Ciba Opens Its Culture and Its Mind (1995)
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Ciba Opens Its Culture and Its Mind (1995)

Chemical and pharmaceutical giant Ciba doesn’t have a chief reputation officer, but it does have a committee, headed by the chief executive officer, that considers the reputational impact of every major decision.

Paul Holmes

Chemical and pharmaceutical giant Ciba doesn’t have a chief reputation officer, but it does have a committee, headed by the chief executive officer, that considers the reputational impact of every major decision, identifies issues before they become crises, and makes sure employees understand how seriously the company takes its responsibilities to the community.
 
Late in 1993, the Swiss-based chemical and pharmaceutical giant Ciba-Geigy unveiled its new visual identity. The friendly, rounded letters that formed the single word "Ciba" were a striking departure from the intimidating corporate formality of the past; the three-piece tricolor jigsaw puzzle that accompanied it expressed the company’s commitment to science and commerce, to environmental protection, and to people through simple, almost childlike illustrations.
 
The happy face that Ciba was presenting to the world was in jarring contrast to the way the most of the world sees chemical companies, and not coincidentally. Ciba was in the process of becoming a very different kind of chemical company, and the new logo was merely the visual expression of a major corporate transformation that began more than a decade earlier.
 
Ciba was one of the first multinationals to recognize that the environment in which it operated was being transformed by forces beyond its control, and to adapt to that transformation. It has formalized processes for managing the reputational implications of its decisions more thoroughly than perhaps any other large corporation, through leadership by example from its most senior management, and through structural devices such as a governance committee that analyzes the impact of decisions on external and internal constituents.
 
Richard Barth, president of Ciba’s U.S. operations, and a 27-year veteran of the corporation, chairs the committee. "Our charge is simple," he says. "The governance committee exists to safeguard the reputation of the company. Whenever business issues come along that have the potential to engage the company in a debate in which the public has a stake or has identified a stake in our activities, the committee considers alternative courses of action."
 
David Taylor, vice-president of public affairs and communication here in the U.S. serves as an advisor to the committee, and says it functions as the company’s chief reputation officer. No public relations person, no matter how well-respected he or she is within the organization, can be individually responsible for reputation, Taylor says. He or she can only provide counsel to management, and try to ensure that employees at all levels understand the importance of reputation and the ways in which their actions might impact it. "Communications doesn’t communicate," he says. "Management communicates, with the help of the communications department."
 
"The first thing we look at is whether the company is right or wrong, whether we are on solid ground," Barth says. "The second thing we look at is, even if we are on solid ground that doesn’t necessarily mean that fighting is the right course of action. Sometimes it is in our interest to yield ground. Even if we win the fight, it may not be good for our reputation. The most valuable aspect of the whole process is that it enables us to address issues before they become controversies, and in many cases it has helped us avoid controversy." That’s something Ciba has not always been so good at.
 
Headquartered in Basel, Switzerland, the company consists of 14 divisions operating in three business sectors - healthcare, agriculture and industry - and 120 countries. It has 87,000 employees worldwide, including 18,000 in the U.S., where sales in 1993 were approximately $4.5 billion.
 
One of a trio of Swiss pharmaceutical and chemical giants - Sandoz and Hoffman LaRoche are the others - with a long history of zealously protecting their privacy (as Financial World put it in June 1993: "The three clubby Swiss giants have long treated outside commentators with an Olympian condescension, keeping secrets as carefully as the number of a Swiss bank account"), Ciba was the first to recognize that candor might be an asset rather than a liability.
 
The roots of the corporate transformation can be traced back to 1952, when Ciba completed construction of a large, state-of-the-art manufacturing facility in the township of Toms River, New Jersey, ten miles from the Atlantic Ocean, utilizing the latest technology to produce textile dyes, industrial additives and oxy resins. For the next 30 years, Ciba was the township’s largest employer and taxpayer, and enjoyed the privileges that generally accompany such a position. Its operations went unquestioned, its presence was regarded as an unqualified benefit to the community.
 
But on April 12, 1984, a hole was discovered in the plant’s effluent pipeline, carrying contaminated waste water out to the ocean. The hole and the resulting leak, halfway between Toms River and the Atlantic, caused a road surface to collapse, the treated water was clearly visible. The community began to ask questions, first about the leak and how it had occurred, then about activities inside the plant.
 
"Unprepared for the magnitude of the public response, Ciba appeared unresponsive," says David Rainey, professor of environmental management at the Hartford Graduate Center, who has studied the incident. "Almost immediately the company’s credibility and public standing plummeted. Plant management became alarmed, not so much by the leak but rather by the public outrage."

That outrage continued for another seven years, during which time the battle between community and plant came to involve state and federal agencies, and the polarization between the company and activist groups made almost daily headlines in the New Jersey media, and drew considerable national scrutiny.
 
"In retrospect, the Toms River experience was a shocking and defining one for the corporation," says senior vp Joseph T. Sullivan, who is responsible for the corporate environmental function and who was recently named by EPA administrator Carol Browner to the National Advisory Council for Environmental Policy and Technology.
 
"We were dragged into a new era of public awareness in which the public demanded to know every aspect of our operations. We learned a great deal about the public’s demand for a new mode of behavior from its corporate neighbors. As a result, we have changed dramatically to the point now where we first ask ourselves this question before moving ahead with a project: How would we feel if the entire community knew about our plans and how would the community react to our intentions? If we are comfortable with the response, we look at moving to the next step of decision-making. If not, then we re-examine."
 
Tom’s River was not an isolated experience. All around there were signs that the world was changing. The first warning had been sounded in the early-’60s with the publication of Rachel Carson’s book Silent Spring, which drew attention to the insecticide DDT, originally developed by Ciba scientists and later found to have a devastating impact upon wildlife.
 
In Japan, at the same time that the Tom’s River plant going online, questions were being raised about the way Ciba was promoting its amoebic dysentery drug cliquinol, which the Japanese, with their preoccupation with all digestive disorders, were taking the drug for even the mildest of stomach ailments, many of them swallowing the medication daily for months or years. Beginning in the mid-’50s, however, physicians had begun to note a connection between cliquinol and a little known but devastating disease, subacute-myelo-optico-neuropathy (SMON), which resulted in paralysis for some, loss of vision for others, fatal convulsions for a number of others.
 
As evidence mounted that cliquinol was causing the problem, Ciba issued a statement that its drug was "unquestionably safe"and that it had been used for more than 30 years, all over the world, without problems. Questions soon emerged, however, about company tests in which animals had died after taking the drug, and about research that indicated a connection between cliquinol and nerve damage.
 
It was 1978, however, before a Japanese court rendered its opinion: "The cause of SMON is cliquinol. In January 1956, when the defendant companies [of which Ciba was one] began manufacturing the cliquinol preparations in question, they were already guilty of not having taken the necessary steps to avoid possible disastrous results."
 
The court ruling caused Ciba to issue an extraordinary statement, and one that may have been responsible for rescuing what remained of its reputation in the Japanese market.
 
"Since the beginning of this lawsuit," the company said, "the plaintiffs and their representatives have told the court of many sufferings caused by SMON.... We believe that we must solemnly accept their grievances. We who manufactured and sold cliquinol drugs deeply sympathize with the plaintiffs and their families in their continuing, unbelievable agony; there are no words to adequately express our sorrow. In view of the fact that medical products manufactured and sold by us have been responsible for this tragedy, we extend our apologies, frankly and without reservation, to the plaintiffs and their families."
 
In Europe, the chemical industry’s wake-up call came in 1986, when rival Sandoz experienced a terrible fire at its plant in Seveso and spilled tons of pollutants into the Rhine. All three Swiss chemical companies began to increase their spending on environmental protection, with Ciba doubling its anti-pollution spending in 1989 alone.
 
Not entirely coincidentally, 1988 was also the year that Heini Lippuner became chairman of Ciba’s management executive committee.
 
"We felt pressures from both outside and inside," he says. "The first was the evolution in society of changing values over the last 15 or 20 years. Our way of leading people was no longer effective. And the position of the chemical industry in society had deteriorated. In fact, you might say we were almost considered to be the enemies of society. We were considered the polluters of the environment. This had led to the point where we were not credible."
 
Lippuner says the company had sound profits through the ’80s, but that beneath the surface the company’s leaders could see that competitiveness was eroding, that corporate structures were becoming bloated, that complacency had set in.
 
Certainly that was the case as far as corporate reputation was concerned. Professor Dr. Walter von Wartburg, who rose up through the company’s legal department to be appointed head of corporate communications, and who is credited by many within the company as the "architect" of the communications revolution that has taken place, says pointedly that "every company has a reputation, even before it starts doing something about it. The reputation is there, good or bad. The only question is the extent to which management is able to control that reputation."
 
Ciba, von Wartburg says, was a company with a deep internal commitment to doing the right thing "almost by nature," but it was also a company that was quintessentially Swiss, information restrictive, even secretive, and faced with criticism - as it was by the environmental movement in the ‘80s - it had a tendency to respond antagonistically.
 
"Prior to Tom’s River there was a disconnect within our organization," says Dick Barth. "We had this tremendous sense of professionalism and pride in holding ourselves to high standards, but the outside world saw us totally differently. Maybe we had a little tunnel vision, perhaps even arrogance that we knew out business, and what does the outside world know about it? The key was setting up a discipline that had to take into account the opinions of others, even if they were not as technically versed as we were."
 
Simultaneously, Ciba was undergoing a worldwide reorganization under the direction of chairman Alex Krauer and the management committee. The plan, called Vision 2000, called for the replacement of the company’s historic centrally-managed structure by an organization of 14 business divisions, each responsible for its own viability and strategic direction. One of the central questions as Ciba thought through this change was how it could maintain company-wide standards of environmental and social responsibility and protect the corporate reputation.
 
The answer was something the company calls "directed autonomy." The direction comes from the Vision 2000 charter, which outlines three equally-important responsibilities for each division: responsibility for the environment, long-term environmental success and social responsibility. The new corporate identity was developed - with the help of two large corporate identity firms and an independent freelance designer, over a period of 18 months - as a visual expression of this vision.
 
Says von Wartburg: "Whether you are an individual or a company, you have a personality. The personality is the way a person thinks, the way a person acts, the way a person talks, the way a person looks. All of these are important. For a company, the same things are important: the think, the walk, the talk, the look. When we were making all these changes, we had to change everything. We changed our think, our walk, our talk, and our look. The logo is the look, it is the clothes you wear. It sends a very powerful message about who you are."
 
Articulating a vision is one thing. Ensuring that it is understood and respected throughout the organization is another, and and Arthur D. Little conducted a study at the company’s largest U.S. manufacturing plant revealed that while management was on board, many employees did not understand or believe the concept.
 
"Everything depends on implementation," chairman and ceo Alex Krauer told The Financial Times last year, candidly conceding that certain divisions had adopted Vision 2000 more readily than others. "This mustn’t just be a declaration of intent. We just actively involve every employee in the process. The danger is that we create a level of expectation and then nothing happens."
 
In the Basel headquarters, for example, the culture was risk-averse, with a passion for avoiding mistakes. That is proving difficult to change, but the company plans to create pressure from both above and below to force managers to see the wisdom of the new way. Questionnaires were sent last year to all 20,000 Swiss employees, asking them to comment on their managers’ leadership behavior.
 
In an extraordinary indication of the extent to which the company believes in openness, the results of some of these surveys, not entirely favorable (at one plant, 22% of workers agreed with the statement "I can’t wait to leave and find a better job"), were shared with the media.
 
The governance committee was formed with the underlying belief that "reputation had to begin with performance," says David Taylor, and to create a mechanism for monitoring the extent to which reality matched the rhetoric. It swiftly internal communications initiatives, focusing on new corporate health, safety and environmental policies; a new code of employee conduct; and the adoption of the Chemical Manufacturers’ Association’s Responsible Care program. It also approved an on-going training initiative focusing on the environmental and social responsibility.
 
One of the questions the committee asks itself, Taylor says, is the extent to which its decision can be communicated to the general public. "If we would not be comfortable communicating with our various stakeholders about a certain course of action, the chances are it is not the right course of action," he says.

The committee also assesses the reputational performance of the company’s plant managers. The decisions they make, and their impact on the company’s relationships with communities, customers and employees, are part of their formal evaluation, and managers who do not fare well on these criteria are unlikely to be advanced. Buy-in, Barth says, has been almost universal, and not only because of these incentives.
 
"One of the things we learned is that most of our managers want to do a good job, want their plants to be well-regarded in the local community," he says. "Not all of them, but most of them. Some of the real leadership for these ideas have come not from the top of the organization, but from individuals at the plant level."
 
All of this has required a major shift in the company’s mindset, and a new approach to resolving conflict.
 
"In many contexts we in the chemical industry have defended old positions by saying there is no scientific proof that this or that does any harm," says Heini Lippuner. "And yet we were still forced eventually to change, and in the meantime have done a lot of damage and lost credibility. Certainly we shouldn’t run after trends that have no substance to them. On the other hand, to always wait until the last percent of proof is on the table would then, I’m afraid, be too late."
 
Von Wartburg gives an example of the way this translates into practice. He recalls a time when consumer activists were attacking one of the company’s products, an anti-arthritis drug.
 
"The normal way for a company to react would be to get into a legal fight, our data against their data," he says. "We decided we would take the bull by the horns. We invited ten of the most vocal critics of our company to a meeting in London and we discussed the issues out in the open, in front of the media. At the end of the meeting we felt that on certain topics, on certain issues, they had a case, that we should look at the way we were doing things. We learned from them. We decided we would change some of the labeling of the product."
 
Inside the company, he admits, there were those who felt that the patient advocates, having secured a partial victory, would be more inclined to attack the company further. That was not the case, however. Today, Ciba has a working relationship with many consumer organizations that is the envy of its competitors.
 
A similar incident on the environmental front provides further indication of the way the company strives to avoid confrontation. A few days before Christmas 1989, a group of Greenpeace activists invaded one of the companies plants, climbed to the top of one of the tallest smokestacks in Basel and unfurled a banner which read "Ciba Violates the Environment."
 
The first reaction of the plant management was to call in security people. The protesters were clearly trespassing. But von Wartburg felt there was a better way to handle the situation. "We are for the environment," he says. "They are for the environment. We should not be antagonistic. There should be ways in which we can work together." Management representatives climbed the smokestack, bringing the protesters hot tea and soup and the opportunity to talk. The protesters were skeptical.
 
The company even allowed them to climb down at night, when none could see them anyway and the temperatures were close to freezing, and then climb back up the next day. Eventually, a climate of trust developed and the two sides were able to discuss their differences and come to a compromise. Early the next year, the Ciba technical personnel and the Greenpeace technical people sat down to discuss ways in which the company’s operations could be made more environmentally-friendly.
 
"If someone is critical, he sees things differently from me," von Wartburg says. "I see something, I think it’s correct. Someone else sees the same thing, he thinks it’s crazy. It is interesting to me to find out why he thinks it’s crazy. Maybe he’s right. Maybe things are not so perfect."
 
At the same time, in keeping with the company’s belief that performance must precede reputation, Ciba’s technology has been improving. From 1988 to 1992, Ciba reduced its U.S. emissions by more than half, and surpassed the Environmental Protection Agency’s target of reducing emissions of 17 major toxic chemicals by 33%. By 1995, the company expects to have achieved a 50% reduction.
 
Internationally, too, the company has been investing in a wide range of environmental activities. In Goa, India, Ciba has created a sanctuary for local wildlife - including crocodiles, fish, turtles, birds and various flora - with an artificial lake at its center. In the U.K., the company’s crop protection division organizes an environmental quiz for its distributors. In Mexico, it sponsors an award for "technological excellence in ecology."
 
The company has a group dedicated to ensuring that the company’s activities in the developing world make a net contribution. Says Lippuner: "We are accused of supplying products and technologies to the third world that only worsen their lot, that make them dependent on multinational industry and make exploitation even worse than it was under colonialism. So we have a group of people that help us be vigilant and stay on the right track. They do environmental audits in developing countries."
 
The Toms River plant, once spurned by the local community, is now a model for others. Says Ben Epstein, president of the grass roots activist group Ocean County Citizens for Clean Water: "Ciba brought in new personnel who were capable of learning how to deal with people in the community. There’s been a remarkable change. If you ask questions, you get answers."
 
The change so far is remarkable. Yet Ciba recognizes it is just a beginning. "The expectations of our people and of people in our communities are constantly changing," says Walter von Wartburg. "We have to be constantly changing also, to keep up. That is the difficult thing."

VISION
 
We, Ciba, are a leading worldwide biological and chemical group based in Switzerland, dedicated to satisfying needs in healthcare, agriculture and industry with innovative, value-adding products and services.
"We strive to achieve sustainable growth by balancing our economic, social and environmental responsibilities. Empowered employees and a flexible organization support our commitment to excellence."
 
VALUES
 
Responsibility for long-term economic success
"We aim to generate appropriate financial results through sustainable growth and constant renewal of a balanced business structure, so that we justify the confidence of all those who rely on our company - stockholders, employees, business partners and the public. We will not put our long-term future in danger by taking short-term profits."
 
Social responsibility
"Ciba is open and trustworthy toward society. Through our business activities we wish to make a worthwhile contribution to the solution of global issues and to the progress of mankind. We recognize our responsibility when turning new discoveries in science and technology into commercial reality; we carefully evaluate benefits and risks in all our activities, processes and products."
 
Responsibility for the environment
"Respect for the environment must be part of everything we do. We design products and processes to fulfill their purpose safely and with as little environmental impact as possible. We use natural resources and energy in the best possible way and reduce waste in all forms. It is our duty to dispose of all unavoidable waste using state of the art technology."
 
Leadership
"Living up to our three equal-ranking responsibilities requires enlightened and determined leadership. Our leaders set examples. They must have vision, courage, human concern and a sense of reality. We believe in directed autonomy - giving direction to our employees while allowing them the authority and the flexibility they need to accomplish their tasks. We encourage and reward an entrepreneurial, risk-taking behavior in our employees."
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