Impact of Strategic Public Relations on Crisis Management of Oil and Gas - Research Paper Example

Impact of Strategic Public Relations on Crisis Management of Oil and Gas Sector of Introduction Across all industries and sectors of the economy, organizations face countless problems and adopt different techniques to solve these crises. Given that business-oriented and non-business oriented organizations have clients who are members of the public, all these problems affect the public and are, thus, of public interest in one way or another. Consequently, once a crisis occurs in an organization, it becomes a public interest issue as the press informs the public on the crisis in question. Crises often imply that the affected organization faces certain legal, regulatory/governmental, political, reputation and financial liabilities and impacts (The New York Times, 2010a). The unpreparedness of organizations for crisis management often implies they get caught off guard when a crisis occurs, meaning the response to and the handling of such a crisis would obviously be in jeopardy (American Petroleum Institute, 2008). In fact, that crises occur at any time from different sources such as human error, management incompetence, industrial accidents and natural disasters makes it rather difficult to foresee. In fact, most management teams, upon creating crises, deny the existence of the said crises, resulting in the accumulation and explosion of problems and the subsequent public uproar. An extensive literature review has revealed that it is the responsibility of managers, junior personnel, and owners to employ whatever means and resources at their disposal to prevent and solver crises before they cause extensive damages to a company’s reputation, productivity, profitability and survival (Parry et al., 2006). The mainly cited techniques of solving industrial and organizational crises are self-confidence, skills/competences and absorption of public fear/anger. All these strategies should be geared towards reducing or entirely eliminating the harm to an organization’s income and reputation. In fact, brilliant managers and owners may even manage and solve crises without the public hearing about the crisis. However, once a crisis becomes a public issue, strategic Public Relations (PR) is highly recommended for addressing such an issue. This literature review section explores the numerous PR strategies that the oil and gas industry stakeholders apply to maintain and improve their reputation when faced with crises. Crisis Management via Strategic Public Relations in the Gas Sector Because information travels quite fast in the contemporary society, crisis management planning has become a useful tool for the gas and oil industry, which is rather crisis-prone. It is, thus, imperative that the players in the industry act quickly while responding to crises and any allegations or questions arising out of these crises. Unfortunately, more players in the oil industry get it wrong while responding to crises compared to those that get it right (The New York Times, 2010b). The reason for this situation is that whenever crises strike, many a company is found unprepared and poorly equipped to deal with these problems (OGJ 200/100, 2008). In fact, organizations are found to prefer to conceal their crises and talk tough in the hope the situations would change or pass unnoticed. Little do they know that their concealing of the crises and talking tough only serve to worsen their situation. In other words, a lot of time is wasted at the initial stages of crises but later, reputation and revenue are lost as crises worsen. Among all these effects and losses, an organization’s reputation is the most important thing at stake during crises. Thus, it does not pay to hide the truth only for some whistleblower to reveal it later because the organization may face bankruptcy and collapse when the public hears the truth. Although crisis management helps oil and gas companies to build and maintain positive reputation, it should also be used to protect customers. Taking into account the many crises that the oil and gas industry faces, the responses by the affected and involved people should, therefore, be apportioned appropriately. For instance, the operational employees, the management, and the communication staff should take responsibility in addressing the crises. While the operational employees should bring the crisis under control, the management should allocate the appropriate resources, ideas, and decisions towards the resolution of the crisis. On the other hand, the communications personnel must ensure that the public and regulators such as the government are informed accordingly until the crisis is completely solved. However, it is the work of the management to coordinate all these groups to ensure that the established strategic public relations steps are taken to protect the public, the company, and its image. As mentioned earlier, preparedness is one of the factors that affect how an appropriate and effective an organization’s PR responses to crisis are. Crisis Preparedness and Response in the Oil Industry Among the oil and gas companies that have encountered reputation damaging crises in recent times is the British Petroleum (BP), not only in the Gulf of Mexico in April 2010 but also in other sites (McAllister et al., 2011). Consequent to these oil spills and other crises, oil and gas companies all over the world have designed and implemented various pipeline repairs and upgrades accompanied by improved monitoring of corrosion in the pipelines and the establishment and observance of corporate and international standards for work integrity and control. Thus, there has been a significant and apparent progress in the prevention of crises and their reputation damaging effects by oil and gas companies, which have instituted regular checks to ensure their operations and machineries work as designed (Webb, 2011). Despite the attempts by oil companies to prevent crises such as oil spills, these crises still occur, making it imperative that oil and gas firms have contingency plans in place. With the many reputation damaging lawsuits, hefty damages and criminal charges that oil companies face after crises, it is essential that these organizations move fast to repair the damages. However, there are numerous challenges that oil companies face as they seek to reclaim their reputation and market share. For instance, while public relations employees would be quick to initiate interventions that would project their firms in positive light, the legal wing may not want to appear to have lost the fight by admitting liability. Public relations in this regard, thus, become a rather dangerous balancing act in which a company’s reputation, revenue and survival could all be at stake. It is, thus, imperative that the concerned organization weighs and compares the cost of admitting liability with the cost of bad public image. For instance, after the Gulf of Mexico spill, BP replaced Tony Hayward with Bob Dudley as head of the response team. In fact, the replacement came after Hayward’s gaffes had angered the U.S. public. Instead of persisting with the remarks that only angered the public, BP decided to tread carefully in its choice of words to the public, even saying it would pay legitimate claims for economic damages (Whitehouse.gov, 2010). However, BP did not define the term “legitimate.” Many stakeholders felt that BP should have been flexible enough to determine what “legitimate” claim was so that it would not face bogus claims. In other words, failure by oil and gas companies to disclose the full details on crises and what they intend to do about the crises could be harmful to their image. Public Relations Methods Used Among the public relations methods used by oil and gas companies are crisis communication, internal communication, financial public relations, consumer or lifestyle PR and government relations. While financial PR entails the communication of the financial strategy and results of an organization, consumer PR seeks to gain publicity for an organization and its products. On the other hand, crisis communication deals with responses to crises. Additionally, internal communication refers to the dissemination of information about a crisis within a firm while government PR involves oil and gas firms engaging governmental agencies and departments to influence public policy and image (Cappiello & Weber, 2011). Notwithstanding the method used, the activities incorporated in these PR methods are similar and include press releases, newsletters, blogs, press kits, social media, video/audio news releases and communication with the media (Rozgonyi, 2007). All these strategies are meant to build relationships and bridges with influential and important organizations and individual audiences – a feat rather important in any business’ PR strategy. In their PR strategies, oil companies have been rather keen on the identification of their target audience so that the right messages are tailored for each class of audience. In fact, that different stakeholders and audiences may have different interests has forced oil and gas companies to create distinct but complimentary messages for these classes of audiences to improve their publicity. Equally apparent and important in PR in the oil and gas sector is the consistency of the messages sent to the audiences so that they are not confused by contradictory information on a given crisis or its impacts. The recent rise in the popularity of social media has also seen more and more oil/gas sector companies and CEOs turn to media such as Twitter and Facebook to communicate to the public about crises, responses, visions, objectives and missions (Wright & Dryfka, 2012). Finally, litigation PR involving the management of communication when a company faces a legal dispute, is the other common PR strategy used by the oil and gas industry stakeholders. It is not enough to just implement PR methods; more should be done with regards to planning and implementing responses to quicken recovery from crises. Planning, Responding and Recovering from Crisis Quite a number of print and electronic literary materials cover the techniques by which the stakeholders in the oil and gas industry may strategically plan, respond and recover from crises such as gas leakages and oil spills. The first recommendation emphasized in many a literary material is the importance of hiring the services of public relation firms, which are long established, knowledgeable, and experienced in crisis communication planning, response, and recovery. In fact, cases have been reported in which these Public Relations (PR) organizations have not only helped oil and gas firms to evade and recover losses but also to benefit from crises (The World Factbook, 2012). Among the common crisis situations in which oil and gas companies have been assisted to avert and reduce losses are product recalls, worker layoffs, work/product-related environmental issues and public health crises, and even deaths. In the processes of assisting firms during these crises, PR firms employ communication experts who must be integral to all the efforts and strategies geared towards responding to both low and high profile PR problems. The other central and integral elements of strategic PR responses to crises in the oil and gas industry are regularly updated plans, response simulations, and training of the relevant personnel. It is only through these strategies that oil and gas firms could not only avert bad public reputation due to crises but also turn a crisis situation into an opportunity for achieving good reputation and increasing profitability. These objectives are achieved via the services offered by these PR companies, which include training on public speaking, media, media relations, marketing communication, and internal communication (Merle & Callison, 2012). Recommendations for PR Strategies There are certain core elements in the development of a strategic crisis management plan proposed for oil and gas companies. These elements/activities include the implementation of a vulnerability audit, the establishment of crisis response teams and the development of a notification system. In addition, a proposed management crisis plan should entail the definition and description of the time of mobilization of the response team and develop a step-by-step checklist and action plan. Importantly, a management crisis plan should offer direction on the location of a crisis and the design of the most ideal crisis communication center for the crisis/situation at hand. The other core elements of a crisis management plan are media and speaker training, research and analysis, simulated crisis training, regulatory and legislative response planning, and coalition building. Most of these elements point to the importance of communication as a PR strategy during crises. Recommended long before crises happen is crisis communication planning. This element of strategic PR is quite helpful in the identification of a firm’s vulnerabilities. Such assessment and identification of crisis vulnerability have, in fact, helped a number of organizations to effect changes in procedures and operations, seeing them avert crises that would have otherwise happened (IBISWorld, 2008). Notwithstanding this prior identification of vulnerability, organizations are bound to suffer crises at any time without any warning. What matters is how an organization, its leadership, and workers respond to crises, especially at their early stages. In fact, the immediate response to crises has been cited as having the greatest bearing on the impacts of crises on brands and a company’s reputation. Two Common Approaches A generally recommended approach to crisis management for the oil and gas industry and any other industry for that matter has two choices: to bring the crisis under control or to deal with the media and public scrutiny that follow such crises. If an organization’s priority is to maintain and improve its positive reputation, then effective communication or strategic public relations are the best option. It is at this juncture that PR companies come in handy in the restoration of a company’s image, credibility, confidence, and the preservation and protection of organizations’ bottom lines (Congressional Research Service, 2007). There are numerous activities that must accompany whatever strategic PR policies to be implemented. These activities include uninterrupted crisis readiness, situation evaluation, short-term and long-term planning for assessed situations, message development, crisis-related media outreach and response, outreach to lawmakers and regulators related to the situation at hand, and the development of the appropriate and effective media information materials. In addition, there should be intense advocacy advertising, third party activation, and grass root mobilization. However, of greatest importance in addressing crises in the oil and gas industry is the establishment of medium- and long-term strategic PR planning and policies to identify and determine the extent of damage caused by a crisis and the best way to prevent similar crises in the future. These policies should also aim at maximizing the turnaround of these crises while minimizing the damages caused. Similarly vital is the designing and the implementation of effective communication programs for the restoration of public and regulator confidence in a firm and its products. Conclusion The oil and gas sector is one of the crisis-prone sectors of the economy not only due to the processes by which the products are drilled but also due to the nature of products, which have numerous environmental and health implications. Major players such as BP have had to deal with several big magnitude crises that have given the firm and other oil and gas companies rather negative publicity. However, using Public Relations (PR) methods such as crisis communication, internal communication, financial public relations, consumer or lifestyle PR and government relations, oil and gas firms have managed to recover their reputation and productivity and to survive. References American Petroleum Institute. (2008). Industry sectors. Retrieved on October 15, 2012 from http://www.api.org/aboutoilgas/sectors. Congressional Research Service. (2007). The market position of national oil companies: The role of national oil companies in the international oil market. Retrieved on October 15, 2012 from www.fas.org/sgp/crs/misc/R42364.pdf. IBISWorld. (2008). US oil drilling industry market research report. Retrieved on October 15, 2012 from http://www.ibisworld.com/industry/retail.aspx?indid=103&chid. McAllister, E., Silha, J., & Bergin, T. (2011). U.S. probes BP for gas market manipulation. Reuters. Retrieved October 15, 2012 from http://www.reuters.com/article/2011/02/02/us-bp-marketmanipulation-idUSTRE7111LY20110202. Merle, P., & Callison, C. (2012). Absence of trade press coverage of mass communication academic research: a bittersweet victory for public relations. Retrieved October 15, 2012 from http://www.prsa.org/Intelligence/PRJournal/Documents/2012MerleCallison.pdf. OGJ 200/100 (2008). Ranked in order of 2007 worldwide oil equivalent reserves as reported in 2007. Oil & Gas Journal. Retrieved on October 15, 2012 from http://www.petrostrategies.org/Links/Worlds_Largest_Oil_and_Gas_Companies_Sites.htm. Rozgonyi, B. (2007). Public relations – a promising SEO trend. Retrieved October 15, 2012 from http://www.ruralconference2010.com/index.php?option=com_awiki&view=mediawiki&article=Public_relations%3Fqsrc%3D3044&Itemid=55. The New York Times. (2010a). As oil industry fights a tax, it reaps subsidies. Retrieved on October 15, 2012 from http://www.nytimes.com/2010/07/04/business/04bptax.html? The New York Times. (2010b). German military braces for scarcity after peak oil. Retrieved on October 15, 2012 from http://www.rainforestportal.org/shared/reader/welcome.aspx?linkid=182279&keybold=energy%20AND%20%20policy%20AND%20%20leadership. The World Fact-Book. (2012). Country comparison – oil consumption. Retrieved on October 15, 2012 from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2174rank.html. Webb, T. (2011). BP faces investigation for allegedly manipulating gas market. The Guardian. Retrieved on October 15, 2012 from www.guardian.co.uk › Business › BP. Wright, D. K., & Dryfka, M. H. (2012). Examining how social and emerging media have been used in public relations between 2006 and 2012: A longitudinal analysis. Retrieved on October 15, 2012 from http://www.prsa.org/Intelligence/PRJournal/Documents/2012WrightHinson.pdf. Parry, P., Varya, D., & Clark, A. (2006). Crisis in the oil and gas industry: A skilled labor shortage threatens to stall the boom in investment and exploration. Retrieved on October 15, 2012 form http://www.strategy-business.com/article/li00003?gko=d0843. Whitehouse.gov. (2010). The ongoing administration-wide response to the deepwater BP oil spill. Retrieved on October 15, 2012 from http://www.whitehouse.gov/blog/2010/05/05/ongoing-administration-wide-response-deepwater-bp-oil-spill. Read More