Crisis Communication

Practical PR Strategies for Reputation Management & Company Survival

Peter Anthonissen

• Publisher: Kogan Page
• Year: 2008
• ISBN:
  9780749455538
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Verwaltung

Senior management and leaders within companies embroiled in crisis, have learned the hard way what happens when the unthinkable becomes a reality - an accident results in death or injury; a failed company takeover causes share prices to plummet; or toxic food, medicines and drinks leads to mass hysteria. All attention focuses on the guilty parties - and the media can be expected to make this crisis headline news within a matter of hours.No company or organisation is immune to crisis. Everyday, organisations run the risk of being affected. However, a crisis does not necessarily have to turn into a disaster for the business or organisation involved. Crisis Communication provides readers with advice on how to limit damage effectively by acting quickly and positively. Moreover, it explains how to turn a crisis into an opportunity by communicating efficiently, through the use of successful public relations strategies.Providing information on accountability; crisis communication planning; building your corporate image; natural disasters; accidents; financial crises; legal issues; corporate re-organisation; food crises; dealing with negative press; media training; and risk managers, Crisis Communication is a thorough guide to help prepare your organisation for any future calamities.Including international case studies, crisis communication checklists and sample crisis preparation documents, this book ensures that you are fully prepared for the absolute necessity of proactive crisis communication and proper planning, should you be confronted with a crisis.

1 No thrillers, but hard reality

Crisis in all its forms

Peter Frans Anthonissen (Belgium)

Introduction

Crises have always been with us. They take companies and organizations by surprise, and they take on a host of forms. If we relive and review a series of noteworthy crises, we are able to draw up a list of general rules to act by. That arsenal of principles must be followed absolutely if – once you’ve been confronted with a crisis – you want to stand a real chance of surviving.

Unfortunately, we have an embarrassment of riches when it comes to examples of crises. The world has been hit by a remarkable number of crisis situations over the past few years. The tsunami that issued an unmistakable wake-up call to the world on 26 December 2004, for example. That enormous tidal wave, originating close to the island of Sumatra, claimed approximately 225,000 victims. The northern point of Sumatra was particularly hard hit, with 60 per cent of the city of Banda Aceh being destroyed by the tsunami, killing more than 200,000 people in that city alone.

Hurricane Wilma in October 2005 destroyed large sections of Mexico and Cuba, killed 62 people and caused more than €20 million in damage. In August of the same year, Hurricane Katrina, which ravaged the city of New Orleans and large portions of the state of Louisiana, killed more than 1,600 people. Hurricane Rita, one month later, raged over Louisiana, leaving approximately 120 people dead. The Norwegian oil tanker Tricolour, which collided with a container ship near the coast of France in December 2002, dumped approximately 178,000 litres of heavy oil into the ocean.

The list of product recalls is getting longer all the time. Coca-Cola, Jupiler, Amstel and Olvarit are only a few of the food companies that have had to take their products off the shelves. Auto manufacturers, such as Ford and Mercedes, and toy manufacturers that brought poisonous dolls to market, saw themselves forced to recall their products from the market temporarily.

Restructurings are a daily fact of life. If a factory closure, a merger, a split-up or relocation are not professionally prepared or executed, major difficulties can arise. The closure of Renault Vilvoorde and the termination of all activities of Marks & Spencer on the European mainland are prime examples. Strikes and other social actions are on the daily menu. Other forms of crises can also hit a company’s human resources department, such as bullying that leads to the suicide of a member of staff.

It almost goes without saying that publicly listed companies are extra-sensitive to bad news. The dotcom madness that dominated all the stock markets in the recent past was responsible, in the first place, for the largest increase in dollar millionaires ever recorded. The fall of those internet and other IT companies was equally fast, if not faster. Internationally, major brands such as Yahoo, Amazon and a large number of other new gods, suffered heavy losses.

Politics also has its share of crisis situations. Crises are an essential component of the political world. Party politics is, in fact, a political conflict model. The House of Commons in Britain is the best illustration of the point: the members of parliament of the majority and the minority parties sit facing one another. It is therefore reasonable to conclude that crisis situations in political life are desirable, planned or created. This is an essential difference with business. Competing companies also torment one another mercilessly, but management is primarily concerned with avoiding crisis situations or, if possible, preventing them entirely. It is in a company’s interest to function well.

Well-known figures are more likely to be the target of a crisis than mere mortals. Bill Gates, for example, the chief of Microsoft and one of the richest men in the world was the victim of a pie-thrower in Brussels. In and of itself, a rather insignificant event, but the video imagery and the photographs were broadcast and printed around the world.

Crises strike everywhere, including sport. On 29 May 1985 the European football championship final between Juventus and Liverpool was to have been a football party, but turned into a drama. A combination of blind fanaticism, panic and failing security measures resulted in 38 fatalities and nearly 400 wounded spectators in the Heysel Stadium in Brussels.

There are no guarantees

These and other disasters and accidents have made both companies and governments realize that they must be prepared for a crisis at all times. No one is assured that he or she will be spared. A permanent state of crisis awareness is therefore a fundamental requirement for every company or organization; but that is not enough. In the event of a crisis, effective and efficient communication can be a matter of life and death: what has really happened and what measures have been taken to deal with the crisis? If a company fails to follow the fundamental principles of crisis communication, the consequences can be far-reaching and disastrous.

The dioxin crisis that struck in Belgium in April 1999 led directly to the defeat of the Christian Democratic Party in the elections of 13 June 1999. Its defeat meant that it was not part of the governing coalition for the first time since 1958. Companies, too, that do not follow the essential principles, can find themselves in great difficulties. The shipping company Townsend Thoresen, for example, felt that it had to throw its name overboard after the sinking of the ferry the Herald of Free Enterprise in 1987 because the name seemed to be cursed forever.

For corporate leaders, it may be a hard fact to face, but the chance that they will be confronted with one major crisis or another has never been as great as it is today. Why? What elements cause crises? Human errors and mistakes, lapses in judgement, failure to react in time, failure to anticipate, mechanical faults or simply the refusal to face the fact that crises can strike anyone. With all of that, you would have to be blind not to be aware that company management will sooner or later be faced with a serious crisis. And let’s be honest: a crisis does not have to be large in scope to be dangerous.

Why do crises strike more frequently today than in the past? We live in a highly developed society with access to a vast arsenal of high-tech resources. Computers lead and guide us on land, at sea and in the air. Some say that we all learn from our mistakes; experience has shown, however, that nothing could be further from the truth. The omnipresent technology means that the chance of a crisis situation arising is greater than it has ever been. The pharmaceutical company B-Braun can speak from experience. The medicines it produces are automatically packaged in sterile containers; there is no human intervention. A computer error led to four doses of potassium chloride being placed in ampoules that were intended for glucose. The ampoules were given to two newborn babies on 13 and 15 January 1999 in the Gasthuisberg University Hospital in Louvaine. They died within hours.

Are more accidents taking place than, say, 20 or 30 years ago? Most definitely not. But the environment has fundamentally changed. The role of the media has increased significantly. The chance that an incident escapes the attention of the all-seeing eyes of the journalists has become significantly smaller. But also, and especially, companies and managers are faced with new, major and additional responsibilities.

Stakeholders are everywhere

In a manner of speaking, corporate managers in the 1970s and 80s were only responsible to their shareholders and, in a couple of instances, their ‘co-workers’ as modern employers call their employees. Today, however, companies are being scrutinized constantly. Little of what companies do – or fail to do – escapes the attention of the many stakeholders. For, it is true, in addition to the shareholders, there is a whole slew of other parties who are involved with the company, or more aptly, feel involved with what companies do: trade unions, environmental associations, animal rights organizations, action groups of all kinds, the unavoidable TV, radio and printed press, the bloggers, but also, bankers, financial analysts, securities watchdogs, governments and parliaments with investigative commissions. In short, there is a virtually infinite constellation of directly and indirectly involved parties.

In addition, companies now live with a constantly expanding and increasingly complex battery of legislation. This is the case at more and more levels: in addition to the municipal and the provincial, there are regional and federation jurisdictions. Standing above all of those is the national or federal administration with, in turn, supranational policy bodies above them. The world is our village: companies are increasingly dominated by global players such as the World Bank, the International Monetary Fund, and the World Trade Organization.

The accountability factor

The whole range of international treaties and supranational legislation must be imposed, implemented and monitored nationally. Innumerable civil servants in ministries and departments fill their days with these activities. Inspection services check on the goings on at companies. Here, too, significant new trends arise that have an immediate impact on the crisis-sensitivity of a company. The creation of the Euro zone, for example, the European Central Bank and the introduction of the Euro as the only currency in 13 European member states meant that there were new legislative and de facto rules of the game. Corporate leaders – willingly or otherwise – must deal with that situation.

The creation of Euronext as the first transnational stock exchange (grouping the markets of Brussels, Amsterdam, Paris and Lisbon) meant that increasing demands for transparency were placed on publicly traded companies. While it may be true that rules of good governance are promoted with heart and soul, living up to those rules leaves a lot to be desired in many companies.

The fact is that companies and other professional organizations will be increasingly confronted with the accountability factor. Certain aspects of the corporate responsibilities of corporate leaders, not only managers but also company auditors, accountants, lawyers and other advisers and consultants will clash. The new corporate responsibilities will be increasingly accounted for publicly. It almost goes without saying that when a company is faced with a crisis in that area, a broad range of public groups will demand immediate accountability over what has happened. And those public groups – who collectively form the often elusive but usually crucial public opinion – will want to know what will be done to deal with the crisis and solve the problems.

Annoying threats

Most crises develop with great alacrity, and news of the crisis travels around the world with the same speed. Companies that have not equipped themselves to deal with a crisis risk being confronted with a whole series of particularly annoying threats:

• boycotts of the company’s products or services;
• collapse of the share price;
• serious legal claims;
• the loss of credit;
• possible bankruptcy;
• serious damage to the company’s image and reputation;
• threatened loss of corporate senior and middle management;
• possible closure of the company or parts of it.

Following the negative publicity concerning the alleged dumping of the Brent Spar drilling platform in the North Sea in 1995, the Shell oil company was boycotted by German and Dutch activists. That led to loss of sales of 15 per cent and more.

Companies in crisis will find themselves facing one or more of these serious consequences. Companies that are well prepared and armed will survive even the most serious crisis. Not only that, they will emerge even stronger than before. Coca-Cola, Shell, Renault, Perrier and a host of others have proved that. How did they do it?

The history of crisis communication in business is still in its infancy, but there is already a case that is often referred to as an example of the proper and successful way of dealing with a crisis: the Tylenol affair. Tylenol is a fever and pain medicine that was developed by Johnson & Johnson, the large US pharmaceuticals group. For various reasons, Johnson & Johnson has assumed a prominent place in the history of crisis communication: it was the first time that a well-known company was confronted publicly with a major crisis. In addition, Johnson & Johnson dealt with the crisis so efficiently that its approach was praised by everyone after the fact and deserved all the credit it got. What exactly was the crisis that caused Johnson & Johnson to shake to its very foundations?

On 29 and 30 September 1982, several people died in the US city of Chicago after taking Tylenol tablets that had been filled with cyanide. At that time, Johnson & Johnson had more than one-third of the pain and fever medicine market, with its successful product, Tylenol. In practice, that meant turnover of US $450 million (€530 million), which represented 15 per cent of the company’s profit. In the first phase of the crisis, the deaths were directly linked to the presence of cyanide in the tablets. As soon as the news was disseminated more widely there was a suspicion that no fewer than 250 deaths and cases of illness could be attributed to the poisoned Tylenol tablets. When the US media began to dig deeper into the matter and the public gained access to more and more information, the figure of 2,500 victims was being reported, both for deaths and illness.

Johnson & Johnson immediately began investigating 8 million Tylenol tablets. The tests showed that 75 tablets contained cyanide. All of those tablets originated – not coincidentally – from the same production batch. Ultimately, seven people died after ingesting the poisoned tablets, all of them in and around Chicago. Because news of the crisis had spread across the country like wildfire, 94 per cent of consumers made a direct connection between Tylenol and poisoning.

After the affair was over, Johnson & Johnson reintroduced the product. A mere five months after the terrible incidents, the pharmaceutical company had succeeded in regaining 70 per cent of its previous market share.

Crises are challenges

Johnson & Johnson used a well-considered approach in dealing with the crisis. The company positioned itself to the public as a defender of consumer interests and behaved as a good citizen by effectively assuming its responsibilities as a company. Furthermore, Johnson & Johnson communicated openly, directly and rapidly throughout the crisis.

How did Johnson & Johnson do that precisely? There is, after all, no guarantee that you will be able to turn a crisis into an opportunity. Johnson & Johnson acted on the basis of the worst conceivable scenario and applied all of the principles of successful crisis communication. To start with, the pharmaceutical company did not lose any valuable time: Tylenol was immediately recalled from all points of sale. All those who prescribed the drug – physicians, health insurers and pharmacists – were alerted and informed of the dangers of the product. By putting the consumer absolutely and unconditionally first, Johnson & Johnson took a great, but calculated risk. The company owed that to itself morally: its creed mandated that top priority always be given to the safety of the consumer. There is, of course, no guarantee that the corporate creed would be translated effectively into practice. The recall of all Tylenol tablets could, after all, have led to major losses. Johnson & Johnson remained true to its mission statement at all times, however.

The Tylenol affair is a perfect illustration of the expression that ‘crises are challenges’: regardless of how large the problem was, Johnson & Johnson discovered the opportunity that it contained. The company believed that the large-scale recall operation it had decided on could also be played out as an excellent marketing component after the fact. Johnson & Johnson quickly found a way to do this: when it reintroduced the product, it was the first in the pharmaceuticals industry to do so with safety packaging. Furthermore, the company was the first to put into practice the provisions of several pieces of legislation that had recently been introduced by the Food and Drug Administration, the US government standards body for medical products.

By removing Tylenol immediately from all sales points, Johnson & Johnson clearly communicated that the company was really concerned about public health. It would have been a painful mistake if the company had chosen the other option: to turn away, to stick its head in the sand, thinking, ‘This, too, shall pass.’ Exxon, for example, made precisely that mistake after the disaster with the Exxon Valdez in Alaska on 2...