10 Rules to Live By

10 Rules to Live By

Business strategists have identified 10 rules to live by when facing a crisis. [3] Following these rules, which have been both adhered to and ignored throughout sports and big business, has become even more important of late due to the immediacy of the media and its influence on consumers. The rules are as follows:

[3] Adapted with permission from Hill and Knowlton's crisis practice.

  1. Take charge. This is not the same as accepting blame. It is, however, being responsible for addressing the crisis.

  2. Measure the crowd noise. Know the difference between an embarrassing development and a full-blown crisis and measure your response accordingly. Understanding how your customers are going to react is key. The media is also going to want to know how you are going to proceed.

  3. Feel the pain. If you are not sympathizing for and empathizing with those affected, any rational arguments you put forth will not be heard. Before a company representative speaks the first word, he or she must make sure the organization knows who the key players in the recovery are, and that the important people on the staff are informed about what will be said.

  4. Be a stats geek. Use research to understand what consumers are thinking about a particular crisis situation and what they think the company should do.

  5. Use a mouthpiece. Third parties are becoming critically important as they are routinely viewed more favorably and with greater credibility than company spokespeople.

  6. Embrace the media. Dealing forthrightly with the media yourself will be more effective than forcing them to gather information from other, possibly less accurate, sources. Make sure a full contingency plan is in place as consumers and strategic allies will want to know how you are going to handle the crisis in the media.

  7. Get ready for the on-court battle. Expect litigation. Make sure you are proactively and forthrightly briefing legal counsel.

  8. Be cyber-savvy. Information, and even more important, misinformation circulates on the Internet, via both e-mail and Web sites, at breakneck speeds. Be ready to address fallout arising from chat rooms, e-mail chains, and other online postings.

  9. Timing is everything. You might do all the right things, but the perception of your company and how you manage the crisis is shaped in the first 24 hours.

  10. The best defense is a good offense. Undertake the steps required to build your reputational assets before the crisis hits.

Rule #1: Take Charge

In 1997, Marv Albert, the TV voice of the New York Knicks and New York Rangers on the MSG Network and lead play-by-play man for NBA broadcasts on NBC, was charged with forcible sodomy and assault and battery. Prior to the trial, Albert categorically denied to his employers that he had anything to do with the woman who had alleged he had bitten her on the back and forced her to perform oral sex in a hotel room in February of that year.

Admitting to the charges early on and agreeing to an out-of-court settlement would have saved Albert and the television networks a lot of embarrassment. Even arranging a settlement before charges were pressed could have saved Albert and his working partners a tremendous amount of humiliation. However, Albert continued to deny, deny, deny and the broadcast networks stood by their man and let him broadcast. Then the firestorm hit.

In late September, two days of trial testimony revealed that Albert enjoyed three-way sex and had worn women's underwear. After a second woman came forward alleging similar activities with Albert in 1994, the broadcaster promptly issued a guilty plea. Within hours, NBC fired its lead NBA broadcaster and Albert resigned from the MSG Network. In the process, Albert's personal and professional credibility took a big hit.

However, just because the networks were partially shielded by the fact that most NBA fans wouldn't boycott broadcasts because of Albert, it didn't mean they escaped unscathed. Throughout the trial, Time Magazine revealed that Jay Leno had told 43 Albert jokes on The Tonight Show (yes, that's right, on NBC!) including this one: "Did you hear NBC gave Marv Albert the pink slip? Yeah, apparently he wore it home." Among other water cooler jokes: "Why did NBC initially stand behind Marv Albert? Because it was the safest place to be." New York newspaper headlines of "Menage a Marv" and "Marv Bites Back" merely compounded the problem.

Albert was rehired by MSG exactly a year after his last broadcast. He was then hired by Turner and eventually resumed his position as the lead voice of the NBA on NBC for the 2000–2001 season. At the end of the 2001–2002 basketball season, Albert was also named to the Monday Night Football radio broadcasts.

Taking responsibility—the basketball equivalent of taking the charge—and admitting fault won't make a crisis disappear; doing so is merely an acknowledgment that a crisis indeed exists. However, being candid and truthful with those who are most immediately and significantly affected avoids further damage. Had Albert told the woman he made a mistake that night, was sorry, and was perhaps willing to compensate her, this wouldn't have turned into the media circus it became. That, of course, still doesn't mean that Albert's actions were acceptable, just that the rest of the sports, business, and media industries would have been spared the gory details and much of the fallout arising from the incident's massive exposure.

Rule #2: Measure the Crowd Noise

Just days before NBA training camps opened for the 2000–2001 season, the NBA had a crisis on its hands when it found out that one of the league's up-and-coming star players, Allen Iverson of the Philadelphia 76ers, was going to release a rap single entitled, "40 Bars." Iverson, who used the rap name Jewelz, had previously been arrested for drug and firearms possession and, while in high school, was convicted on rioting charges and served four months in jail.

Although the song was scheduled to be released on an album in February, the lyrics found their way on to the Internet three months earlier. At the same time, radio stations were sent advance copies of the CD by Columbia Records, NBA Commissioner David Stern was being made aware of the crisis. The lyrics contained in the song were far different than those used by other NBA player/rappers Shaquille O'Neal and Kobe Bryant: "Come to me with faggot tendencies. You be sleeping where the maggots be," and "You man enough to pull a gun? Be man enough to squeeze it. Die if you don't believe it." The song concludes with the cocking of a gun and a gunshot.

Civil rights groups and the media were quick to respond. Fortunately, so too was Stern. Civil rights groups, some of which protested outside the First Union Center before a Philadelphia 76ers preseason game, demanded that Iverson apologize. Iverson then met with some of the groups to hear their concerns, but ultimately decided not to change the lyrics.

Stern reacted quickly. He arranged a meeting with Iverson and, after concluding the meeting, released a statement that explained that Iverson wouldn't be suspended or fined, but had to change the lyrics. Stern made clear that the lyrics not only affected the way people perceive Iverson, but also the way people might perceive the 76ers, as well as the NBA.

As the 76ers dominated the Eastern Conference, in large part due to Iverson's emergence as one of the NBA's top stars of 2001, the February release of the CD suddenly became late June. By the time late June arrived, Iverson had just finished his MVP season, leading his team to the NBA Finals. By the time training camp for the 2001– 2002 season rolled around, Iverson made the announcement that allowed the NBA and the 76ers to breathe a sigh of relief. The CD was never going to be released.

Iverson said that due to the negativity behind the CD he just felt like it was not something he should pursue—or ask his teammates, children, or family to endure. In the end, Iverson considered the impact his CD would apparently have and decided he didn't have the passion for it anymore.

By measuring the response (i.e., the crowd noise) well, David Stern, NBA officials, and eventually even Allen Iverson realized that the statement he was hoping to make with his new rap CD wasn't worth the negative feedback that engulfed the stakeholders in this crisis.

Rule #3: Feel the Pain

It is not possible to adequately deal with or move beyond a crisis without realizing—and appreciating—its impact on stakeholders, regardless of whether they were a party to the crisis or merely an innocent bystander to it.

Although the NFL had nothing to do with the terrorist attacks on New York and Washington, D.C. on September 11, 2001, it experienced its own crisis on a much smaller and far less consequential scale. The NFL and its commissioner, Paul Tagliabue, who once served in the office of the Secretary of Defense as a defense policy analyst on European and North Atlantic affairs, needed to decide if the league's games should be played the Sunday following the attacks.

MLB had already postponed some of its games (which would ultimately result in the playoffs and the World Series being pushed back and leading to the first November World Series in league history), but the league was wavering as to how to handle the continually and rapidly unfolding crisis. Numerous college football conferences vacillated about their playing status with many of the so-called "money conferences," those with lucrative TV contracts, initially suggesting that they would play.

The NFL also faced extraordinary logistical and financial issues. Given the NFL's scheduling differences, including the fact that teams only play once a week and some are granted "byes" from time to time, postponing the games was much more complicated. Without knowing how the events of September 11 would be resolved, Tagliabue called off the weekend games. He determined that it came down to the loss of life and the ability of players to absorb what the nation had been through. Tagliabue felt it was right to take a week to reflect and to help the friends, families, and people in the community who needed support.

Tagliabue was not immediately concerned about the potential revenue losses—a week's ticket revenue and compensation owed to the TV networks. Instead, he was only thinking about the others outside his corporation who were affected by the tragedy.

After considering multiple scheduling scenarios and their financial impact on important league stakeholders, Tagliabue, remarkably, kept the NFL season intact by postponing the Super Bowl one week. By more delicately balancing the interests of his constituents (including grief-stricken fans) than other sports leagues, Tagliabue demonstrated unparalleled crisis management acumen. His unprecedented savvy reinforced his standing as the sports world's top executive. The Sporting News named him the most powerful person in sports in 2001 and The Sports Business Journal selected Tagliabue as its 2001 Sports Executive of the Year.

Unfortunately, almost 40 years earlier, the brilliant 29-year career of NFL commissioner Pete Rozelle was slightly tarnished by his inability to see and feel the pain. Only two days after John F. Kennedy was assassinated in 1963, Rozelle announced that the NFL would play its seven-game schedule that week, whereas the rival American Football League canceled its four matchups.

Rozelle suggested at the time that everyone had a different way of paying respects and that he had done so by attending church that Sunday and imagined many of the people at the (Giants) game had as well. He didn't feel that playing the game was disrespectful—nor did he believe he had made a mistake. However, 30 years later, Rozelle admitted that it was indeed the worst decision of his career.

Tagliabue confronted the crisis caused by the September 11 attacks head on, taking the pulse of his crisis' stakeholders, including the American public, whose pain and grief were immeasurable, and delivering a measured response. In the process of demonstrating keen leadership that included "feeling the pain" of the American people, Tagliabue elevated his and the NFL's brand to new heights.

Rule #4: Be a Stats Geek

Often, it is the company that must consider the rules discussed in this chapter when dealing with a crisis. However, when companies have strategic alliances with an organization experiencing a crisis, they, too, could be affected.

For example, when an athlete gets arrested, the athlete's agent might want to know how badly his or her client's public image has suffered and to what extent the arrest has hurt the agent's ability to recruit new clients. Additionally, those companies with whom the athlete has endorsement contracts would also immediately consider the merits of retaining him or her to represent the company to the public.

John Hancock Mutual Life Insurance was an official Olympic sponsor for many years, allocating tens of millions of dollars for the privilege to be associated with the Games. When it was determined that several Salt Lake City Olympic bid officials had bribed IOC officials to host the 2002 Olympic Games, the company threatened to withdraw its support.

David D'Alessandro, president of John Hancock, was a vocal critic of the Olympics who indicated his company had conducted three research surveys after the scandal, finding that many of the respondents no longer thought positively about the Olympics or its sponsors.

Compounding matters, the scandal emerged just as the Salt Lake Organizing Committee (SLOC) and the USOC were in the process of their $1.34 billion fundraising campaign to underwrite the cost of hosting the Games. While Olympic officials vociferously challenged John Hancock's findings, the issue remained highly visible in the mainstream press.

Because D'Alessandro didn't believe the IOC was acting quickly enough to resolve the scandal, Hancock's future investment in the Games was uncertain. However, the departure of 10 corrupt IOC members, who either were fired or were forced to resign, assuaged D'Alessandro's concerns about how the bidding process would be conducted. Consequently, Hancock re-signed a reported $50 million deal for what turned out to be a wildly successful 2002 games, as well as for the games in 2004 and 2006 and likely for the games in 2008 in Beijing.

John Hancock's response was a vivid reminder that crises have ripple effects that might impact other "players." It is important to understand—and swiftly address—the ramifications of crises to each and every company that yours is associated with.

Rule #5: Use a Mouthpiece

Commissioning public opinion polls sometimes works and sometimes doesn't. One reason companies conduct polling is to show the business world—and consumers—that what is being portrayed as the problem among the mass media really isn't as much of a issue (even if it is) as they are making it out to be. The third party, of course, technically conducts the poll, but the company itself determines which questions will be asked and in which spirit they will be posed.

The week after the 2001 winter meetings, public opinion of MLB Commissioner Bud Selig and team owners was low due to the MLB's surprise announcement that it would eliminate two teams due to poor financial health. This announcement was made just days after an exhilarating World Series was concluded and followed Selig's Congressional testimony, where he explained that baseball teams had amassed $232 million in operating losses in 2001.

Although much of public opinion indicated that eliminating two teams was disliked by fans and that these same fans believed Bud Selig was doing a poor job, MLB's survey revealed something different. The survey—conducted by Penn, Schoen, and Berland, which had been polling for MLB for more than 10 years—indicated that the sport's problem was a lack of competitive balance, which in fact was a significant issue facing MLB.

From 1995 through 2001, 219 of 224 playoff games were won by teams with the largest payrolls. The poll revealed that 75 percent of the fans believed that there was a problem with competitive balance in baseball and 77 percent of them were happy with Selig's attempts to improve competitive balance. Using statistics, the owners, in the new collective bargaining agreement negotiated in the summer of 2002, persuaded the players to agree to a luxury tax that was meant to slow down the spending of the higher payroll clubs. Management called this a competitive balance tax.

Of course, the poll included no questions about whether contraction helped combat the issue of competitive balance. There were no questions about whether fans believed that allowing teams to relocate would help competitive balance. No questions about the overall opinion fans had of Selig were asked.

Mouthpieces don't always work. It all depends on who receives the information and then who wants to listen to—and act on—the information. MLB's poll was intended to draw attention away from contraction and focus on improving competitive balance. For the most part, MLB did not accomplish this goal because of the relatively short list of media members that received the poll's results and the media's limited coverage of these results.

Rule #6: Embrace the Media

On September 10, 2000, Bobby Knight was fired from Indiana University after leading the school to three national championships and 24 NCAA tournament appearances in 29 years. At a time when far too many athletic programs stressed winning over matriculating student-athletes, Knight was known for graduating the majority of his players while contributing millions of dollars to the school's library.

Most of Knight's contributions to academia were overshadowed by a string of highly publicized incidents. To many, Knight was the sports industry's king of crises, a reputation he began to develop in 1979 when he struck a Puerto Rican policeman at the Pan Am Games. From the time he screamed and kicked his own player-son, Pat, at a game at Notre Dame in 1993, to the time he blasted an NCAA assistant for announcing that Knight wouldn't be at a press conference at which he eventually appeared, Knight was volatile. Throughout it all, he rarely indicated to the media that his behavior was anything less than acceptable.

The media was and remains critical to Knight's career because its job is to communicate with—especially in a time of crisis—important stakeholders who want to be kept abreast of Knight's actions and how these actions (or inaction) are portrayed in the media.

It is evident that Knight has not only failed to embrace the media, but has treated them as adversaries. Not surprisingly, this relationship with the media contributed to his losing his job at Indiana University, because the press was not willing to give him the benefit of the doubt about any of the crises he encountered. A good deal of media members believed that Knight truly didn't see the arrogant, insensitive bully that they had come to expect.

For this reason, many media members kept close tabs on Knight, monitoring his behavior in hopes of uncovering an outburst. After Knight was found to have choked former player Neil Reed and the university issued a "zero-tolerance policy"—meaning Knight's next indiscretion, however slight, would result in his firing—many in the media called for his dismissal.

Although Indiana officials certainly had their own issues with Knight, the media's constant and negative portrayal of him finally took its toll. A heated, albeit minor, exchange with an incoming Indiana freshman gave the university something it desperately needed: a violation of its zero-tolerance policy that enabled the school to fire Knight.

Embracing the media does not mean that it should be cow-towed to without reason, it simply means that a company should use the appropriate spokespeople to help combat the perception of the crisis to the rest of the organization's stakeholders. When Bobby Knight had a crisis, he appeared at press conferences, highly charged settings that did very little to improve his situation. He routinely overlooked one of the primary rules of crisis management: Identify and address what others deem to be a crisis or face tremendous scrutiny for failing to do so. Knight might not care about crisis management, but his new employer, Texas Tech, has to worry about it every time he steps out on the court or into a press conference.

Rule #7: Get Ready for the On-Court Battle

Ensuring that a legal team is thoroughly aware about any and all aspects of a crisis is very important because problems affecting (potential) customers might begin as complaints, but they can quickly turn into lawsuits.

Three fans complained about their seat location in the Tampa Bay Buccaneers new stadium, Raymond James Stadium, where the team moved for the 1998–1999 season. The three quickly retained a lawyer and were soon holding a news conference about their plight. The Buccaneers tried to have a circuit judge dismiss the case but, when that failed, the team filed a $1 million defamation suit—claiming that the fans' statements were false and unfair.

For the damage done to the team's reputation, the Buccaneers wanted $1 million from each fan, $5 million from the lawyer, and $5 million from the attorney's Tampa law firm. Ultimately, the team agreed to drop the case in June 2000.

Former Cleveland Browns owner Art Modell wasn't a popular man when he announced on November 6, 1995, that he was moving the team to Baltimore. Fans protested, calling the move unfair. Then, later that same day, they sued to keep the team in Cleveland. What began as a couple of plaintiffs quickly became thousands of season tickets holders who joined in the claim that insisted Modell violated his contract with them after leading them to believe that there was going to be another season in Cleveland. In April 2001, Modell settled out of court by paying $50 per season ticket held to each plaintiff.

Months later, and again in Ohio, the Cincinnati Bengals were compensating 1,750 season ticket holders. A Bengals fan, with the help of his lawyer, Janet Abaray, complained that he had paid for a specific location in the Bengals new stadium, but when he arrived at the first game, the seats weren't in the proper location, so he decided to sue the team.

Abaray then held a town meeting with other season ticket holders who bought personal seat licenses, which merely gives fans the opportunity to buy season tickets, but had been assigned the wrong seats. As other ticket holders joined as plaintiffs, county commissioners advocated that the ticket holders should deal with the team directly rather than rely on the courts for relief.

The team admitted that the stadium was reconfigured after the seat assignments were made. In the settlement, ticket holders could upgrade their seats at no additional cost, keep their seats and pocket the difference in price, or relinquish their seats and receive a refund.

In a crisis that is sure to gain national attention, including those where season ticket holders sue professional sports teams, it is critical for organizations to retain legal counsel that not only understands the law as it applies to the case, but that are also extremely sensitive to sympathetic figures such as sports fans and the media that cover them.

Rule #8: Be Cyber Savvy

Recall from Chapter 3 (with United and Untied.com) that negative news gets forwarded pretty quickly in the technological world of the Internet and via e-mail. Nike found out just how quickly with its Nike iD program.

In 1999, Nike capitalized on making a personal one-to-one relationship with its customers by debuting Nike iD. The ultimate in personal expression and individualism, the Nike iD program enabled customers at Nike.com to pay an additional $10 to special order shoes that contained a personalized message and color combination and arrived in the customer's mailbox in two to three weeks.

Since the mid-1980s, many customers who bought Nike shoes felt their purchase experience had become commodified. Although the customer couldn't completely design every aspect of the shoe, the Nike iD program attempted to prove that the company wasn't too big to care about the individual customer.

Making customers feel as if they were needed has always been a tenet of a good business and the one-to-one world helped make even larger companies create this perception. Nike had Nike iD just as Amazon.com has its personalized book lists based on past purchases.

Yet much to Nike's dismay, Jonah Peretti, a graduate student at MIT, capitalized on this branding opportunity by attempting to make his own brand statement. Peretti requested that the word sweatshop be emblazoned on his pair of Nikes.

What was intended to be a brand-building initiative ultimately became a major public relations challenge for the company as it faced swift and immediate fallout resulting from its selective allowance of personal expression. It is an example of how companies, even as prepared as Nike was with specific rules, could have difficulty in the one-to-one world. The following e-mail, one that became one of ESPN.com's most forwarded stories of 2001, magnified the problem as evidenced by these excerpts: [4]

[4] Farrey, Tom, "Just Don't Do It." ESPN.com. February 27, 2001.

From: Jonah H. Peretti

To: Personalize, NIKE iD

Subject: RE: Your NIKE iD order o16468000

Greetings,

My order was canceled, but my personal NIKE iD does not violate any of the criteria outlined in your message. The Personal iD on my custom ZOOM XC USA running shoes was the word "sweatshop." Sweatshop is not: 1) another's party's trademark, 2) the name of an athlete, 3) blank, or 4) profanity. I choose the iD because I wanted to remember the toil and labor of the children who made my shoes. Could you please ship them to me immediately.

Thanks and Happy New Year,

Jonah Peretti

From: Personalize, NIKE iD

To: Jonah H. Peretti

Subject: RE: Your NIKE iD order o16468000

Dear NIKE iD Customer,

Your NIKE iD order was canceled because the iD you have chosen contains, as stated in the previous e-mail correspondence, "inappropriate slang."

If you wish to reorder your NIKE iD product with a new personalization please visit us again at www.nike.com

Thank you,

NIKE iD

From: Jonah H. Peretti

To: Personalize, NIKE iD

Subject: RE: Your NIKE iD order o16468000

Dear NIKE iD,

Thank you for your quick response to my inquiry about my custom ZOOM XC USA running shoes. Although I commend you for your prompt customer service, I disagree with the claim that my personal iD was inappropriate slang. After consulting Webster's Dictionary, I discovered that "sweatshop" is in fact part of standard English, and not slang. The word means: "a shop or factory in which workers are employed for long hours at low wages and under unhealthy conditions," and its origin dates from 1892. So my personal iD does meet the criteria detailed in your first e-mail.

Your website advertises that the NIKE iD program is "about freedom to choose and freedom to express who you are." I share Nike's love of freedom and personal expression. The site also says that "If you want it done right ... build it yourself." I was thrilled to be able to build my own shoes, and my personal iD was offered as a small token of appreciation for the sweatshop workers poised to help me realize my vision. I hope that you will value my freedom of expression and reconsider your decision to reject my order.

Thank you,

Jonah Peretti

Although Nike did not reconsider Peretti's request, the company certainly learned the perils of the one-to-one world and how the e-mail and the Internet world can spread company ill will faster than ever before. Peretti's well-distributed e-mail, it turns out, has taught the company a valuable lesson in what experts call "viral" marketing, which thrives in an e-mail environment.

This didn't stop Nike from staying with the importance of creating individual shoes for the customer. In fact, the company never changed anything on its personalization rules because of the Peretti experience. Three years into the program, Nike had 23 shoes available for personalization and the program, which was once only available in the United States expanded to Europe and Japan.

Although it might not have admitted to changing its rules dealing with personalizing products, one has to believe that Nike has certainly become more cyber-savvy because of the Peretti's high-profile response.

Rule #9: Timing Is Everything

On February 18, 2001, around 4:50 p.m., NASCAR was faced with the greatest crisis in its history after racing legend Dale Earnhardt, who had won 76 races and more than $41 million, crashed into a wall on the final turn of the Daytona 500.

By dissecting the timeline of events over the first three-and-a-half hours following what became the Associated Press sports story of the year, it quickly becomes clear just how important solid decision making is in the moments following a major crisis.

Earnhardt was extracted from the car and received immediate emergency care at the speedway following the crash, including on-site CPR. Within minutes, he had arrived at Halifax Medical Center, located just a few blocks away from International Speedway Boulevard, where a trauma team was waiting for him. At 5:16 p.m., Earnhardt was pronounced dead. By 6:50 p.m., official word had reached the speedway. Approximately 10 minutes later, NASCAR President Mike Helton, flanked by the medical center's doctor, Steve Bohannon, was briefing reporters.

Helton informed the media that he wasn't educated on everything and that all the answers wouldn't be known right away. Bohannon then explained everything he could from a medical standpoint. Helton and Bohannon didn't answer many questions, hoping not to fuel any fire surrounding safety standards.

At 7:40 p.m., the flag near the racetrack's finish line was lowered to half-mast. At 8 p.m., NASCAR announced that the post-Daytona 500 ceremony, set to take place Monday morning, was postponed indefinitely.

Over the following days, weeks, and months, many columnists criticized NASCAR for its safety standards and in the six months that followed the crash several conflicting reports surfaced about the actual cause of Earnhardt's death. Further, a separate controversy erupted over whether Earnhardt's seatbelt had broken or had been cut during extraction.

Still, important action was taken. On August 21, NASCAR released a 324-page report that included input from more than 50 experts. Three months later, NASCAR mandated that drivers in its top three divisions wear head and neck restraints.

What cannot be criticized was the timely and fluid manner in which NASCAR responded to one of the biggest sports tragedies of all time.

Because NASCAR handled the initial crisis well and measured the rest of its response over time, it averted what most certainly would have been even more scrutiny—scrutiny that could have harmed NASCAR just as it was gaining national notoriety.

Rule #10: The Best Defense Is a Good Offense

According to crisis management experts, the most effective crisis management occurs when potential crises are detected and dealt with quickly—before they can impact the organization's business. In those instances they never come to the attention of the organization's key stakeholders or the general public via the news media. [5]

[5] http://www.crisisexperts.com/essence_main.htm.

The National Hot Rod Association (NHRA) is one of the few sports organizations that not only understands this in theory, but has put it to the test. The impact of the 1998 settlement between state attorneys general and the major U.S. tobacco companies rippled through the sports industry, most significantly impacting motorsports.

Forced to choose which sports sponsorship it would maintain, motorsports' biggest corporate partner, R.J. Reynolds' Winston cigarette brand, decided that maintaining its 31-year-old sports marketing relationship with NASCAR's Winston Cup was its top priority. Winston's decision, based in large part on NASCAR's enormous presence on network TV and its annual on-track attendance of approximately 4 million at its 35 national events, snuffed out another major motorsports league, the NHRA.

The comprehensive marketing partnership between Winston and the NHRA spanned 27 years and was valued at between $10 million and $15 million annually, making Winston the NHRA's most important sponsor. Replacing such a significant sponsor wasn't going to be easy at a time when the economy was soft and sponsorship dollars were few and far between.

A year before the official Winston/NASCAR announcement and because it believed it could lose Winston's support, the NHRA began contingency planning. On the one hand the NHRA could not undertake any initiatives that would undermine Winston's ongoing support, for doing so could prove costly and severely threaten the NHRA's viability.

On the other hand, having a tobacco company as a major NHRA sponsor limited its ability to broaden the sport's appeal to the next generation of fans. What the NHRA really wanted was a partner, one mutually vested and invested in the sport. This dynamic left the NHRA feeling ambivalent toward Winston, but allowed it to be proactive in advance of the announcement rather than be reactive as was the case with many sports leagues and properties that relied on tobacco money.

The NHRA began dealing with this potential funding crisis several years earlier when it committed to shoring up its management model by organizing itself in way that streamlined internal and external communications. With five vice presidents reporting directly to the NHRA president, the organization successfully crafted a managerial framework that enabled it to cohesively—and in a contained fashion—develop and implement a strategy for replacing Winston.

With its stated goal to grow the sport, the NHRA focused on extending the sport's coverage on TV and improving its racing facilities. In doing so the NHRA believed it would be able to leverage these developments during sponsor negotiations.

The NHRA's advance planning paid off, as it was able to articulate this vision to numerous would-be suitors, including the Coca-Cola Company's Powerade brand. Just as the negotiations were drawing to a close, the September 11 terrorist attacks occurred, leading many prominent sports spenders, including Coca-Cola, to circle their wagons.

Rather than panic and risk losing an ideal corporate partner, the NHRA quickly identified two steps it had to take to keep the sponsorship alive. First, it had to communicate to Powerade that not only wasn't the NHRA desperate to close the deal, but that it was more than willing to work with any new time table provided by Powerade. Second, and equally critical, the NHRA provided Powerade with timely and important new research detailing how and why the relationship should be quickly consummated.

These efforts were rewarded on December 3, 2001, when the NHRA announced that Powerade had agreed to a five-year worldwide exclusive agreement. NHRA called December 3 the most important day in the organization's history.

Although the NHRA might not have been able to live up to Winston's lofty expectations, it was able to provide Powerade with the highly coveted audiences, targeted youth programs, and incredible responsiveness it needed. Such a combination of attributes is rare in today's sports business world and enabled the NHRA to replenish the millions of dollars lost indirectly to the tobacco settlement.

In the end, the NHRA's reputational capital and brand name were greatly enhanced because of the way in which it handled this sponsor issue during a recession and following the September 11 attacks. For the NHRA, it was a strong offense that kept it from having to play defense.

Not only did the NHRA correctly prepare for and navigate through a crisis that could have seriously impacted its long-term industry standing, it did so while taking into account the numerous stakeholders that contribute to or challenge its success.