Paul Holmes 03 Jun 1991 // 11:00PM GMT
When public relations people talk about crisis management, they are often in reality talking about much narrower disciplines: crisis communication, or damage control. Real crisis management is simply an extension of a day-to-day operating process that can described as reputation management and that can prevent crises happening or minimize their consequences when they do.
Former Johnson & Johnson chairman James Burke, the man widely credited with guiding the pharmaceutical giant through two Tylenol crises, has often told audiences that J&J had no formal crisis plan when the product tampering tragedy struck, and that even today many senior J&J executives do not believe a crisis plan would have had a significant affect on the company's performance.
Others have credited Burke himself with being responsible for the company's unwavering commitment to doing the right thing, but in truth the credit lies with J&J founder, Robert Wood Johnson, and with all the CEOs that succeeded him and preceded Burke, all of whom have played a part in the development of a corporate culture that made Burke's response all but inevitable.
While most crisis public relations experts promote the crisis plan as the first line of defense against crisis, the most sophisticated are looking at corporate culture with an eye not to damage control and effective crisis communication, but to minimizing the risk of crises in the first place.
John Scanlon, of New York communications counseling firm Sawyer Miller, recalls visiting an industrial client and having executives discuss the size and scope of their crisis manuals. "It was along the lines of they have a two inch manual and we only have one inch," he says. "It was like small boys comparing genitalia."
That, says Scanlon, was when he realized that most companies were fooling themselves about what crisis preparedness really meant.
"They make it into a very mechanical process," he says. "It's all about making sure they have access to the wire service and know who the reporters on their beat are, and it is important that you know all these things, but more important is the idea that companies have to have some sort of value system to guide them through crisis." According to business academic Ian Mitroff, in his book We're So Big and Powerful Nothing Bad Can Happen to Us, "how people react to crises and/or extreme events provides one of the most powerful windows, if not the most powerful window, into the souls of people and their institutions."
Experts say that corporations can be extraordinarily creative and resourceful in rationalizing their failure to prepare for crisis. Mitroff contends that some executives have difficulty admitting to themselves that their companies could face crisis because in doing so they would have to question the excellence of their company and in some cases even their own professionalism.
Companies may believe in a variety of talismen that prevent them from addressing crisis issues before they occur. Some believe their size, location or the type of business they are in will protect them. Others regard crisis management as a luxury, or believe crisis is an inevitable cost of doing business.
Others subscribe to the fallacy that wellmanaged companies simply do not have crises. This trait can afflict even the most public relations oriented corporations. Indeed, it can afflict them even more than others. When Nestle was attacked for selling infant formula in undeveloped countries, where it was often mixed with contaminated water, the company's belief in its own caring, nurturing image made it difficult for senior executives to accept the criticism. There was a prevailing belief that anyone who attacked Nestle must be crazy or a communist or both.
"Corporations are not unlike people," says Mary Woodell, who heads the crisis management practice at consulting firm Arthur D. Little. "Some are arrogant, they believe they can behave any way they want. Others adopt a bunker mentality, particularly in industries that are always under attack. They see themselves as victims. Others practice denial. They fail to realize the magnitude of their problems. Nestle was one of these. So was Audi. When their cars were accelerating suddenly they blamed the drivers. It was stupid Americans who didn't know how to drive their wonderful cars."
Then there are those who believe that their superior scientific expertise, their command of statistics, will help avoid crisis and deflect criticism if crisis strikes. The nuclear industry is just one that had learned what a mistake this is. As the Kemeny Commission Report after Three Mile Island pointed out:
"While the major factor that turned this incident into a serious accident was inappropriate operator action, many factors contributed to the action of the operators, such as deficiencies in their training, lack of clarity in their operating procedures, failure of organizations to learn the proper lessons from previous incidents, and deficiencies in the design of the control room."
Crises, says Mary Woodell, divide into two kinds: catastrophic crises, which derive from a failure of operations—such as a refinery fire or explosion—and failures of issues management, which result in crises such as hostile takeovers, labor disputes, or fraud by senior executives. Effective crisis management should be able to anticipate and preempt many of both kinds.
Mitroff divides "crisis-prone" corporations into two types: destructive companies, which believe it is their fundamental right, even their duty, to exploit all human, financial and natural resources for the profit of their shareholders; and tragic companies, which understand the need for change but do not have the emotional or cultural resources to make it happen.
There is little that can be done for destructive companies (Exxon is an example, Drexel another, General Motors under Roger Smith another) but tragic companies can be helped by outside experts, analysts who can identify problems in not apparent to those too close to them and inhibited by fear for their jobs.
"A great part of what we do is help companies recognize where they are vulnerable," says Bob Wilkerson, president of The Corporate Response Group. "We teach them how to recognize the series of events that can lead to crisis. For example, at Exxon the Valdez spill was the not the real problem, it was simply a symptom of the problem. What companies need to do is get to the heart of the problem."
Woodell points out that if companies identify potential danger area and fail to guard against crisis, they may be more responsible legally than if they had not bothered to investigate in the first place.
"That attitude is changing, but as far as people in high risk industries were concerned there used to be an attitude of what you don't know won't hurt you," she says. "What's happening now, though, is that the courts are starting to say if you didn't know you should have known."
Another obstacle is the tendency of corporate executives to think inside "boxes." The CFO is likely to see crisis exclusively in terms of the bottom line. The chief legal counsel may see crisis exclusively in terms of its legal consequences. And public relations people may consider only the media impact of crisis. A more holistic approach is needed.
Attorneys, traditionally, have been the most powerful adversaries of public relations professionals, urging their CEOs not to take any action that might be construed as an admission of liability. However, Bob Wilkerson believes there has been a change of attitude and that many companies have been successful in persuading attorneys (and public relations people) to think in terms other than those of their own discipline.
"One of my first clients was an architectural engineering firm where the attorney and the vp of public affairs literally would not talk to each other," says Wilkerson. "We went through two hours of crisis planning with the organization and after one and a half hours the attorney leaned across the table and said he had not understood before, but now he did. You have to make a real conscious effort to include everyone."
Unfortunately, that requires a very different culture, both internally and externally, than exists in most U.S. corporations. John Scanlon talks about a company defining itself in terms of its responsibilities to four major constituencies: its employees, its customers, the communities in which it operates and its shareholders. "If you are constantly considering the impact of your actions on each of these constituencies, handling a crisis becomes a more or less automatic response," he says.
It is important, however, for companies to view Scanlon's four stakeholder groups not only as customers, the community, employees and shareholders—terms that may encourage the feeling that they are entities to be manipulated—but also as fellow human beings, to whom the corporation has a responsibility.
"What it amounts to is that companies must behave ethically," says Lynne Doll, executive vp at Rogers & Associates. "But I believe companies that run their operations in an ethical manner and consider the way their actions will be perceived by their various audiences actually will avoid crises."
Doll says she advises companies to remember that any action they take could be made public—and in today's heavily scrutinized business environment probably will be made public—and to act accordingly. The process starts, she says, with employee relations. The way a company relates to its internal audience is often indicative of its attitude to other constituencies.
Wilkerson believes changing corporate culture is possible, but that it is not easy. "There are no steps one to ten in crisis management, that if you just follow these steps you will be okay." What you can do, he says, is analyze the culture that exists, and develop from it a set of values compatible with that culture. However, ensuring that those values permeate the company depends entirely on the commitment of senior management.
Similarly, Scanlon suggests that companies define themselves in terms of a credo that expresses their core values, but emphasizes that they must go beyond a "boy scout oath" and ensure that the values they believe in permeate the entire company, becoming the "soul" of the company.
Exxon, he says, appeared to have no soul. "Exxon's experience indicated that there was no corporate culture, or that the culture was directed to only one of the four key constituencies, the shareholder. If they had been thinking more about their consumers and their communities, the oil spill would not have happened, and if it bad they would have responded very differently."
One of the greatest obstacles to a "liberal" corporate culture of the kind that avoids crisis is the emphasis placed on quarter-to-quarter bottom line results. Says Lynne Doll: "The focus on quarterly results means that some companies see investment in crisis preparedness, whether culturally or even in terms of a fairly basic crisis plan, as an unnecessary expense. In reality, of course, it's not expensive. It's one of the best investments a company can make."
Unfortunately, the pressures bear on corporations by Wall Street mean CEOs do not need to plan for the long-term security of their companies. They do not need to prevent crisis indefinitely. All they need to do is gamble on crisis not striking until their tenure is over.
Corporate culture is a somewhat nebulous concept, but it can be considered in terms of the unwritten rules of the organization—"don't disagree with the boss;" "don't be the bearer of bad news;"—who the heroes and villains are, what standards of behavior, dress and ethics obtain. (In this context it can be seen that Wall Street in the '80s, as typified by Drexel, was a culture almost certain to be hit by crisis eventually.)
This kind of thinking needs to permeate the whole organization, and every decision it makes. Its impact can be dramatic, as is evidenced by a comparison between the Johnson & Johnson decision-making process (in an instance unconnected with the Tylenol case) and that at Union Carbide prior to the tragedy at Bhopal.
Twenty years ago, long before concerns about the affect of the sun’s rays became public, J&J's baby oil was a successful tanning product, worth $10 million in annual sales. Yet president David Clare was concerned that the idea of a "healthy tan" was misleading, and that the company might be enticing its customers to harm themselves. Despite the absence of the kind of concrete evidence companies generally wait for, J&J stopped promoting the use of its baby oil for tanning and sales fell to $5 million.
The guiding question, say executives, was not whether outside forces could prove tanning was harmful, but rather whether J&J could conclusively prove it was not. Moreover, Carl Spalding, then brought to baby oil product manager and now president of the dental care group at J&J says: "It told me that the Credo meant something to the people at the top and that it should mean something to the product manager too."
On the other hand, one of the key factors in the lead up to the Bhopal tragedy was Union Carbide's decision to cut back on further investment in the plant. Key personnel were laid off, and morale dropped. A decision made to address a potential financial crisis helped create the circumstances for a much more damaging human crisis.
The Bhopal tragedy, in fact, typifies the kind of incident that good crisis management could have averted. In
1982, three years before the leak, a company safety report said there was "a higher potential for a serious accident or more serious consequences if an accident should occur" at Bhopal. The Bhopal plant did not have a computerized monitoring system, as its sister plant in the U.S. had, and workers used their eyes and noses to detect leaks.
Even worse, in retrospect, was the fact that the company issued no safety tips, no public education, not even the most elementary public relations effort directed to the local community. One of the most tragic aspects of Bhopal was that the simple act of placing a wet cloth over the face could have saved countless lives, if anyone had told the people nearby of this simple life-saving technique.
In September 1989, a few months after the Valdez disaster, Exxon Shipping president William Stevens told a crisis conference in New York that the company's management structure and culture could not be blamed for what he insisted was a case of individual human error. He apparently did not consider it significant that the individual in question had been appointed by management and was a part of the culture, or that Exxon's senior management had, only a few weeks before the spill, decided not to reexamine its crisis plan because the chances o a crisis were deemed remote.
One can have little confidence in a man agement that fails to recognize the causes c crisis even after one so damaging to corpc rate reputation. Exxon compares unfavoi ably in this respect to Perrier, which upo the reintroduction of its bottled water after benzene contamination caused by the failure of an employee to change a filter. Perrier acknowledged that management was at fault for failing to detect the problem, and announced that it would be reexamining its management structure to avoid recurrences.
There are those who see "public relations" as part of the problem. By some estimates, more than three-quarters of the articles published on crisis management in the past few years emphasize communication after a crisis rather than the substantive actions a company can take to minimize the possibility of crisis.
To a certain extent, the public relations industry encourages this view. Most of those who present themselves as crisis management experts emphasize communications and the crisis plan, rather than corporate culture and reputation management. Yet this is the area in which good
public relations professionals should be most active. In Steven Fink's Crisis Management, the author argues that: "Outside the executive suite, most companies typically have two departments that command all-seeing vistas of the rest of the company. One is personnel/human resources; the other is communications. Of the two, the communications department is in the advantageous position of processing data from other departments with a broader application.
"If your communicator regularly wanders the halls, visits other departments, and asks what's new there, does the company avail itself of the information he or she discovers? When the executive committee decides to close a plant for unshakable bottom line reasons, is any thought given to how the story will play in Peoria?"
Arthur Little's Mary Wooddell agrees that public relations people have a vital role to play, but emphasizes that it must go beyond the media to all the companies constituents, viewing media simply as a means to reaching these constituencies.
"The media have tremendous influence as opinions are informed," she says. "Wise companies understand the media§ role in influencing the decisions people make about them."
Hill & Knowlton CEO Bob Dilenschneider summed up the approach that public relations practitioners must take if they are to be successful as crisis managers in a speech on corporate comebacks, when he talked about communications as management actions that conveyed values and were compatible with what the company said about itself.
"The wired age we live in forces political and economic institutions to match their words and actions if they are to survive," Dilenschneider asserts. "Our communications age is ruthless in its exposure of discrepancies. Many institutions still try the old way, but the rising public impatience with hype and deception make those institutions vulnerable.
"A successful communications program must be based on a system of shared values and beliefs to avoid gaps between words and actions."
Dilenschneider also has a number of practical suggestions: shared decisionmaking, new compensation programs that reward productivity and problemsolving. He cites Chrysler's resurgence under Iacocca and Xerox's comeback against the Japanese as examples of the power of this approach.
The final argument for a major public relations role in reputation management is that communications can help organizations ensure that the cultural commitment they have made to their major constituencies is recognized by those audiences.
All of which is not to say that crisis plans are useless. Johnson & Johnson executives, whatever the strengths of their culture, now have two crisis manuals each: one in their offices and one at home. But crisis plans need to encompass preventative strategies and day-to-day procedures as well as detailed instructions on behavior and communication during a crisis.
"Preparing a crisis plan is a process that helps you identify problem areas," says Lynne Doll. "It also helps peo ple think creatively about the things that could happen to their companies, to consider possibilities they might not normally consider."
It also helps companies identify those individuals who should be part of the crisis team, what their responsibilities should be, and gives them some experience of working together.
Finally, it can help build goodwill that a company can draw on if crisis does strike. While a track record of philanthropic behavior is not going to indemnify the company against any misdeed (the same way a life of charitable behavior will not stop the prosecution of a drunk driver) it will ensure that the company gets the benefit of the doubt, wherever doubt exists.
"The time to begin crisis communications is when there is no crisis and when it is possible to create a reservoir of good will," says Steven Fink.