It’s Not Just the Economy: Don’t Be Stupid About Natural Disasters
by Linda Carlson
“Disastrous” is how many publishers feel about sales and returns these days, but some are also struggling to overcome an additional disaster—a fire, flood, or mudslide. Like plummeting sales and skyrocketing returns, natural disasters can have significant long-term effects on a business. You lose inventory; you lose your work space; you may lose files, furniture, and computer gear—and perhaps worst of all, you lose time. Instead of tending to the business of publishing, you’re focused on insurance, liability, replacing what’s been lost, and determining how to handle displaced employees.
Just ask Jim Leisy at Franklin, Beedle & Associates in Wilsonville, OR, who spent much of January cleaning up after the Northwest’s unusually heavy December snowfall caused flooding in his office. Leisy had had a French drain malfunction two years ago, so he’d been through a flood; the surprise this time was that three feet of melting snow caused water to seep through his office building’s roof.
He walked in after a four-day Christmas weekend to find water dripping from the ceiling, ceiling tiles broken on the floor, and a saturated carpet. Because the company has always racked books at least six inches off the floor, and kept computer CPUs up, there was no loss of equipment or inventory. But the mildew created such a serious health hazard that Leisy’s seven employees could not come in for three weeks—and that was after two weeks when the snowstorms and interrupted bus service had kept most employees home.
You’ll hear even more dramatic stories if you talk to Bob Sehlinger, publisher at Menasha Ridge Press in Birmingham, AL, and Kathleen Nettleton, who handles day-to-day management at Pelican Press in New Orleans. Each of their companies weathered disasters—that’s plural—significant enough to make other publishers close their doors. Both companies survived second calamities partly because of the policies and disaster plans they created after the first. Their recommendations are important for all publishers, large and small, wherever their businesses are based.
The Fire Next Time
One of Sehlinger’s first pieces of advice is that each business should assess what its space is vulnerable to. Many of us worry about fire, flood, or vandalism, but Menasha Ridge’s first disaster was a mudslide, the direct result of a shopping center construction project upslope from the publishing company. In the summer of 1996, when a retaining wall erected by the construction company collapsed, mud rushed through the publisher’s warehouse bay door and into the offices. Within minutes, the floor was covered with more than two feet of mud, and the electricity was cut off.
Like most of us with limited space in our offices, the 14 Menasha Ridge employees had hard drives on the floor, which meant most electronic files were destroyed. Water and mud also destroyed at least a third of the company’s inventory of 120 titles. Another third was unsalable within days because of warping caused by humidity that went uncontrolled because no electricity meant no air conditioning.
Sehlinger’s first surprise was that his insurance would not cover this loss. The liability was with the construction crew, but determining which subcontractor was responsible, and getting that contractor to accept liability, took most of a year, even with what Sehlinger calls an aggressive attorney. Without the support of a locally owned bank, which lent Menasha Ridge enough to function until it was compensated for its loss, the company very likely would have failed.
Four years later, Sehlinger was off the coast of Venezuela when he was awakened with news of a fire. This time he knew the company was better prepared.
“We had taken a lot of precautions, so we lost very little work, and we had adequate insurance coverage,” he says. For example, since the mudslide, the company had developed such policies and procedures as:
a separate facility for inventory
daily backups of all computer files, and a backup tape taken off-site every night
fireproof filing cabinets for the storage of such valuable materials as photographs
up-to-date contact information for employees, including where they would evacuate to in the event of a hurricane
Even with such protection, a disaster may cost you half your year. As Sehlinger warns, “Your revenue will drop; your cash needs change; your work in process is disrupted; your people may have to work from home and drive to a central location for meetings; and your key people will be tied up with insurance claims, replacing the work space and equipment, and general administration of the problems caused by the disaster.”
Hurricane Times Two
Pelican Press also suffered a devastating fire that was started late on New Year’s Eve 1997 by firecrackers and bottle rockets and burned for 24 hours. But as Kathleen Nettleton points out, all the employees were safe, and there was no damage to their homes.
With Hurricane Katrina in August 2005, however, some staff members were evacuated for weeks, some never returned, and some lost everything but the clothes they were wearing when they fled New Orleans. Pelican had barely reopened its doors when Hurricane Rita struck a month later.
Like Menasha Ridge, Pelican had the help of its banker after the 1997 fire. Due to a merger, space, furniture, and a telephone line were available in a bank administration building, where the publisher moved most of its 27 staff by mid-January. But 60 percent of the inventory, all the equipment and furniture, and everyone’s Rolodexes were destroyed. So were the mechanicals and photos for the lead title for spring 1998, which had been packaged for pickup by UPS when the building caught fire. Although the invoicing and inventory backups were offsite per policy, other important backups had been left atop a filing cabinet and required expensive restoration.
“So at least we knew who owed us money,” Nettleton remembers. “Many customers paid us promptly; it was obvious they wanted us to succeed.”
Established in 1970, Pelican had about 1,000 titles by the time of the fire, with many produced so long ago that all files were paper. All press releases were still on paper, and there were no electronic files of reviews. So one of the postfire policies was that everyone’s work would be backed up—and backed up to the network.
“We became forceful about all work being done on the network,” Nettleton says. She is also adamant about maintaining an electronic office-fixtures inventory on the network. Like Bob Sehlinger, she no longer permits employees to move CPUs to the floor. A third new policy: folded and gathered proofs must be returned to the printer within three days, and they can never be kept over a weekend. Fourth, employees are expected to keep an “in progress” list of work, including all deadlines within the next weeks (for advertising copy for contracted space, for example); this information is to be backed up via email to each employee’s personal account as well as to the network to ensure that employees will know what their immediate professional commitments are after a disaster.
After the fire, the Pelican employee manual was revised to address how people are paid during closures or disruptions caused by disasters. One result: after Katrina, when some employees were reluctant to return to work immediately, they used accrued vacation so that they did not go without pay.
Pelican also now requires that employees provide information about where they would evacuate to and about personal contacts. This information is updated annually, at the beginning of hurricane season. Department heads and their employees are expected to exchange even more detailed information regarding evacuation plans, a policy that proved valuable when the staff evacuated for Hurricane Gustave in autumn 2008. During evacuations, managers are also encouraged to help student interns, whose homes may be thousands of miles away.
“By the time of Katrina, everyone had cell phones and personal e-mail accounts, but we managers didn’t have all those numbers and addresses,” Nettleton recalls. “What we especially needed were contact numbers outside our 504 area code, because there were no circuits free for phoning within that area.”
Besides alerting your banker and insurance provider when a disaster has occurred, Nettleton has other advice for owners and top management in publishing companies. The company owner must always know how much it can afford to do, especially in terms of how many employees to keep on. After the New Year’s Eve fire, owner Milburn Calhoun had employees meet at his home on January 2. “‘As long as you show up and work—at whatever task you’re assigned—you’ll be paid,’ we were all told,” Nettleton reports.
If, like Pelican, you must completely refurnish and resupply your office after a disaster, be sure to notify your credit-card issuer. “I had to buy 25 of everything at the office supply store just to get us started after the fire,” Nettleton explains, “and we got a call regarding the unusually large charges I was making.”
Linda Carlson (lindacarlson.com) writes from Seattle, where she used to keep both her hard drive and UPS on the floor of her office.
A 13-Point Disaster Preparedness Program
by Bob Sehlinger
Back in 1997, when I co-chaired a program for publishers on disaster preparedness, the evaluation forms painted a most unsettling picture. More than half those present found the presentation interesting but not relevant. To them, the possibility of disaster striking their business was simply too remote to justify a whole program.
A year earlier, I might have been among the uninterested, but that was before I found a river of mud coursing through my building and stood stunned in shin-deep mud watching books, files, and important papers ooze past me. Also, it was before the University of North Carolina Press was destroyed by fire, before August House was damaged by flood, before Wyrick & Company was devastated by a hurricane, and before Pelican suffered first a fire and then Hurricane Katrina.
To help other publishers avoid the months—even years—that it can take to recover from a mudslide, flood, fire, or other natural disaster, I offer the following specific recommendations.
Develop a list of your greatest risks. Take into consideration such factors as your location, topography, environment, weather, building type, sewer and drainage system, electrical and plumbing systems, and local crime rate.
Review your casualty insurance. Obtain a specimen of the actual policies; do not accept a simple summation of coverages. Examine the language carefully, asking for written definition of important terms, especially those that relate to coverages, exclusions, and claims. Make sure you have replacement-value coverage. If your policy covers furniture and fixtures, ask what that means. For example, is the cost of furniture assembly covered? Do not assume that the insurance company defines terms according to normal, everyday usage.
Make sure that you understand how the insurer will pay off, as well as what is covered. Some provisions in policies are conditional. “Business interruption” and “lost profit” coverage are particularly difficult to define. Play “What if?” with your insurance agent, proposing different claim scenarios. For instance, “What is our coverage if a pipe breaks and floods our office?” Go through all the risks you outlined in the first item above.
Make sure you understand the claim process and what supporting documentation you will be required to provide. In the case of ruined or damaged items, ask if you are required to preserve damaged items for examination or whether you are allowed to dispose of them.
If yours is a home-based business, contact your agent for an explanation of what role your homeowner’s or tenant’s insurance would play.
Keep good records, especially inventories and depreciation schedules. Back up the electronic files of these records and maintain copies in a safe place. Require that key records, contracts, and work be backed up and stored offsite. Create video and still photographic records of your premises. Install a central water- and fireproof file cabinet or safe in your offices for all these. Redundant backup systems can save a world of woes.
Don’t wait to develop the relationships you will need in an emergency, especially relationships with:
an independent insurance agent who will spend the time to get your coverage right, answer your questions, and aggressively pursue any claim.
local legal counsel, preferably with a well-respected law firm possessing both good negotiators and good litigators. Pay for the best talent available: it will save you money in the end. Understand the advantages and disadvantages of contingency versus hourly fees. Remember that the attorney who represents you for intellectual property issues is unlikely to have the experience to handle disaster claims.
a commercial real estate agent who specializes in the area where you want to locate, in case you must relocate temporarily or permanently.
a banker, in case you have to borrow or factor accounts receivable to meet short- or medium-term crisis-cash needs. Because even straightforward insurance claims often take months to settle, and cases that must be litigated frequently take years, it is essential to develop an emergency cash plan.
Develop a salvage plan now, in advance of any need. Determine which items are to be removed first, second, and so on. For Menasha Ridge, the order was computers and electronic files, followed by hard files, followed by work in progress, then office machines and phones, art objects and photography, publishing archives, personal effects, furniture, and finally inventory.
Expect emotional trauma. You may feel numb, even disabled. Take stock, evaluate the safety of the building, secure the area as well as you can, and then formulate an action plan and establish priorities. Anticipate feelings of insecurity, anger, displacement, personal violation, grief, and profound shock among your employees. Understand that the emotional consequences of a disaster last much longer than the disaster itself, and that you will observe post-traumatic stress behaviors in yourself and your staff for months afterward.
After a disaster, your priorities will include filing a police report and arranging for a night patrol if your building cannot be adequately secured, plus documenting your losses immediately with a sound-on video recorder and with still photographs.
To file a claim, prepare schedules for each category of loss (moving expenses, furniture and fixtures, leasehold improvements, for example) with all supporting documentation and a summary cover sheet for each category. The more detailed and organized your documents, the faster your claim will be settled or the stronger your case in the event of litigation.
Determine who in your company is authorized to deal with the media. Before releasing any information, consult your attorney and insurance agent to identify any sensitive issues and outline appropriate responses. Many claims and litigations have been severely prejudiced by ill-considered, impulsive comments that were published. Don’t hesitate to work the press to your advantage.
Allow your friends and colleagues to help. That’s what friends are for!
Bob Sehlinger is the president of Menasha Ridge Press, a book publisher and packager in Birmingham, AL.