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There is no doubt that there is work to be done. The terrorist attacks on last week have touched hundreds of companies directly. Those companies need help communicating—first and foremost with their employees, but also with their customers, their shareholders, their communities, all of which are likely to require reassuring in the wake of the tragedy. Other organizations may need help with their philanthropic efforts or with social responsibility programs.
But the demand for other public relations services in the wake of the disaster remains uncertain. Obviously, companies canceled new product introductions and other marketing efforts in the wake of the attacks, and many have not yet resumed advertising. Even when they do, they are likely to be incredibly sensitive to PR programming that seems light-hearted or celebratory.
And then there is the looming question of what impact the attacks will have on the economy, already teetering on the brink of recession. While some observers hope the rebuilding effort will provide a needed boost, most observers fear a decline in business and consumer confidence that will lead to reduced spending and a prolonged downturn.
But the first step for many PR firms, which allowed people to leave early on Tuesday—the difficulty of getting out of Manhattan notwithstanding—and closed their offices Wednesday, was simply opening their doors again on Thursday.
“I felt very committed to opening,” says Mark Weiss, president of Rowland Worldwide. “As long as we were not in harm’s way, I wanted to get back to business as quickly as possible. It’s an important first step to rebuilding a sense of confidence and normalcy. We have to show our resiliency. We have to demonstrate to our people that there is a secure place they can come.”
Those sentiments were echoed by almost all of Weiss’s peers, and most agencies were back in business by the end of the week, although many were not sure what business they were back in. No one seemed quite sure how proactive they should be in terms of offering advice and counsel to their clients. Says Larry Kamer of GCI/Kamer Singer in San Francisco, “I’m sure all of us have wondered if what we’re doing is enough—or worse, too much.”
GCI Group began contacting some of its clients toward the end of the week, asking whether they needed any special assistance. Says CEO Bob Feldman, “We have tried to contact most of our clients, to provide them with a little bit of a check list of things they need to keep an eye on in communications terms, from CEO communications when the stock market opens to employee communications. We are trying to walk a fine line between providing help where it is needed while not coming across as if we are making a sales pitch.”
The same concerns were evident throughout the industry. “We’ve sent e-mail messages to clients and close friends asking ‘May we share a few thoughts on communications,’” says Michael Weiser, president of financial services specialist The Weiser Group. “We want to walk a fine line between doing our job and seeming to be opportunistic in any way. We feel our part in this is to stay connected and help others do the same.”
“We have reached out to all our clients with general advice on crisis response,” says Burson-Marsteller chief executive Chris Komisarjevksy. “As far as non-clients are concerned, our policy is that we will provide whatever help is needed on a pro bono basis. If that develops into a relationship later, that’s fine, but for now we just want to do whatever we can to help. We would never call up anyone and ask them to retain us in a situation like this.”
For the companies with the greatest need—those who lost friends and colleagues to the terrorist attack—ordinary crisis management counsel seemed completely inadequate.
“These incidents are unlike any we have ever seen, so it is completely understandable that we’d be somewhat perplexed about what we can do as human beings, let alone how to put our professional skills to work,” says Larry Kamer. “Yes, there are questions about crisis management that inevitably arise, but there is a priority that is much higher than crisis management right now. It’s disaster management.
“What’s the difference? The incidents at the World Trade Center, the Pentagon, in Pennsylvania, are disasters—unprecedented, almost incomprehensible catastrophes that we can do nothing about at the moment. All we can do is attempt to process, understand, and deal with their aftermath. We are stunned in a way that no amount of preparation, crisis planning, or drills could ease.
“The only people who can deal with disasters on a regular basis are those who do so professionally: the Red Cross and Salvation Army, emergency room personnel, EMTs and firefighters, grief counselors—and believe me, this kind of work takes an enormous toll on them.”
Burson-Marsteller prepared a checklist for companies dealing with the employee communications demands of the disaster:
Make clear to employees that their safety is your number one priority. Communicate only what you know. Assure employees you’ll provide them with additional information as soon as you know it. Set up phone banks and/or an online center to respond to concerns. The phone bank must be staffed by communications professionals. Use your website or intranet to address employees concerns, and as a source of information. Offer stress-related counseling services. Maintain open lines of communication between senior executives and employees. Refrain from using any inflammatory or culturally insensitive rhetoric. Reach out to community groups and social service agencies. Help employees who want to participate in community assistance. As you assess the potential impact on business operations, communicate your findings to employees and clients. Richard Tilghman, partner and co-chair of the corporate and securities practice of law firm Piper Marbury Rudnik & Wolfe, agreed. “If your company has been or may be directly affected by the tragedies, we strongly recommend that senior management disclose how the company will be affected,” he says. “Such disclosures need to be accurate and sensible assessments of the likely effects of this week’s events on your individual business. Investors still have a right to know and understand material developments regardless of these terrible events.” Specific advice includes: Remember disclosure laws. Regulation FD, which requires that material financial information be released to the public simultaneously with disclosure to major investors and analysts, remains in force. Avoid speculation. “It is critical that management avoid speculation in situations where it is too early to tell what the effects may be on your company,” Case said. Adhere to regularly scheduled earnings announcements. Involve sell-side analysts. The panel noted that companies are likely to receive many inquiries from analysts in the wake of the disaster, and must be mindful of selective disclosure. But analysts can play an important role in communicating to investors and help the market digest information that has been duly disclosed. But not everyone agreed with the pessimistic consensus. Diane Swonk, chief economist of Bank One, says rebuilding and new government spending will give a boost to the economy. As a result, gross domestic product could grow 3 percent by the second quarter of 2002, she says.
Investor relations professionals, meanwhile, are advising “extreme thought and care” in disclosing corporate news when the markets reopen, but say companies need to be proactive in reaching out to investors at a time when many of them are likely to be uncertain about the wisdom of keeping their funds in the market.
“Corporate leaders are certainly under the gun to evaluate the potential impact of this week’s tragic events on the companies they run,” said Donni Case, president of The Financial Relations Board, a unit of BSMG Worldwide, at a panel discussion sponsored by the two firms. “This is creating pressure to disclose details to investors, but extreme thought and care is required under what is clearly a unique set of circumstances.”
The companies worst hit by the attacks also have external communications needs. They must reassure their clients that critical data was not lost, and that business will resume. Merrill Lynch resumed advertising on Friday. In a message from chairman Dave Komansky and president Stan O’Neal, the company reassured clients that “Merrill Lynch is open for business around the world…. Merrill Lynch is financially strong, and our clients’ assets are financially safe and secure.”
Morgan Stanley, with 3,700 workers based at the World Trade Center—most of whom were accounted for by week’s end—had a similar message: “Our assets and all of our clients’ assets are completely safe. And we are ready to begin again as soon as the market opens,” said chairman Philip Purcell in its first post-crisis ads.
The airlines—particularly American Airlines and United Airlines, which lost planes—face a more daunting challenge. Even before Tuesday’s events, analysts were predicting that U.S. carries would lose as much as $3 billion in 2001, and each day airlines are grounded costs $250 million in revenues, according to Morgan Stanley airlines analyst Kevin Murphy. Those losses are likely to be exacerbated by the public’s hesitancy to resume air travel, potentially volatile oil prices, and the cost of implementing new regulations designed to enhance security.
“My guess would be that the airlines’ biggest priority right now is making sure that they cooperate fully with the FAA,” says Tom Hoog, president of Hill & Knowlton’s U.S. operations.
But airlines have other concerns. The first is limiting their liability in the lawsuits that will likely be filed over the coming months by the families of victims. While the Association of Trial Lawyers of America has asked its members to hold off on filing lawsuits, many expect that the airlines will be targeted by those claiming lax security was part of the problem, and American and United have already begun lobbying Congress for protection against suits that could potentially drive them out of business.
“American and United are victims,” says John Graham, chairman of Fleishman-Hillard, which represents United. “I don’t think there’s any negligence here.”
Still, questions have surfaced about the airlines’ security measures, with some television networks broadcasting details of security violations and FAA fines at both carriers. If people are casting around for someone close at home on whom they can take out their anger, the airlines may make tempting targets, despite the fact that no one predicted the kind of attack terrorists launched last week. And even if people don’t blame the airlines, many are extremely concerned about flying.
“I think confidence will come back slowly,” says Hoog. “I think the airlines will do some things above and beyond what the government has already mandated—including greater cockpit security—but it will take some time.”
The hotel industry will suffer too: revenue will decline by about 5 percent for the year as a result of canceled conventions and reduced travel, the worst performance in 33 years, according to PricewaterhouseCoopers. The insurance industry will be hit equally hard. Chubb says it expects to pay $100 million to $200 million on property claims alone. American International Group says its losses from the attack will total about $500 million. And broadcast networks and their affiliates have lost about $100 million a day in ad revenue because of their decision to provide 24-hour news coverage uninterrupted by commercials.
All of these industries will need to communicate heavily with their consumers if they are to rebuild confidence.
But crisis management is one thing; old-fashioned consumer PR is another. Gillette postponed the launch of a new Oral-B product scheduled for the morning of the attack, and it is hard to imagine of lot of traditional new product introductions taking place over the next few weeks—the public mood is simply too grim.
“It’s one thing to tell the world we are back in business,” says Richard Edelman, president of Edelman Public Relations Worldwide. “But we have to be sure that whatever we do over the next few months doesn’t seem trite, silly, or ridiculous. I was listening to advertising as I drove back from Nebraska, and it just sounded ridiculous. I think we have to give a lot of thought to the kind of programming we produce.”
Mark Weiss agrees. “I think people were already beginning to question the frivolous nature of some of the work we were doing. People were becoming more reflective. I think corporations are going to be looking for programming that underscores their basic values, and the basic values of democracy.”
Elliot Sloane, president of New York’s Sloane & Company, reinforces this point when he tells of his reaction to a call from a client who wanted to discuss his company’s annual report. “I just think everyone in New York needs another week.” And even then, he says, “Where is the line? What work is important? What is not important? I don’t know the answer to those questions.”
West coast public relations firm Paine Communications took a scientific approach to figuring out when it might be appropriate to start pitching again. Says agency president David Paine, “We went back and gathered all the stories we could about the Oklahoma City bombing—the closest comparison we had. While this is inherently anecdotal, it will give you an idea of the number of stories in the major news media as time goes by.”
The Oklahoma City bombing happened on April 19, 1995, and news coverage peaked around three days after the incident. Ten days later, it had declined by about 30 percent, and three weeks later it had declined about 50 percent—although it was still a dominant story.
Given the relative magnitude of the crisis, with a death toll 50 times higher than Oklahoma City, it may be many months before reporters are ready to start accepting anything but the most businesslike press releases. And that’s only if companies can afford them. There’s a great deal of concern that the attacks will shatter consumer confidence and push the already faltering economy into a recession.
Sung Won San, chief economist for Wells Fargo & Co., made headlines the day after the attack by predicting. “The U.S. economy will go into recession as a result of the terrorist attack.” He wasn’t alone in that prediction.
“People are going to pause, and that pause is going to have a real impact on the third quarter and probably the fourth quarter,” says Fred Poses, chairman of American Standard Companies. Brian Wesbury, chief economist at Griffin Kubik Stephens & Thompson, agrees: “We’ll see a huge drop in consumption,” he told Business Week.
On Friday, the Conference Board published its own, not particularly optimistic, statement: “Clearly, consumers’ reactions to these events represent an important key. It has been our experience that consumers can react swiftly and negatively to heightened uncertainty—as was the case in the Persian Gulf crisis.”
Consumer confidence is one problem. Another is the declining profit expectations will pull down global markets and increase volatility. And some are worried that the U.S. may lose its reputation as a safe haven, reducing foreign investment and driving down the dollar.
Timothy Noah, a contributing editor for The Washington Monthly and a writer for Slate, is even more optimistic. “We live in a very wealthy nation that responds to horrible disasters by spending large sums of money. In this case, the spending will come both from private insurers and from the government’s Federal Emergency Management Agency.
“Money will be spent in the nerve center of American finance…. It will provide a meaningful Keynesian stimulus to a national economy that was tottering on the brink of recession well before September 11. The recession may still come, but the counter cyclical spending should help shorten it.”
Surveys conducted in the days after the tragedy indicated that Americans could respond with a calculated show of economic bravado. A poll conducted by Harris Interactive suggested that even though Americans expect a further downturn in the economy as a result of the attacks last week, they won’t necessarily change their behavior—with the exception of cutting down their flying. Large numbers believe stocks will decline a lot (35 percent) or a little (30 percent) but only 1 percent will sell their own stocks.
However, 64 percent say they would be afraid to fly on an airplane in the next few days, and 27 percent say they will avoid flying for the next few months.
According to FRB’s Neal Cannon, “The biggest concern of investors once U.S. markets re-open will be consumer confidence. There seems to be growing consensus that confidence is shaken but not broken. While there may be a short-term impact on stock values, the market will recover. Valuation is based on long-term future cash flows, not short-term interruptions in earnings.”
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