The straighter, the better

What to do in a crisis situation: draw up an action plan, be straight with the media and your clients, accept help from public relations agencies and keep cool. But are PR professionals really worth their money?

You might think that Pirelli Pekao Real Estate is not involved in any new investments at present. Advertisements have, admittedly, appeared sporadically in recent months, but there has been no information in the media. This may be regarded as success for the company, especially when you bear in mind the poor impression left by Pirelli Pekao Real Estate’s recent press.

 Summer night fever

 The heat was almost tropical in August 2006, both outside and within the housing market, where prices were climbing rapidly. But the heat was most intense in the Warsaw office of Pirelli Pekao Real Estate, where reports were flooding in by the dozen of unhonoured reservations for apartments in the developer’s investment on ul. Okopowa. Changes in the plan for the project had been made requiring a new building licence, which meant that reservations already delayed several times were becoming invalid yet again – leaving customers in the cold, watching helplessly as market prices spiralled. They felt cheated, giving furious vent to their feelings in the press. The developer had to read some unpleasant comments about itself on the first pages of the Warsaw edition of ‘Gazeta Wyborcza’, ‘Rzeczpospolita’ and the ‘Uwaga’ programme on TVN. The headlines ran: “What are developers really for?”, “Brazen developer” and even “Developers’ deprive customers of rights”.

Saving face

 The first venture of the Italian company, which took over Pekao Development in April, was, therefore, a bit of a false start. In the eyes of the law the company was in the clear, since the reservations only obliged it to sell customers homes at a defined price once the building licence had become legally valid. But the licence had not been issued and the reservations expired.The company’s image had been badly tarnished and the overriding question now was: How to get out without losing face?

According to Przemysław Mitraszewski, managing partner in the Lighthouse Consultants public relations agency, specializing in PR crises and advising developers: “Simple solutions are always the best.” In his view, the simplest solution is: “First talk openly with the customers. Secondly, convince them that you are not just playing for time just to benefit from rising home prices.”

The solution may seem trivial, but not when emotions enter the picture. The board with its legal consultants, who thought that since the law is on their side no special measures were required, had dug themselves in on one side of the barricade. The embittered customers were on the other side. The first effect of the clash of these ‘two enemy camps’ was evident in August. Those who felt they had had the dirty done to them urged the media to publicize their situation in a series of articles about ‘capitalist bloodsuckers’, while PPRE’s board simply broke off all communications with the public. The stand taken by the Polish Association of Developers (PZFD) cooled the media down somewhat over the next few days, by supporting the developer and, in particular, the decision issued in November by the Office of Competition and Customer Protection (UOKiK), which was unfavourable to the customers. In its verdict, the Office declared that Pirelli Pekao Real Estate in not meeting the conditions to reserve apartments had not broken any regulation. But delivering the whole controversy to the Office was not the idea of PR consultants. So was cooperation with the agency really worthwhile?

Keeping cool

 According to Ryszard Danielewicz, the president of the board of Pirelli Pekao Real Estate: “Employing a PR agency was connected with the widening scope of the company’s operations, the requirements for corporate order of our new owner and above all to allow more rapid and effective steps to be taken in a crisis situation. It is quite natural that emotions are aroused when things get difficult and that it is a good solution to have a PR company – which is emotionally detached from a situation since it does not concern them directly – to take a cool look it. That apart, it also possesses much greater knowledge about the media, publication cycles and how journalists’ articles etc. are prepared.”

The agency entered the fray in October 2006 after signing a contract with PPRE. The public relations operators started by soothing relations with the customers.

Przemysław Mitraszewski stresses that: “It is senseless to approach the media with new press releases if the original conflict has not yet been resolved.”

Avoiding clauses

 What Lighthouse proposed to do to break the stalemate was to promise that people who had earlier reserved apartments would have rights of first-purchase and that the prices would not rise by the increased market rates but only by the costs incurred by construction stoppages.

The head of Pirell Pekao RE believes that: “The situation in which we had become painfully embroiled could have been experienced by any developer. On the one hand, the law did not force us into any specific obligations. On the other hand was the fact that we had to ensure a sense of security to those customers whose reservations had expired, especially with the shortage of homes and soaring prices.

I personally convinced our main shareholder Pirelli Real Estate to accept this strategy.” All the customers received a specially drafted letter.

In the opinion of one PR consultant: “The simple and clear language used was crucial. There was a place for emotion in the letter.  But we rejected our lawyers’ advice, as they thought a dry text full of legal clauses would do the job. In the existing situation it could only have irritated the addressees even further.”

Another idea to improve relations was to establish a telephone infoline. Przemysław Mitraszewski describes what this entailed: “Our agency was entrusted with its handling. We listened to everyone who phoned in, knowing that some conversations would be highly emotional. There were calls with complaints, queries and doubts. And that was our aim – to convince customers that we understood their anxiety and also to convince them that we had the best intentions.”

Another piece of advice accepted by PPRE was to open up to the public. In Mitraszewski’s opinion: “A company representative, ideally the president, should be accessible to the press. Nobody, not just journalists, likes being ignored.”

Happy ending

 When a few months had passed, the situation could be said to have been resolved.

Ryszard Danielewicz explains: “I feel that the company’s reputation in the eyes of the customers has been saved. Following the proposals we had presented to customers guaranteeing them the right of first-purchase of the apartments at prices increased solely by costs incurred by work stoppages, we stuck to our word and when the amended building licence for the ul. Okopowa building had become valid, customers received offers to purchase reserved apartments at price around 10 pct higher. Around 90 pct of the more than 180-person group decided to sign contracts to buy flats under the new conditions. The remaining flats will be sold at market prices.”

The Lighthouse Consultants agency is currently drawing up a PR strategy for PPRE connected with a new, entirely different organization of the company. There is also going to be a campaign to celebrate the first anniversary of Pirelli Real Estate’s entry on to the Polish market this April.