Holmes Report 31 Jan 2011 // 12:00AM GMT
The past year started with some of the corporate world’s most celebrated brands facing major crisis: BP, Goldman Sachs, Toyota, and even Johnson & Johnson, which announced the recall of several over-the-counter medicines, including popular products such as Benadryl, Motrin, Rolaids, and Tylenol. When even the company that wrote the book on stellar crisis communication appeared to stumble—its response was “complacent and sloppy,” according to a business professor quoted in a New York Times analysis—observers could be forgiven for asking whether corporate communicators had forgotten even the basics of good crisis management.
As the year went by, remarkably few of the companies faced with high-profile crises covered themselves in glory, and the lesson drawn by many observers, including Forbes magazine, in an article accompanying its Biggest Corporate Blunders list, was that “corporate reputation is very fragile. What takes years to build can be ruined overnight.”
But people are less fickle than some of the coverage suggested. Reputations can have tremendous endurance if they are built on authentic action rather than exaggeration or downright deception. The problem with BP’s “beyond petroleum” campaign—and with some of the other supposedly stellar reputations that were tarnished in 2010—is that they were inauthentic. They were aspirational rather than real, built on words rather than on actions. So one of the two most important lessons for communicators from the crises of the past 12 months is to manage expectations. Crises are more harmful when they draw attention to a gap between public perception and private behavior. (If you want an example from the non-corporate world, look at the coverage of Tiger Woods’ sexual indiscretions.)
The other important lesson—a reminder, really—is draw from the final crisis on our list, one that had only limited implications for the companies involved but could be the most significant crisis of 2010 in terms of its long-term implications. The publication of corporate data by WikiLeaks is a harbinger of things to come: radical transparency, amplified by digital and social media.
1. BP Oil Spill
BP—a company that for the past decade has been assuring stakeholders of its intent to move “beyond petroleum”—was responsible for the worst accidental oil spill in US history following an explosion on a rig in the Gulf of Mexico that killed 11 and injured 17. Plugging the leak took months, and by the time the company had the situation under control, 4 million barrels of oil had been pumped into the ocean in one of the world's biggest environmental disasters.
“If the original Tylenol crisis is the ultimate textbook ‘do’ for crisis communications, BP’s handling of the biggest oil spill in history will surely become the textbook ‘don’t’ for this generation,” says Carreen Winters, executive vice president at MWW Group and head of the firm’s crisis practice. “While millions of people watched the spill growing via a live video feed on the internet, BP downplayed the impact of the incident, attempted to shift responsibility to a sub-contractor and generally did just about everything wrong.”
Perhaps the most memorable moment of the crisis, according to Winters, was CEO Tony Heyward’s misguided comment that: “I just want my life back,” which alienated the media, politicians and most notably the Gulf community that was actually suffering the real consequences of the crisis.
The CEO—since replaced—seemed to get both the tone and the content of his response entirely wrong. The Observer’s City editor, Richard Wachman, summarized: “Given that about half of BP's business and 40 percent of its shareholders are in the US, there was a need from the outset for Hayward to address US public opinion. The last thing the Americans wanted was aloofness, wry smiles and a stiff upper lip that were hallmarks of the Hayward riposte.”
The company also seemed to be blindsided—at least initially—by some innovative use of social media by its critics. A Twitter account, @bpglobalpr, attracted more than 180,000 followers and pushed out a stream of statements that not everyone realized were parody: "The bad news: we're being sued by the United States. The good news: they sue in dollars, not pounds."
Finally, it was clear the crisis had a major impact internally as well as externally. Interviews conducted by the Financial Times "reveal[ed] a company where many are fearful about jobs and savings, dismayed at their employer's part in another terrible accident, and furious at management's handling of the crisis." According to one interviewee: "The question [employees] are asking is: am I working for the company I thought I was working for, with the right values?"
Perhaps one obvious lesson is that communicators need to rethink the idea that it is important for the chief executive to be the “face” of its crisis response.
"The CEO needs to be visible at the outset but can designate the person in the U.S. to be the face of the crisis." Harlan Loeb, director of US crisis and issue management at Edelman, told The Wall Street Journal. Davis Weinstock, chairman of Omnicom-owned Clark & Weinstock, agreed that Hayward "was not the right face" for this crisis.
But while the crisis was badly mishandled, the real problem was that in the preceding years, BP had worked to create an image that was detached from the reality of the company’s behavior. “Ultimately, BP’s lack of authenticity was its downfall,” says Winters. “Three successive CEOs pledged to make safety a priority.
The company was recognized by the UN for environmental stewardship. The statistics of on the job injuries painted a rosy picture— mostly because of an emphasis on rules like all coffee must have a lid, and people must hold handrails, rather than processes that actually assured safety.
“If the company had been committed to improving and assuring safety, rather than simply giving the appearance of safety, it may have found itself with better communications ammunition than finger pointing and attempts to minimize the severity of what quickly became an environmental Armageddon. But even when BP said the right thing, it was too little, too late. Because saying the right thing is not a substitute for doing the right thing.”
2. Toyota Recall
Toyota was forced to recall millions of its vehicles in the US and Europe and reports of accelerator defects emerged. The Japanese automotive giant was criticised for putting profits ahead of safety, and an ill-coordinated communications response did not help matters. Toyota’s brand values—reliability, safety and quality—came under sustained scrutiny.
“Like most Japanese companies, corporate communications and overall corporate message development, was heavily centralized in Japan,” according to Kreab Gavin Anderson Japan managing partner Deborah Hayden and New York CSR director Mark Boutros.
This caught Toyota’s Japan HQ, dominated by its engineer-led, consensual culture, flatfooted. “There was a lack of leadership from Japan, which meant countries had to pick their own strategy in the early days,” explains Porter Novelli corporate practice leader Neil Bayley. “This meant they appeared paralyzed, reacting in different ways across key markets.” “The findings that are emerging from lawsuits are showing that there does not appear to have been a fundamental product problem; at the end of the day Toyota faced a public relations problem,” adds Hayden.
Handling a PR problem of this magnitude was not something that Toyota was equipped to do. “The media went chasing Toyota and the eventual press conference, where Mr Toyoda wore a surgical mask, didn’t do the company any favors,” says Bell Pottinger head of issues and crisis management Alex Woolfall. “Sadly, nor did his faltering English.”
The press conference itself was held in Nagoya, further inflaming international media sentiment, and was conducted largely in Japanese.
“These were a few very simple problems that could have been avoided – leaving the media to concentrate on the issue and what Toyota was going to do about it,” add Hayden and Boutros.
“This reinforces the fact that, in a crisis, the messenger is just as important as the message,” says Woolfall. “But Toyota also failed to communicate with customers and dealers early on about the nature and scale of the problem, which simply heightened anxieties.”
Eventually, Toyota plugged the communications gaps, enacting an aggressive social marketing campaign, coupled with a PR offensive, to try and mitigate the damage. By the summer of 2010, meanwhile, it finally called in external PR counsel, asking Brunswick to help it develop a better strategic PR architecture.
Toyota’s insularity, compared to other companies its size, stood out, as did its evident inexperience in proactively communicating with key stakeholders in the US.
“As the biggest car brand in the world, they need to understand the world and listen to the world,” say Hayden and Boutros. “They need to incorporate more diversity in their global team that can help them understand and communicate with the markets they operate in – for example, they have one American on their board – and this is new…Honda has none.”
“The cozy tradition in Japan of simply briefing the Nikkei, knowing that they would portray the company in the ‘correct light,’ no longer worked,” add Hayden and Boutros. “Toyota learnt that they needed to communicate with all their stakeholders, which meant preparing communications initiatives that fed both a domestic Japanese audience and an international one, instantaneously.”
The company also reorganized its PR department in Japan, giving more access to senior executives, a development that would not go amiss at other Japanese manufacturing giants.
3. Goldman Sachs and the Global Financial Crisis
Arguably the most successful firm on Wall Street for several decades, it is not surprising that Goldman Sachs came in for much of the criticism when the financial markets crashed in 2008 and it was forced to seek assistance from the federal government. But the company’s hardball tactics, lack of contrition, and swift return to profitability—and the culture of excess that fuels public mistrust of big business—made it the most tempting target for Wall Street’s critics, and in April, the bank was accused of securities fraud in a civil suit filed by the Securities & Exchange Commission that claimed it had created and sold a mortgage investment that was secretly devised to fail.
Says Rich Tauberman, executive vice president, financial communications at MWW: “It was a rough year for Goldman Sachs, which suffered through lawsuits from the SEC, federal investigations on their mortgage practices and leaked emails disparaging investments the firm was peddling to clients and unhappy shareholders to name just a few highlights.”
Early in the year, the company sought to ease its public relations problems by setting aside $500 million in a fund to help thousands of small businesses recover from the recession. It is an indication of how damaged the Goldman Sachs brand had become that most of the coverage was scornful rather than grateful. The New York Times editorialized: “The money will be welcomed by the recipients, but if Goldman wants to make a meaningful contribution, it would have to be in the billions and aimed more directly at taxpayers.”
Asked reputation management consultant and author Peter Firestein: "When was the last time a company voluntarily took half a billion dollars out of its own pocket, contributed it to the good of others, and still failed to erase the perception that the money amounted to nothing more than a fine or a sentence of community service?"
One reason for that response was an interview provided by chairman and chief executive Lloyd Blankfein to the Sunday Times, in which he insisted that the bank was doing "God's work." The implication appeared to be that anyone who opposed Goldman or criticized its behavior was pretty much by definition an agent—wittingly or otherwise--of Satan. According to Taubermann, Blankfein’s “bravado assertion that Goldman Sachs was doing ‘god’s work’ ranked right up there with BP head Tony Heyward’s ‘I just want my life back’ as classic what not to say quotes for media training instruction.
“While many financial institutions had serious issues to deal with and public relations gaffes along the way, Goldman Sachs communications and lack thereof at critical points smacked of a hubris that didn’t take into account the vastly changed views of Wall Street across audiences and the hyperbolic 24-7 media/social media environment that even the firm now lives in.”
Blankfein’s attitude appears to have infected the firm’s approach to communications. Market Watch, commenting on the communications style of its senior public relations executive Lucas van Praag: "The message is you're emotional and don't have your facts straight. We're reasoned and objective about our own matters. You, dear media critics, don't know what you're talking about."
“After being tone-deaf to the mood of the country regarding financial institutions and taking his beleaguered shareholders for granted for too long, Blankfein did go on a mea culpa tour to repair his and the firm’s reputation at the annual meeting of shareholders and a media tour where he pledged greater transparency at Goldman Sachs,” says Taubermann. “Besides transparency which is always a good thing for a public company, the Goldman Sachs dramas also show that humility, a proactive approach to communications and thinking before you speak can also help protect one’s reputation.”
If Goldman Sachs wants to be seen as a responsible company, as part of the solution rather than as part of the problem, it needs to come a lot cleaner about what it did wrong ("we participated in things that were clearly wrong," is, as the Times points out, irritatingly non-specific) and about what it is going to do to ensure that it doesn't make the same mistakes again. It needs to define what a responsible financial institution would look like, and then provide sufficient transparency so that people can judge whether it is living up to that standard of responsibility.