Distress has presented itself in spades in the past year with an extraordinary crisis rocking global capital markets. Stocks are fluctuating wildly and investors have watched life savings evaporate, crippling people’s trust in financial institutions and, in many cases, big business as a whole.

While public scepticism and negative emotions have run high, such a time of crisis has also meant that, unlike during times of calm, companies have had an eager audience that is willing to absorb corporate messages. While filled with doubt, people have yearned to be spoken to and reassured.

During times of crisis, many companies flail by failing to act or by taking the wrong kind of action when communicating with distressed stakeholders. But in these circumstances, a crisp and transparent communication strategy can set a company apart from the competition by fortifying employee relationships, showcasing superior client/customer focus, and strengthening a company’s reputation for transparency, reliability and integrity with members of the wider public. By acting quickly and communicating thoughtfully, a company can build reputational capital and weather the storm to come out on the other side perceived as a long-term leader. Below are some suggestions.

During times of economic downturn, all organisations should be aware that they are vulnerable, regardless of how much or how little they are directly implicated in the predicament. Reputation by association can all too easily cause companies in the right to be lumped in with the perpetrators who are wrong. Public fear – compounded by persistent media coverage – can further chip away at trust in a business sector, or even big business as a whole.

Communication crib sheet for crisis times

During a crisis, companies can uncover opportunity by adhering to a few simple guidelines when communicating with investors, employees, the press and the general public.

● Do not hide: not hearing from you will breed additional suspicion and mistrust among stakeholders

● Gather relevant information and stick to your story: be as informed as possible to reassure stakeholders that you are in control and in the know. Switching gears or waffling signals insecurity

● Communicate early and often: both internally and externally. Keeping employees well informed is a vital step to keeping your organisation on message with all stakeholders

● Centralise communications: sending conflicting messages from different areas of a company signals disorganisation and undermines stakeholder confidence

● Get inside the media’s head: anticipate how the press might spin first-hand or second-hand information

● Choose communication channels thoughtfully: how and where you say something is as crucial as what you are saying. During a period of distress, scrutiny of corporate communications is higher than ever as stakeholders clamour for information

● Communicate directly with affected constituencies: during times of instability and uncertainty, people want to be reassured by hearing information straight from the horse’s mouth

● Keep the business running: even in the face of upheaval, remind stakeholders that you have not taken your eye off your primary purpose as a for-profit corporation that drives returns for investors

● Keep values and character centre-stage: in a period of crisis, maintaining trust is paramount. Adhering to corporate values, and using them as a navigational compass to guide corporate strategy and communications, will demonstrate stability and reliability, assuring stakeholders your head and heart are in the right place.

Beware of guilt by association

Reputational risks have intensified during the past year, with the credit crisis yielding real-life villains such as Bernard Madoff, the New York money manager and former Nasdaq chairman whose alleged $50bn fraud served as the pièce de résistance in the shattering of trust in financial institutions in the US. Or B. Ramalinga Raju, founder and former chairman of Satyam Computer Services, the Indian outsourcing company, who resigned after admitting he had manipulated the company’s books for many years including the creation of a fictitious cash balance worth more than $1bn.

Poor communication strategies or tactics make organisations or individuals likelier targets, even if they are well-meaning and innocent. Hank Paulson, former US Treasury secretary, serves as a prime example of how not to communicate during a downturn. In recent months, his missteps turned him into a household name. Never a spin-doctor, Mr Paulson forgot that the communication of his economic recovery plan would be just as important as its actual substance. Crucially, he did not effectively market his Troubled Assets Relief Plan (Tarp) as a rescue instead of a bail-out. Instead, his ineffective and soft-spined communications allowed the media to grab the reins and position the Treasury’s efforts as a highly questionable $700bn bail-out of greedy banks. Making matters worse, in interviews and public communications Mr Paulson switched gears a number of times, signalling indecisiveness and even helplessness in the face of the financial storm.

Communicate early, often and clearly

Being aware of a corporation’s vulnerability during a downturn is only the first step. The second, perhaps most critical step is to place more emphasis than ever on communicating clearly and consistently in such a precarious environment. During downturns, cutting communications teams as a non-revenue-generating area of an organisation may seem like an easy way to slash budgets but companies do so at their own peril. During a crisis, shareholders instinctively grasp for any shred of knowledge to hang on to and often misinterpret information. Stakeholders can end up feeling abandoned, confused or distrustful, and this can do long-term damage to a company’s reputation.

Companies must also be sure to focus on employees, who, all too often, are the last to receive information. As the first point of contact for many external stakeholders, employees should be well informed and, therefore, able to project an air of confidence and stability to angst-ridden consumers and investors.

In the wake of the credit crisis, Bank of America enhanced its intranet site with news flash features to keep employees up to date with the stories relating to the bank that consumers were reading. The company also supplied employees with communication tools such as talking points, enabling them to more effectively address potential customer concerns over news items and the highly volatile financial services landscape.

Employee anxiety, unrest or mistrust can permeate beyond company walls to be picked up by the public. In November 2008, when Citigroup’s share price plummeted to close to $3, from about $33 a year earlier, over concerns about its financial health, the bank struggled with employee leaks, allegations of in-fighting among its board of directors and a spin-off of Smith Barney, its brokerage arm. On a call to employees, Vikram Pandit, Citigroup chief executive, insisted that the company’s capital position remained strong while “rumour mongering [was] at the heart of [the] problems.”

Learn to say sorry

Candid corporate communication means publicly recognising any missteps, as well as relating lessons learnt that will help to deliver future improvements once storms have been weathered. Failure to do so during and following a period of crisis can make a company seem complacent or, worse, arrogant. Consider the opening remarks made by Jeffrey Immelt, chairman and chief executive of General Electric, during the company’s annual investor outlook call in December 2008. Mr Immelt diplomatically underscored the lessons learnt during a year of earnings disappointments: “So, we come through this I’d say having learned a lot, having navigated through some really challenging times. And, like anything else, we use it as a learning experience to get better.”

Contrast this with another Citigroup communications oversight: in an interview with US broadcaster Charlie Rose, Mr Pandit positioned Citi as far-removed from the root of crisis, failing to acknowledge past missteps or assume responsibility for risk management failings and the resulting investor losses. “I can completely understand how people on Main Street, people who are not close to this industry would be furious at what’s happened and furious at kind of where we’ve gotten to ...” he said. “If you start throwing everybody under the bus, we’re going to need a very large bus. Given what we have gone through, the most important thing is who can do the job going forward.”

While presenting a forward-moving plan is indeed critical, preserving goodwill with stakeholders can only happen if organisations are open and honest about their own role in and responsibility for a crisis, however small or indirect.

Use the Web 2.0 opportunity

As discussed earlier, a crisis can be an opportunity to demonstrate to your stakeholders just how strong you are as an organisation. Social media and digital communications create unlimited possibilities for corporations to have candid and personal conversations with their stakeholders. From internal and corporate blogs to websites complete with videos from management and tools such as Twitter, this is the first time that social media have played a big role in the dissemination of information during a crisis. Companies such as IBM, Dell and Ford, which faces widespread negative perceptions about itself and US automakers in general, are seizing the Web 2.0 opportunity to re-establish relationships with their stakeholders and to set the standard for transparency.

Ford’s chief blogger and community manager, Scott Monty has done a great job of positioning the ailing automobile company for future success through Twitter pages, multiple posts and interviews, and a general level of savvy about Web 2.0 that most companies have not yet acquired. However, as Mr Monty said in a recent interview: “The tools don’t matter a fig. They’ll change, ebb, flow and go away. But you have to approach social media from a holistic viewpoint: how is this going to touch and affect what I’m doing across the board, and what do we want to accomplish?” In other words, don’t forget that goal-setting is part of strategy.

Continuity, not re-invention

While invigorating a corporate communication game plan is critical during times of distress, be aware that radical new tacks in communication strategies can breed unwanted suspicion.

In the past year, investors have been severely burnt by false promises from senior executives, most notably from Lehman Brothers, which is under US federal investigation for potentially misleading comments to investors concerning the company’s financial health by Richard Fuld, former chief executive. Investors have paid the price through depleted 401k retirement saving plans and mistrust of corporate communications has increased. As a result, sudden and unexpected communications – even those with the best of intentions – can heighten public fears.

Consider GE’s shares slumping 10 per cent on December 1, when the company announced an unscheduled update. The announcement turned out to be positive – reiterating the company’s strong credit rating and dividend commitment – but this example demonstrates how actions perceived as “unusual” can provoke harmful knee-jerk reactions from jittery investors, even when a company communicates well.

Increasing communication is essential, but developing a coherent communication strategy and selecting channels, timing and messages thoughtfully will be most important to avoid giving off alarmist signals. Similarly, maintaining a distinct sense of identity and focusing on

corporate values becomes more essential in turbulent periods to reiterate corporate consistency and a willingness to stay focused on stakeholders’ best interests.

Communication as crucial to financial risk management

The current crisis underscores how vital communication is to a company’s financial risk management strategy. For a corporation to attract and retain investors, it must convey its financial and organisational picture in a clear, cohesive and trustworthy manner. Failing to do so can easily dent a financial reputation, particularly during times of crisis, when investors and consumers demand more – and even more timely – information, including why the crisis happened, how they will be affected, and what will be done to rectify the situation.

When the going gets tough, a corporation has an opportunity to showcase its mettle and position itself as an entity to be trusted through thick and thin. Such trust is built over the long term, through thoughtful words backed by action to build an authentic corporate character that stakeholders can genuinely believe in.

As J.P. Morgan, the famous industrialist, rightly explained in 1912: “The first thing is character... before money or anything else. Money cannot buy it... because a man I do not trust could not get money from me on all the bonds in Christendom.”

Paul A. Argenti is professor of corporate communication at Tuck School of Business, Dartmouth College
paul.a.argenti@tuck.dartmouth.edu