Measuring Up

When bankruptcy meant failure

Chapter 11 used to have a shameful and negative connotation in corporate America. Quite simply, it meant failure through bankruptcy.

That was the past, though. For decades, many companies have willfully utilized Chapter 11 protection laws to gain a second chance. We've seen it over and over again. Those over their heads in piles of debt, or companies that simply come close to running out of cash use these bankruptcy laws to erase most (if not all) their obligations and problems.

Even though Chapter 11 filing is used as a business strategy now, it's fair to say that most in the business world still view it as a failure to succeed. That's why I find today's news of Sbarro's bankruptcy filing to be so comical. More to the point, specific comments made by its CEO about this news are just plain odd.

Let's state the facts first. The company is suffering from a serious liquidity crisis. In its current state, it couldn't afford to keep paying off loads of debt, while operating its 1000+ restaurants. What pushed it into Chapter 11 is when Sbarro's financing options died. All of this happened because of recessionary matters which also forced the company to shutter 150 stores.

The bankruptcy will allow Sbarro to shed 195 million in bad debt, coming out of bankruptcy relatively quickly, but not unscathed and certainly not completely healthy as it will owe 175 million to debtors and creditors still.

Yet, its CEO Nicholas McGrane, said in court papers earlier this week, “Sbarro is a strong company that will quickly emerge from Chapter 11 and remain very competitive."

Huh? Is that comment just a tad too optimistic considering the company's current predicament? I mean the company has run out of cash.

It also makes the company's senior management come across as pathetically too optimistic, out of touch with what readers will believe and just plain silly.

Does the company have a bright future? I'm not sure anyone knows that answer. More to the point, if this CEO wants to be taken seriously, he needs to understand an important communication strategy— choose words and tone that are both believable and fit within the current scenario he is dealing with.

We often advise clients on this very issue. I've witnessed many cases where executives just didn't understand that their overly positive statements wouldn't come across well. Often, they were edited or changed to more acceptable language. Clearly that didn't happen in the case of Sbarro's CEO. Unfortunately, it's an egregious mistake.

The leak that roared

Today's guest post is by Peppercommer Matt Purdue.

It is a PR pro's nightmare and a journalist's dream come true.

The leak. 

Leaks are making news at a rate not seen since Deep Throat in the 1970s. Of course, there's WikiLeaks, masterminded by the creepy Julian Assange. Today the media is hot on the story of a Swiss banker who leaked information about rich tax evaders to Assange’s brainchild. But other leaks also abound. Goldman Sachs recently announced that it was going to bar US clients and all employees from investing in Facebook because someone leaked information about the deal to the media. Goldman is rightfully concerned that all the media attention could be construed as a violation of the prohibition against publicly soliciting a private placement deal.

With the economy stagnant and mistrust of our government and financial institutions running high, leaks are bound to happen. Disgruntled individuals with an axe to grind love to spoil a mar/comm executive’s day by leaking classified data.

So what's a PR pro to do to mitigate the risk of leaks and minimize their damage? Here are some tips:

Educate and train: Regularly remind all agency and client stakeholders that anyone caught leaking sensitive information will be disciplined and face legal action.

Password protect sensitive documents: It takes about three seconds in Microsoft Word to password protect a file. That password can then be shared with only folks who need to know it.

Use a document sharing site: Instead of emailing documents, set up a password-protected mini-site (a private version of GoogleDocs) where people can upload, view and download important files. These sites also enable users to track who viewed what files and when.

Pick up the phone: Secret emails and texts have a notorious knack for ending up in the Wall Street Journal. If you don’t want to see it in print, don’t type it. If you have a sensitive issue to discuss, use your voice.

Be your own leak: Happens all the time in politics. If you have super-sensitive info to disseminate, consider setting up an exclusive with a friendly journalist before you blast to the news to the world.

Have a crisis plan: Leaks happen. There is no excuse for lacking a strategy to deal with them. Denial is usually the worst option. But if you act fast with smart messages to key media outlets, you might be able to get out in front of the leak as soon as it occurs. Keep in mind that a leaker usually provides information to only one or a few media outlets. If you go to that outlet’s competition, you may be able to bend their ear. No reporter likes being scooped.

It’s a day-to-day learning proposition that we’re all still figuring out…

This is a consensus point that came out of an interesting conversation that Steve and I had with three leading  corporate communicators the other day. The conversation was actually part of a larger podcast discussion that we hosted to celebrate Peppercom’s 15 years in business.

Our three guests were asked a myriad of questions about how the state of corporate communications has changed today, what they need to do day-in and day-out to be successful and how this crazy thing called social media has turned everyone’s world upside down. The headline above refers to the latter point as they eloquently described the new challenges associated with a 24/7 blogosphere where any online comment can blow up into a real crisis at any time. Our guests were:

-    Monica Teague, Senior Manager, PR, Brand Business Teams, Whirlpool
-    Tom Topinka, Public Relations Leader, Genworth
-    Amber Harris, Manager of Digital Communications for Discovery Communications.

We recorded 30 minutes of discussion on two separate podcasts. The first contains their views on present opportunities, challenges and obstacles they face. Next week, we’ll post the second part containing their views and predictions for what lies ahead. I think you’ll find the discussion to be quite insightful.

To listen, click on the gray bar below.

15th_Year_Anniversary Podcast-Part 1