According to crisis management experts, everyone involved in the home building space, from executives to front-line employees, should prepare strategies to deal with an expected domino-affect likely after this week's news that Atlanta-based Beazer Homes was under investigation for possible impropriety in its mortgage operations.
"The U.S. Attorneys, States Attorneys, and to a degree the IRS, which is under a lot of pressure itself, are going to watch this very carefully," predicted Robert Dilenschneider, founder and CEO of New York City-based Dilenschneider Group, which counsels corporations, financial services and consumer products organizations, as well as top Wall Street law firms, and federal agencies similar to those cited in this story.
"If they can make some hay--in other words, find Beazer to be culpable-they are going to try and extend their investigation to other home builders," said Dilenschneider. "That will get all kinds of plaintiff lawyers interested in this. All kinds of suits will be filed and what that will do is create enormous panic and havoc in the industry."
So with a new catalyst aggravating the already fragile home building environment, what should builders be doing about it?
According to Eric Dezenhall, CEO of Washington D.C.-based crisis management firm Dezenhall Resources, most industries would choose to do nothing-i.e. wait for the storm to blow over and get back to business. But he cautions home builders to consider a proactive versus reactive strategy.
"We are dealing with a climate of increased regulation and increased legal scrutiny," said Dezenhall. "It would be prudent to conclude that this hostile climate is here to stay for a while."
What's likely is that the industry's first instinct is going to be wrong, Dezenhall predicts. Most industries immediately will move to jump on an ad campaign. They say, 'let's educate consumers about the value of our products.' But remember: That's not what is being questioned."
Instead, he suggests builders quickly develop strategy and tactics that deal with specific industry challenges. Today, those challenges are two-fold:
1. How do you deal with influentials that are in a position to hurt you? These include the regulators and those involved in the legal processes.
These very elite audiences have to be persuaded that the industry is doing all it can to address this problem, thereby not meriting further scrutiny. Often, this type of communications is very sophisticated and happens through lobbyists, lawyers, and high-end public relations. "In Beazer's case specifically, they need to be very aggressive and tie legal defenses together with public relations to come out of this in a way that's as clean as possible, or that demonstrates it is going to get clean," said Dilenschneider. "If someone has to walk the plank, they have to walk the plank."
2. How do you deal with consumers?
Obviously, this is a very different problem, some of which can be addressed through issue-driven advertising. According to Dezenhall, another way to engage the media is through a PR outreach campaign that communicates specifically about what is being done at your company to avoid these abuses. "Assure consumers that they will not be put at risk in this process."
And don't forget your sales staff. Since they interface directly with the public you need to immediately arm them with the proper training and arguments. (See the May 22 issue of BIG BUILDER magazine for coverage on how builders are training sales staff to address this issue)
At the very least, Dilenschneider suggests builders, especially Beazer, provide their front-line staffers with a very simple statement like:" We have enormous confidence in the fundamentals of our business. If there were indiscretions of any kind, we intend, through our own internal investigation, to root out those problems and deal with them immediately. In the meantime, those people that deal with our company who deal with extensions of our company should feel confident that the long-term integrity of this organization is in tact and will remain intact for the future."