The Top 10 Crises Of 2011
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The Top 10 Crises Of 2011

From TEPCO to News Corp to Penn State to Blackberry to Dow Chemical, some of the biggest crises of 2011 and the lessons we learned.

Holmes Report

The Biggest Crisis of 2011: Part 2

1. Tepco                 

In March 2011 an earthquake and tsunami devastated parts of Japan, including several nuclear reactors. An “atomic power emergency” was declared by the Japanese government, with thousands of residents evacuated from the area surrounding Tepco’s Fukushima plant.

Extensive damage to the plant soon sparked widespread public fear of a nuclear disaster, concerns that were accentuated by Tepco’s fumbling public relations response. The utility was slow to respond to public anxiety, and eventual statements left many questions unanswered.

“Tepco’s handling of the communications aspects of this crisis contributed significantly to widespread anxiety,” says Edelman Japan CEO Ross Rowbury. “This led to severe reputation damage for the company and created a new low in the public trust of institutions in Japan.”

Specifically Rowbury points to two fundamental issues that Tepco got wrong. First, it defaulted to a command and control model of communications, “that led to perceptions of selective disclosure or hiding of information.”

Second, there was a glaring lack of consistency in spokespersons, “or spokespersons with the appropriate communication skills to translate complex data into meaning guidance.”

The crisis, coming amid numerous other issues at Japanese companies, resulted in the charge that Japanese organizations are unprepared for the radical levels of transparency that are required in the modern public relations era.—AS

2. News Corp

It is difficult to think of a story that has transfixed the UK media quite like the ongoing saga of News Corp’s phone hacking scandal. After rumbling along in the background for years, the story exploded onto the front pages in 2011, when it emerged that the News of the World had hacked the mobile phone of murdered schoolgirl Milly Dowler.

With dramatic speed, the scandal appeared to escalate on a daily basis. News Corp was forced to shut down the News of the World (NotW), one of the world’s biggest selling newspapers, and the crisis has claimed a number of high-profile scalps, including Dow Jones CEO Les Hinton, News International CEO Rebekah Brooks and former NotW editor Andy Coulson, who had since become communications director for UK prime minister David Cameron. It also crossed the Atlantic, where News Corp owns Fox News, once it emerged that phone hacking may have also taken place in the US.

A contrite Rupert Murdoch appeared before a parliamentary inquiry with James Murdoch, and News Corp withdrew its bid for the remainder of BSkyB, while also calling in Edelman for PR counsel. Yet the scandal was inflamed by poor decision-making on the company’s part, says Porter-Novelli EMEA corporate head Alex Woolfall, starting with the “flawed” move to close the NotW, but keep Brooks in her role. In any crisis, he notes, the “fairness baromoter” swings into action immediately.

“On a very basic level, it’s human nature to think: but you ran the shop, so how can everyone else lose their job and you keep yours?” points out Woolfall. “It suddenly added fuel to the fire and allowed the story to go up a gear, with the inevitable clamour for Brooks to go. That was definitely an early own goal. It’s easier to go, take some steam out the crisis and come back when you have proven you weren’t to blame, than protest your innocence while all around you burns!”

That error was compounded by continued dissembling from News Corp regarding its knowledge of dubious methods by which its journalists obtained information. The “I didn’t know” argument, utilised extensively by James Murdoch, undermined News Corp’s reputation says Woolfall.

“I suspect few people would say they have been won over and are now convinced by the Murdochs’ protestations of ignorance,” he explains. “Because when people are accused of something they didn’t do, or knowing something they never knew, they tend to sound indignant and come out all guns blazing.”

Instead, James Murdoch’s carefully crafted legal answers “inevitably lead Joe Public to assume that the person is guilty as charged, but determined to avoid implicating himself,” adds Woolfall.

Thanks to these crisis response issues, News Corp’s road to redemption is a rocky one. Woolfall believes the company must communicate now about any current or planned reforms. “I don’t see any big push by them to seize the initiative and set out a plan for how they will change the culture of the company so that past mistakes will never be repeated. It would be foolish to pre-empt or second guess Levenson, but there is an opportunity – as there often is post crisis – to get a step ahead by moving the debate on from mea culpa to clear evidence of changes being made to prevent past misdemeanours.”—AS

3. Penn State

In the immediate aftermath of the child sex scandal that embroiled Penn State and ultimately cost head football coach Joe Paterno his job, Washington Post opinion blogger Erik Wemple gave voice to a common concern, that much of the media coverage focused on the university’s communications mistakes, and concluded: “Down with our PR-obsessed culture.”

In reality, a little more obsession with public relations might have helped the university minimize the fallout from the scandal. If someone with a little expertise in public relations had been involved in the decision-making process after Paterno and university president Graham Spanier first learned that assistant coach Jerry Sandusky had been caught in a shower with a 10-year-old boy, it’s hard to imagine that he or she would have given any advice other than to report the incident to the proper legal authorities immediately.

There would still have been a heavy volume of media coverage, and there would still have been questions about what the university knew about Sandusky’s proclivities and when, but there would have been no cover-up and no suggestion that the entire leadership of the institution had lost its collective moral compass.

Says Rich Torrenzano, president of New York’s The Torrenzano Group and author of the new book Digital Assassination: “Cover ups always cost many times more than maximum disclosure with minimum delay. Here is solid evidence that lack of a crisis plan, as well as lack of management oversight, not only fueled the crisis, but cost management their jobs.

“Cutting corners is never good public policy. The authorities at Penn State thought they were ‘too big to fail.’ It was all about them, their football program, and integrity and ethics be damned.”

Ken Makovsky, president of Makovsky & Company, comes back to first principles when he says, “First and foremost, don’t ever do anything that you would not wish the world at large—or your mother—to know about.”

He adds several additional tips, most notably: “You can’t rely on a great reputation to forestall criticism. Any disjunction between how you are perceived and how you actually behave only adds to the public’s lurid interest in every detail of your problem.”—PH

4. Blackberry

Research in Motion (RIM) had built the success of its BlackBerry smartphone on an ability to provide politicians, media and businesspeople with reliable and instant access to digital information. “Any crisis PR expert wouldn’t want to be without their Blackberry; unfortunately it appears the reverse wasn’t true,” says Sermelo founder Jonathan Jordan.

A major outage saw BlackBerry email services fail in Europe, the Middle East and Africa, before progressing to US and Canada. It took a number of days for RIM to defeat the technical problems, and its communications efforts during this period were roundly panned. Statements were deemend defensive and jargon-heavy, evidence - says Jordan - of an engineering-based culture that was already sensitive to media criticism.

“I would imagine the company’s leadership, who had been on the receiving end of a barrage of criticism in the weeks and months before the outage, were understandably reluctant to engage with the media until the issue was resolved,” says Jordan.

“However, as hours became days, the company’s staccato communications did little to address the scale of the problem. RIM’s statements also failed to provide customers with any reassurance it was regaining control of the situation, especially as their validity were openly challenged in the media along with reports that Facebook posts were being deleted.”

The brand’s attempts to compensate customers were also criticised. In addition, the crisis served to concentrate investor concerns over RIM’s proprietary network architecture. Coming amid continued skepticism of RIM’s long-term business prospects, the situation also underscored the threats that RIM faces from key rivals Android and Apple.—AS

5. Dow Chemical

It has been 27 years since a gas leak at a Union Carbide plant caused untold suffering for the people of Bhopal, claiming thousands of lives and injuring many more. While parent company Dow Chemical may have assumed that the passage of time had quelled emotions, it was instead offered a signal reminder last year of the Bhopal tragedy’s continued capacity to inflame feelings.

The offending issue in this case was Dow Chemical’s £7m sponsorship of the 2012 Olympics, which would see it ‘wrap’ London’s Olympic Stadium with its branding. The proposed deal caused considerable disquiet in India, with the country’s Olympic athletes making their unease felt amid calls for a boycott.

Dow Chemical responded as it has done since it acquired Union Carbide in 2001: by dismissing any suggestion that it was responsible for a leak that occurred 17 years earlier, despite litigation that continues to this day. The company’s stance, says one senior crisis specialist, makes the common mistake of confusing a court of law with the court of public opinion.

“This has infuriated so many clients with whom I’ve worked, with them becoming completely exasperated at how, in their view, Joe Public can be illogical and irrational.”

Accordingly, adds the executive—who asked to be unnamed—Dow’s response needed to be far more emotional. “It should have acknowledged publicly that it understood why people were uncomfortable about its sponsorship because of Bhopal and recognized why they were raising those concerns,” he notes. “Having done that gives you more legitimacy to then put your side of the argument.”

However, Dow’s argument itself did not address the accusations leveled at the company, that its behaviour in addressing compensation claims made it morally unfit to sponsor the Olympic Games. The company made the critical, and typical, mistake of relying on a legal formulation, pointing out that only the courts could determine if it was required to take any more action.

“This sounds like a lawyer speaking and a legal answer to an emotional question rarely works from a PR perspective,” explains the crisis specialist. “If Dow really felt it had behaved properly in relation to Bhopal; done all the right things; discharged all its obligations and behaved morally and ethically by the book, then why didn’t it say so?”

Dow’s failure to match the outrage and indignation of its opponents made the company seem perilously detached from the issue. A lack of third-party support only made them appear more isolated.

The company eventually decided to ditch the wrap, but then said the decision was made months before the protests - a claim that was treated with considerable scepticism.

“The sad fact is that as long as there are journalists alive to rehash the tragedy, or until Dow gives every dollar that they have to the Indians and the Indian government, this controversy will live on,” says Ogilvy PR crisis management MD Al Tortorella, who worked on the Union Carbide affair in 1984. “Dow needs to find its one big product or service, and yes, a generous amount of money, that the Indian government and the citizens of India will recognize as a sincere attempt to finally rectify the past, and is seen as giving back to the Indian citizens and the world more than the Bhopal disaster took from it.”—AS

The Biggest Crisis of 2011: Part 2


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