How to Destroy Your Business

They say that history is a great teacher, and it’s true. If you are willing to learn from the mistakes of those who have gone before you, then you will have a massive head-start when it comes to growing your business.

One important lesson that many companies could learn from is the story of Gerald Ratner. Mr Ratner turned the Ratner family business into a successful chain of jewellers during the 1980s, only to go on to narrowly avoid causing the collapse of the company thanks to some off-hand comments made during a speech at what he thought was a private conference.

Ratner called the products sold by his company “total crap”, and said that some of them were “cheaper than an M&S prawn sandwich but probably wouldn’t last as long.” Word of the speech quickly spread, and the value of the company fell by almost £500 million as public opinion turned against the company.

Crisis communications was not a skill that was highly valued in the early 1990s. Back then, public relations still meant sending out press releases to newspapers, and the prevailing attitude was that any publicity was good publicity.  Ratner learned the hard way that there were some damaging forms of publicity, and that joking statements can be easily misinterpreted.

It’s a sad fact that brand images and reputations are more important than product quality. Today, when someone makes a similar mistake it is often referred to as “doing a Ratner”. One recent example of such a gaffe is the leaking of an internal memo by Hilmar Veigar Petursson, the CEO of online gaming company CCP. In the memo, Petursson said that in the wake of some unpopular decisions made by the company, they were receiving “very predictable feedback” from their customers but, that this was one of the times where the company should “watch what they do, not what they say”. In response to the leaked memo, a huge number of players decided to prove their anger by unsubscribing, which was exactly what the company did not want to happen.

Fortunately for CCP, they have people who have had good crisis management training.  Where Ratner was lacking in crisis communications skills, and floundered when the unfavorable comments came to light, CCP’s public relations department put modern crisis management training to good use and did the only thing that they could do. They acknowledged the anger of the players, apologized to them for poor communication, and met with some of their customers to put together a plan to fix the issues.

Of course, crisis communications can’t turn back time, but it did repair a lot of the damage; stabilizing the number of customers, and reducing the explosion of anger to a mild simmer. If Ratner had known that a public apology and a clear explanation of the context of his remarks would have repaired the damage, he may not have had to resign from his position.

If you’re the owner of a company, however small, then it’s a good idea to invest in some crisis management training. You may never need it, but if you do, it will pay off many times over.

This article was written by Amy Fowler on behalf of Insignia, who offer crisis communications and management training. Amy dreams of running her own business but wants to learn as much as possible before taking the plunge.

Explosion image courtesy of ShingThings.

Filed in: Business Success, Crisis Management, Entrepreneur, Feature Articles
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