crisis communications

Carillion and crisis communications: what’s the verdict?

In General News, Strategic Communications by Tim SwabeyLeave a Comment

‘Crisis communications’ is the management and mitigation of severe reputational damage which could threaten a company’s ability to operate in the future.

The collapse of outsourcing titan Carillion dominated the headlines for a week. Worth more than £2bn just 18 months ago, and with around 450 government contracts to its name, the company finally buckled under the weight of £1.35bn of debt and a £587m pension deficit in early January.

It’s impossible to tell how effectively all facets of their crisis communications were managed. We can however infer they could have handled some elements more effectively.

Did Carillion manage their stakeholder relationships well?

The company issued three profit warnings throughout 2017, the last in November causing a 34% drop in its share price.

Financial updates were also accompanied by media statements as the crisis intensified. In December the company stated that it had reached a deal to sell its healthcare business. On the 22nd it reported that it had successfully secured a delay in the testing of its banking covenants. The updates continued into the New Year, with reassurances that it remained in “constructive discussions” with its creditors on Jan 12th.

However, it’s clear that Carillion was failing to communicate with their single most important stakeholder – the Government. They had effectively managed the expectations with their 160 bankers and creditors, but reports state that they received an icy reception when they finally met ministers.

We do not know the true extent of the communications work done between Carillion and the Government. It’s clear, however, that while the political situation was heated, better engagement with their largest customer may have garnered them more goodwill at the crunch point. Instead they were thrown to the wolves.

Did they manage internal communications effectively?

Leaked internal communications documents show Carillion asked staff to avoid posting sensitive information on social media or speak to journalists.

This is not unusual. It has been known for sensitive corporate information to leak during crises, even by accident. Requesting that staff not speak to journalists helps to prevent confusion and ensures you maintain control of the narrative.

Having a social media policy in place for staff is also an important element of crisis communications planning. Staff should be discouraged from sharing anything on social media about the company, as this can be picked up by others and spread confusion.

Could they have done more?

One of the most emotionally grating aspects of the Carillion collapse is the failure of its former directors to say ‘sorry’. The tabloid press were notably vicious as they chronicled how the top brass had insulated themselves from the financial repercussions of the calamity.

Simply saying ‘sorry’ publically when things go wrong is an underestimated and yet incredibly important part of reputational management. It provides a degree of emotional satisfaction for audiences which phrases such as ‘I apologise’, ‘I’m sorry you feel that way’ or ‘this situation is regrettable’ can never do.

Tone is key. Carillion’s management displayed a tin ear when it became obvious thousands of jobs could be lost and a numerous small firms could go under. Shockingly, their final statement makes a no mention of the staff at risk of losing their jobs, or the subcontractors facing financial Armageddon.

They will rightly be remembered in a highly negative light.

So?

Ultimately it was very unlikely that effective crisis communications could have saved Carillion. Its foundations were rotten, and it may not have survived even with financial support from the Government.

Nevertheless it seems they managed relationships and communications poorly. Perhaps worst of all, they failed to show humility and concern for those who lost everything in the crash. Both caused un-needed reputational damage – and guaranteed the episode will not be forgotten.

How prepared is your business for crisis communications?

GK are experienced in supporting businesses, particularly those in highly–regulated markets, to understand, plan for and execute programs and defensive strategies that mitigate risk, and protect and enhance value.

Our work varies from supporting business leaders under intense media scrutiny through to long-term projects, where businesses are keen to understand and manage risk proactively. The second scenario is always favourable.

For more info, get in touch with tim@gkstrategy.com

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