PR lessons from Steinhoff

We can take two important lessons from the December 2017 Steinhoff accounting scandal.

 1. When a crisis hits, the results can be sudden and spectacular

 Warren Buffett is widely quoted as saying: “It takes 20 years to build a reputation and five minutes to ruin it.” There is no such thing as overnight success, but there certainly is overnight failure.
 
In the case of Steinhoff, the company was in the making for 50 years. It had reached the Top 40 on the Johannesburg Stock Exchange, making it one of the 40 largest market cap shares on the bourse. The price peaked at over R95 in 2016. From November that year to October 2017, it traded in a relatively narrow band between R60 and R70.
 
In November 2017, it broke below R60 but the real damage came during December 2017. The share began the month on R55.81, lost R10 in two days and then plunged 61% the following day. In the first five trading days of the month, the Steinhoff share price fell 89%. And it has yet to recover.
 
Once a crisis takes hold, the reputational damage can be swift and ruthless.
 
2. You can’t communicate enough
 
Alec Hogg put it succinctly when looking at the disaster, saying that “… when a crisis hits, you simply cannot over-communicate. Steinhoff’s response has been an almost perfect inversion. Since detonating that sparsely worded bomb last Wednesday, the company has issued just two short statements. In the two previous months it had published eight strong denials of allegations which now appear to be true.”
 
He’s quite correct. When a business (or any other entity) is in a crisis, the first thing that needs to be done is to communicate with stakeholders. This is Crisis Communication 101. Silence merely creates a void in which speculation becomes rife and once that happens, it becomes increasingly hard to separate the facts from the fiction. The “fake news” phenomenon likes nothing more than a lack of information in which to breed. Even a month after the crisis broke, the board did little to clarify or elaborate on the situation for stakeholders, resulting in the share price languishing at about 5% of its peak for the month.
 
Preserve your reputation

Reputations are precious and need to be managed. Negative headlines can – and do – impact the bottom line. Take some time to review your reputation management practices and incorporate issue management protocols, procedures and guidelines within them.
 
What other lessons does this crisis offer us?