at what level should they be addressed?
In this article, we take a closer look at corporate communications during crises. We examine the advantages and disadvantages of a full disclosure policy and the circumstances under which this approach should and should not be used. Although we cannot offer a formula for responding to crises, we provide recommendations for executives facing such events---executives who must cope with the inevitable battle between corporate counsel and the media and public relations advocates. Though these two sides may not agree on what and how much should be said during crises, they both agree on one thing: What you say (or don't say) can be as important as what you do.
What Is a Crisis?
"Crisis" is a relatively amorphous term. When it is used in the context of business organizations, most of us think of disasters--nuclear meltdowns, plane crashes, plant explosions, and the like. But the term covers a much broader group of activities.
According to Gerald Meyers, former chairman of American Motors, crises can result from many different types of situations. These include erosion of positive public perceptions, sudden market shifts, product failures, top management successions, cash shortages, industrial relations incidents, hostile takeovers, sudden shifts in regulation or deregulation, and adverse international events. Though vastly different in causes and consequences, these nine categories have many features in common. In all cases, the situations run the risk of escalating in intensity, interfering with the normal operations of business, jeopardizing the positive public image presently enjoyed by a company or its officers, damaging a company's bottom line, and falling under close media or government scrutiny.
As the latter point illustrates, organizational communications during such situations may significantly alter a firm's legal exposure. Effective communication cannot minimize this exposure but it can lessen other risks. If handled properly, communication may reduce the chance of escalation, limit interference with normal business operations, and contain damage to the company's reputation and bottom line. However, knowing generally that communication is important is "miles away" from knowing the most effective approach. The latter requires an in-depth look at one's options. We begin by exploring the approach known as "full disclosure."
THE CASE FOR FULL DISCLOSURE: WHAT YOU DON'T SAY CAN HURT YOU