Crisis Musings

Two recent and unrelated events brought to mind the hearing scene from the great 1981 film, “Absence of Malice.”

In the scene, James Wells, a Justice Department official (played by Wilford Brimley) is questioning a number of people about a criminal investigation gone awry.  One of those being questioned is Michael Gallagher, a liquor wholesaler (played by Paul Newman):

Wells:  “Everybody’s just doing their job.”
Gallagher:  “And Teresa Perrone’s dead. Who do I see about that?”
Wells:  “Ain’t nobody to see.”

Having done crisis management for the better part of my adult life, and seeing companies’ reputations sullied, I can relate to the line, “Ain’t nobody to see.”

Too often, companies’ reputations are unfairly damaged – often permanently, thanks to Google – by allegations (sometimes malicious) ultimately proven wrong.

Company executives struggle with the question, “Who do I see about that?” 

Traditionally, companies have resisted the idea of joining the public fight; choosing instead to maintain a low profile out of fear of exacerbating the situation, or hoping to prevail in the court of law.  They believe that they must adhere to Marquess of Queensbury rules, even while their opponents steal from the WWE playbook.

But faced with the prospect of a public flogging at the hands of the media, trial lawyers and/or publicity-seeking politicians, more and more companies are rethinking that approach. 

The two events that reminded me of this scene were Taco Bell’s aggressive and deliberately public reaction to the class action lawsuit accusing the company of misleading customers about the composition of its ground beef they use, and last week’s report from the National Highway Traffic Safety Administration (NHTSA) that ruled out electronics problems as a cause for the reported stuck accelerator problems that led to the infamous Toyota recall last year.

Let’s start with Toyota.

Around this time last year the auto company found itself in the middle of a world-class s**t-storm following the recall of millions of vehicles due to accelerator problems.   Congressional investigators – helped in part by trial lawyers and auto critics – could smell the blood in the water and Toyota executives were hung, drawn and quartered on live television.

The popular scapegoat for the problem was on-board electronics.  And notwithstanding the insistence of the Toyota executives that there was no evidence to suggest the electronics were the cause of any problem, the politicians and the media weren’t about to let go of that theory: 

At a February 24 House oversight committee hearing, Rep. Brian Bilbray pressed the question to Toyota CEO Akio Toyoda:  “You stated that you had 100%, you were 100% sure that the difficulties with the pedals, with the acceleration, was not electronic, that it was not going to be involved with the data systems, that it was a physical problem.  Do you stand by that statement?” 

At the same hearing, Ohio Rep. Marcy Kaptur (in her own, fractured sort of way) chose to excoriate the company for issues well beyond accelerator safety:  “Mr. Toyoda.  I am not satisfied with your testimony.  I am being very forthcoming.  I do not feel it reflects sufficient remorse for those who have died.  And I do not think you have accurately reflected the large number of complaints that have been filed with Toyota for nearly a decade.  So I as one member am disappointed…  Mr. Toyoda.  How did Toyota lose its way?  You say in your testimony your company grew too fast.  Some smart lawyers gave you those words.  I think what happened was your company went from emphasizing long-term quality values and corporate responsibility to fighting against safety regulations, against insider influence inside this city and your own capital in Japan, and environmental regulations and indeed worker rights and card checks inside your company.”

And even though Mr. Toyoda told lawmakers that he was “absolutely confident” that the electronics of Toyota’s gas pedal systems were not the source of problems, his word evidently didn’t count for much.

At a March 2 Senate Commerce Committee hearing, Transportation Secretary Ray LaHood said, “We also believe, based on what people have told us, that [perhaps the electronics could be the problem too.”

At a May 20 House Energy & Commerce Committee hearing, Chairman Henry Waxman said, “These assurances were baffling.”  And his colleague, Bart Stupak, added, “Toyota engaged in damage control almost immediately following our hearing by continually asserting confidence that extensive testing proves the safety of the electronics systems and attacking those who disagree with them. But … the record doesn’t support Toyota’s statements that it conducted extensive testing.” 

Fast forward to February 8, 2011, and the results of the NHTSA investigation (carried out in part by NASA engineers):  “NASA engineers found no electronic flaws in Toyota vehicles capable of producing the large throttle openings required to create dangerous high-speed unintended acceleration incidents. The two mechanical safety defects identified by NHTSA more than a year ago – “sticking” accelerator pedals and a design flaw that enabled accelerator pedals to become trapped by floor mats – remain the only known causes for these kinds of unsafe unintended acceleration incidents.”

On top of that, Secretary LaHood now concedes that part of the problem may have been “pedal misapplications.”   In other words, driver error.

 And in looking at the tattered remnants of what was once a gold-standard brand, it’s not hard to imagine Toyota executives wondering “Who do I see about that?”

 Which brings us to Taco Bell.

After being hit with a class action suit accusing the company of misleading consumers about the nature of the meat it serves, the company decided to hit back – and hard.

 Through a special-purpose website, national print ads, social media and other channels, the company denied it was misleading consumers, stood by the quality of its products and said, “Thank you for suing us… We take any claims to the contrary very seriously and plan to take legal action against those who have made false claims against our seasoned beef.”

 With this strategy, the company moved the discussion away from the merits of the allegation to the merits of the communications strategy, and in the process won by praise and criticism for its willingness to respond to critics in such a public manner.

 But will the company’s strategy ultimately pay dividends?  Has it reassured consumers?  Will it put the brakes on the lawsuit? 

It is too soon to answer those questions, but it does raise the broader question, “Under what circumstances is it in a company’s interest to join the public fight?”

 Doing so just to make a CEO or employees feel better is not sufficient justification.  But I do believe there are times when it makes sense for a company to join the battle, but only under the following circumstances:

1.  When the risk to the company is real enough, and big enough;

2. When the company is  certain the facts are on 100% its side.

3.  When the awareness of the problem is great enough that it does, or could, have a significant impact on the company’s reputation (big enough to justify taking the risk of raising the profile of the conflict even further);

4.  There is solid research to define stakeholder awareness and attitudes, and the messages have been tested to ensure their effectiveness; and

5.  The company is backing up its words with actions – e.g., file suit, etc.

What was compelling about the Taco Bell campaign is that the company promised to take legal action. In other words, walk the talk.  Complaining alone is insufficient, as it simply raises the question, “If you feel so strongly about being harmed, why won’t you do something about it?”We’ll see if Taco Bell really does back up its words with action.  But in the meantime, the aggressive posture by the company may embolden other corporate leaders to adopt a similar approach.

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(NOTE:  Following the Yes Men-sponsored hoax on Chevron in October, my colleague Brendan Hodgson and I were asked to contribute to Ad Age our observations on how companies should handle such attacks.  The following is reprinted from the October 25, 2010 issue of Ad Age.)

Six Lessons From the Chevron Hoax

What Marketers Should Take Away From the Hijacking of Marketer’s Public-Relations Push

By Chris Gidez and Brendan Hodgson

October 25, 2010

The hoax perpetrated on Chevron this week offering fake ads, websites and news releases mimicking the company’s new corporate advertising campaign is a sign of the times. And it is a dangerous sign.

We’re not talking about clear parodies such as The Onion or “The Colbert Report,” or the imposters misrepresenting themselves on calls to the “Larry King Show.” Instead, what we are seeing are sophisticated and well-planned campaigns designed to confuse the media and the public. Whatever the intentions, the consequences can be very real.

Many of these campaigns are orchestrated by a group called The Yes Men, which was also behind the 2004 fake announcement about Dow Chemical and its association with the Bhopal incident, which caused the company’s share price to plummet more than $2 billion after news organizations were duped into believing the announcement was real. The Yes Men, in conjunction with Amazon Watch and Rainforest Action Network, claimed responsibility for the Chevron hoax.

But this group doesn’t have a corner on the spoof market. More recently, a fake BP Twitter account was created to “help” the company with its PR response to the Gulf spill. However, in that case it was immediately apparent this was an attempt at satire, and the host of the account quickly agreed to label it as such.

The irony here is that in this age of transparency, where companies are expected to be more open and honest with their activities, we see campaigns by social activists — who have long called for greater accountability by public companies — attempting to confuse the public.

As we see more examples of such spoofs, and as we see continuing examples of the media being too quick with the trigger in reporting “news” and then having to admit they were misled, one very real consequence may be a growing distrust of all institutions that deliver information.

The lesson for companies here is to be ready. The following are some steps they should take in that direction:

Anticipate. Companies should understand all the potential disruption scenarios that the web now enables. This goes beyond cyber threats and must include attempts to hijack the company’s brand, as we saw in the Chevron attack.

Prepare. Companies — particularly those companies that are involved in controversial social issues — should have a general plan in place ahead of such an attack. And they should take steps to protect their brands from being hijacked on the web.

Monitor. Watch the radar closely to determine whether the campaign is gaining momentum, causing any confusion among key audiences, or having other consequences (impact on trading, sales, etc.).

Don’t overreact. Often, such hoaxes are intended to provoke a company. Response should be measured, and in line with the actual threat to the company. Outrage alone is not a sufficient reason to react. Consider all options, but using hand grenades to down a pesky gnat is never a good strategy.

Be nimble, be quick. These campaigns can spread with lightning speed, cause news media to file erroneous reports and otherwise create havoc with audiences. Be prepared to move quickly to adjust messaging and connect with target audiences. Messaging should be designed to set the record straight and reassure audiences (including employees), and should reflect an appropriate tone (concern, not anger).

Remain focused. Companies must protect against allowing guerrila tactics such as these to disrupt their own activities. And given the Google effect, vestiges of the hoax can resurface weeks, months or even years after the event itself.

The internet provides critics with a new set of weapons in which they can pursue their campaigns against companies. Companies, in return, must understand this new landscape, and be prepared to manage it.

~ ~ ~
Chris Gidez is senior VP-U.S. director, risk management/crisis communications and Brendan Hodgson is senior VP-digital risk management at WPP’s Hill & Knowlton, which does work for Chevron but was not involved in this most recent campaign or the response.

Take every corporate crisis one can remember — gather them all up and the sum only comes close to the size of the Deepwater Horizon disaster facing BP — and the prospect of enormous operational, financial, regulatory, legal and reputational consequences that will follow.

I have been asked any number of times (by colleagues, clients and reporters), “How is BP doing with their PR” and “What will BP need to do to repair its reputation?”

My answer to the first has been, “As compared to what?” BP truly is in unchartered waters in terms of crisis communications. We’ve never seen anything on this scale. This has no precedent, and thus it is unfair and impossible to compare BP’s communications response to that of any other corporation or institution that has suffered a crisis.

Ultimately, though, no amount of quality communications (PR, advertising, digital, community, public affairs, etc.) can compete with that live video stream of the oil gushing out of the sea bed. In short, the best PR move BP can make is to stop the leak. They know this.

While one can quibble with some of BP’s tactics, and some of BP’s messages may be off-target or ill-conceived (most notably, Tony Hayward’s “I want my life back” remark), one cannot fault BP on its commitment to communication. No company has every invested as much in terms of people resources, money and tools in order to connect with its many stakeholders.

And frankly its latest ads — “We will get it done. We will make this right.” – are bold, impactful and show heart. People will now wait to see if BP delivers on the promise.

To be sure, by the sheer scale and scope of its communications efforts, BP has raised the bar for all other companies facing a significant crisis in the future. Every reputation manager should be asking the questions, “Are we prepared to commit the scale of communications resources being deployed by BP?… “Is my CEO prepared to relocate to the center of a crisis for the foreseeable future, and to speak to media on a daily basis in a compelling manner?” … “Are we prepared for the prospect of carrying out a crisis communications program in the eye of a hurricane?”

As to the second question, “What will BP need to do to repair its reputation?” the short answer is that they will need to embark on a reputation program comparable in scale to the Manhattan Project. But before even considering doing that, they will need to get their house in order.

A lesson for all reputation managers from this crisis is that there is great danger when there is a delta between a company’s performance and behavior and how the company presents its performance and behavior.

Through its “Beyond Petroleum” campaign, audiences were led to believe that BP was different – and better – than its peers in the oil patch. It was greener, more responsible, and more progressive. Its values were somehow different.

This indeed is what BP aspired to be. But it is clear that it is not what BP was/is. The occasion of the Deepwater Horizon incident has revealed that the emperor, to a degree, had no clothes.

In this era where trust is a commodity is scarce supply, companies must be ever-more careful to keep their performance and their articulation of their performance in balance.

There may have been a time when the public wanted companies to be aspirational. They probably still do. But the public need to see companies live up to their aspirations.

BP will survive. At its foundation, it is a strong company. It has shown skill before at smart, progressive communications. I imagine it will do so again. But it will be a different company.

Just has ExxonMobil has had to live with the reputation scar of the Valdez Incident, BP will forever more have the scar of Deepwater Horizon.

Something About Tiger

Maybe it’s just the first step in a master plan that ultimately will be seen as a brilliant exercise in reputation rehabilitation.

Or maybe this was a rushed move to get out ahead of new unflattering developments.

Or maybe he’s promised an exclusive to SI, or Vanity Fair, or Esquire, and this is just an effort to set that up.

Maybe it’s all of the above.  Or none.

But on its face, the announcement by Team Tiger to stage a “friends only” and no-questions-allowed event appears to be a ham-handed attempt at a pressure-release mechanism that shows a wholesale lack of understanding of the public’s mood and media dynamics; suggests a fear on Tiger’s part; and is ultimately doomed to fail.

Moreover, announcing this three days ahead of time simply gives the media a head-start to tear this apart.  Tiger will have lost the battle before he even gets to the microphone.

(Not to mention pulling this stunt in the middle of Accenture’s golf tournament.  Not only must this annoy Accenture to no end, but also the players in the tournament who are now faced with this distraction.  And despite his efforts to put a positive spin on it, PGA Tour Commissioner Tim Finchem cannot possibly be pleased with this. )

The Danger of Living Inside the Ropes

Tiger has lived his entire life “inside the ropes” where he is seen by the masses, but not accessible.  Where his entire life is sheltered and programmed. 

This first step at coming out appears to be an attempt to remain inside the ropes.  And strictly in that regard it will succeed.  No one will get to him.

(BTW, this reminds me of the “town halls” organized by the Nixon campaign in ‘68 where all the participants were hand-picked and no one was permitted to say anything impolite.)

But the media are angry, and the public feels deceived.

What they are looking for is for Tiger to dive into the mosh pit.  Acknowledge his indiscretions.  Demonstrate his remorse.  Make his apologies.  Explain his absence.  Discuss his future.  And, most important, give the fans a reason to support him again.

Certainly a frightening prospect that is sure to lead to bruises.  But for someone with as much nerve and guts as Tiger, who routinely stares down unmake-able puts on the 18th green on Sunday before tens of millions of people, this should be make-able.

As bad as their own crisis handling was seen, Tiger runs the risk of being unfavorably compared to Mark McGuire, Michael Vick, Pete Rose, Kobe Bryant, etc.  Imagine that!

And to those who insist this is just a personal matter, forget it.  The statement on Tiger’s website (“While Tiger feels that what happened is fundamentally a matter between him and his wife…”) simply underscores the fact that Tiger and his handlers are either delusional or just don’t get it.

The moment he withdrew from the tour Tiger turned this from “fundamentally a matter between him and his wife” to a business issue affecting many companies, hundreds of millions of dollars and the very viability of the PGA tour. 

Tiger is a guy whose ambition – it seems – has been to become a fusion of Roy Hobbs and George Washington – both the greatest there ever was and the most admired.

This is no way to get there.

Want to Succeed?  Go Outside the Ropes

But there is hope.  His goal may be attainable.  But it will require a wholesale redesign of his strategy:

1.       Get outside the ropes.  Learn some lessons from Arnold Palmer – one of the greatest who achieved fame not only by winning, but by being a populist (right now “Tiger’s Army” looks more like a small platoon), and acting responsibly.

2.       Get back on your winning ways.

3.       Act responsibly.

The public is terrifically forgiving, but they need a reason to believe.  They won’t forget, and there will need to be an adjustment to a new normal, but the Tiger brand can be repaired.

… About how profound a crisis Toyota is facing, that question was answered Saturday morning.  My three sons were sitting at the kitchen table eating breakfast.  CNN was on the in the background, and evidently there was a report on the Toyota recall.  Suddenly my 8-year-old announces, “Toyota is the worst car.“

Of course it isn’t, but if we have reached the point where the Toyota recall has gotten the attention of elementary school children, then that is a fairly good indicator of how deep this is now embedded in the American psyche.

As I speak to more reporters, it’s time for me to update the Q&As from my prior posting:

1.  Has Toyota’s apology been effective?

First of all, beauty is in the eye of the beholder.  So that is a question best posed to Toyota’s customers and shareholders.  But generally speaking, apologies have limited value.  The published apology or expression of regret is now part of the mandatory playbook for companies in crisis.  Companies are expected to do it (and criticized if they don’t), but they don’t win many points for it.  The apology is to the corporate world what the admission of a drinking problem is to the alcoholic.  It’s necessary, but alone doesn’t mean much.  What is far more important is the performance and behavior going forward.

 2.  Why has this become such a big story?

 There are several reasons for this.  First, the sheer size of the recall.  Second, the unusual step that Toyota made in suspending product sales.  That’s not something one typically sees in a recall.  Third, that Toyota didn’t yet have a fix in place at the time in announced the recall.  And, perhaps most important — Toyota’s own reputation for quality and safety was its own undoing.  Were this to have occurred to another car company not known for quality and safety, the reaction may not have been as severe.  The lesson for companies here is that they must work to maintain a balance between the reputation they aspire to and the products and services they sell.

 3.  Has the fact that this is a Japanese company affected how the crisis has evolved?

 It is certainly a question worth exploring.  Jeff Kingston, director of Asian Studies at Temple University Japan, put it this way in an op-ed in last Saturday’s Wall Street Journal (“A Crisis Made in Japan,” Feb. 6):

 “It is not surprising that Toyota’s response has been dilatory and inept, because crisis management in Japan is grossly undeveloped. Over the past two decades, I cannot think of one instance where a Japanese company has done a good job managing a crisis. The pattern is all too familiar, typically involving slow initial response, minimizing the problem, foot dragging on the product recall, poor communication with the public about the problem and too little compassion and concern for consumers adversely affected by the product. Whether it’s exploding televisions, fire-prone appliances, tainted milk or false labeling, in case after case companies have shortchanged their customers by shirking responsibility until the accumulated evidence forces belated disclosure and recognition of culpability…

“Japanese firms often seek to cover up or fudge the facts and the people communicating with the media and public often do not have the information they need to do their job. The absence of a structure to quickly get accurate information to top management hampers an accurate and adequate response. That leaves management unprepared to deal with media questioning and conveys an image of stonewalling and indifference.

“There is a cultural element to this penchant for mismanaging crisis. The shame and embarrassment of owning up to product defects in a nation obsessed with craftsmanship and quality raises the bar on disclosure and assuming responsibility. And a high-status company like Toyota has much to lose since its corporate face is at stake. The shame of producing defective cars is supposed to be other firms’ problems, not Toyota’s, and the ongoing PR disaster reveals just how unprepared the company is for crisis management and how embarrassed it is. In addition, employees’ identities are closely tied to their company’s image, and loyalty to the firm overrides concerns about consumers.

“There is also a culture of deference inside corporations that makes it hard for those lower in the hierarchy to question their superiors or inform them about problems. The focus on consensus and group is an asset in building teamwork, but also can make it hard to challenge what has been decided or designed. Such cultural inclinations are not unknown elsewhere around the world, but they are exceptionally powerful within Japanese corporate culture and constitute significant impediments to averting and responding to a crisis.”

 Companies — whether Japanese or not — ought to do some soul-searching to determine whether their culture, their management style, their policies and systems will enable them to effectively manage a global crisis in today’s environment.

 4.  What can we expect next?

 Crises such as this follow a very predictable trajectory, as I pointed out in my prior posting.  The Toyota recall is no different.  However, as a media event I think we will soon reach a saturation point and media will move on to other issues, either because of fatigue (the media are notorious for their A-D-D), or because a new story emerges.  But the fact that the story disappears from the front pages should not be seen as an indication the crisis is over.  It just means it is time to turn the lemons into lemonade.

What do you get when you combine Three Mile Island, Exxon Valdez, Tylenol, Peanut Corporation of America and just about any other high-profile crisis?  Answer:  Toyota.

We can officially declare the Toyota Recall to be the crisis of this young decade (until another one comes along… and it will.)

This is the perfect storm… One of the world’s leading carmakers, its reputation built around safety and quality; a media community desperate to demonstrate it is still relevant; regulators falling over each other to show the world they are the stewards of public safety; a global company struggling to keep up with the pressures of a global marketplace and the lightning speed at which information now moves; a public that has absolutely no faith in any institution (particularly car companies and politicians), whose nerves are raw and which is now empowered by social media.

I’ve done a number of media interviews over the past week.  Most every reporter asks me the same questions.

1.  How is Toyota doing?

2. Can Toyota recover?

3.  What comes next?

In response to #1, I say it is too soon to tell.  It’s easy to judge companies on the tactics they employ — apologies, letters, websites, etc.  But at its core this is a BUSINESS problem first, and a REPUTATION problem second.  A smart and prompt fix to the business problem is far more effective than compelling communications.  There are plenty of metrics that can be tracked to determine how the company is faring — sales, resales, customer satisfaction data, earnings, etc. (But right now it doesn’t appear that Toyota has a smart and prompt fix, nor compelling communications.)

To Q2 my answer is “sure,” but there will be a new normal.  Bridgestone/Firestone recovered, but the crisis will never be forgotten (not in this Google world).  Exxon recovered, but its name will forever be linked with Valdez.  Tiger Woods will recover, but he will never be viewed in the same light again.

To Q3, I tell reporters that this crisis is running a very predictable trajectory.  One that is similar to most other corporate or product crises.  And because it is on a familiar path, one can predict with relative certainty what will come next:  

The announcement of the recall is initially met by straightforward media coverage in the first 12-24 hours, but all hell breaks loose after that:  personal stories of drivers who had problems… lots of internet chatter… reporters doing the “how are they managing the crisis?” analysis… politicians jumping on the bandwagon… people start asking, “what did they know, and when did they know it?”… Trial lawyers chumming for clients to file class actions… copycat events (problems with other models, or with competitors’ models)… the company announces the financial impact of the event… hearings… Ultimately the media and public lose interest as fatigue sets in or they move on to another crisis.

But an examination of corporate crises over the past decade will bear out this pattern.

SO WHAT ARE THE LESSONS FOR REPUTATION MANAGERS WHEN FACING SUCH A CRISIS?

1.     Try to regain control of the agenda as quickly as possible.  Easier said than done, to be sure, but so long as others are driving the conversation (pardon the pun), companies will be in a reactive mode.

2.    Understand the speed at which information now moves, and adjust to it.  The time allowed to make decisions is now measured in minutes, not hours or days.

3.    Anticipate the trajectory of the situation, and plan for it.

4.    Connect with your audience emotionally.  Fear and anxiety are far more powerful than reason.  You won’t get very far in connecting with people rationally until you can address peoples’ emotions.

AND WHILE I’M ON THE SUBJECT…

I was reading an article in the Wall Street Journal yesterday on a very different topic – the decision by the medical journal, LANCET, to retract a study it had published in 1998 suggesting a link between vaccines and autism.

That single study prompted a heated, emotional and long-running debate among parents and physicians over whether such a link existed, whether children are facing a greater risk by not getting vaccines, and so forth.

What does this have to do with gas pedals?

A physician, Dr. Paul Offit of Children’s Hospital of Philadelphia, was quoted in the WSJ article:

“It’s very easy to scare people; it’s very hard to unscare them.”

That single statement best captures the conundrum facing companies – whether they are car manufacturers, pharmaceuticals, food processors, airlines or any other consumer-facing company.  Once the notion of fear is introduced to consumers, it is damn-near impossible to erase it, even if the notion is ultimately discredited.  This is something that media, politicians (Ray LaHood??) and consumer groups should keep in mind as they consider weighing in on such an issue.

Am I suggesting that the Toyota recall issue is overblown?  No.  But I have seem very little data presented to show the number of accidents caused by the faulty accelerator pedals as a percentage of the total number of cars on the road.  Such data is far more important than anecdotal personal stories that have not been verified, and which indeed may be promoted by a trial lawyer with a vested interest in a cash settlement.

The Toyota recall is big for several reasons:

1.    Scale.  Not only is Toyota among the largest car companies in the world, but also so many models are affected.

2.    It seems to be blossoming… Now separate and unrelated problems are becoming apparent with other models.

3.    The irony of a company that built its reputation on safety and quality, finding itself having to apologize for lapses in safety and quality.

Enough for now.  Stay tuned.  This crisis has not yet reached its apogee.

It was 25 years ago that Coca-Cola launched “New Coke,” which quickly entered the annals of history as a collosal business mistake.

Today we may be witnessing a similar blunder with NBC’s ham-handed handling of the Leno-O’Brien-Fallon trio of talk show hosts.

And while it remains to others to judge whether the Leno prime-time experiment was a disaster or not, what is clear is that NBC’s handling of it certain is.

And herein lie some lessons for reputation managers.

While Coca-Cola took some deserved hits for rolling out a new product without really understanding what they were doing and the potential consequence, their response to that mistake was actually quite good.  They may not have turned the proverbial lemon into lemonade, but their handling of the aftermath of the New Coke roll-out was admirable.

And that is where there is a divergence with the Tonight Show experience.

NBC clearly wasn’t ready to handle the fall-out from it’s seemingly rushed decision to shuffle the chairs on the deck, and it is being pounded for it.  Worse so, because Leno and O’Brien enjoy the benefit of a pulpit from which they can take digs at their own employer, while NBC has to work through press releases and media interviews.

So what do we draw from this?

1. Here is another example of how companies are judged not for the problem they experience, but their handling of the problem.  Everybody knew that Jay Leno’s prime time show was a bit flat and expected the network to make some sort of change, but the “fire-ready-aim” approach employed by NBC has been more reminiscent of the Three Stooges than the well-oiled GE/NBC machine.
2. It is impossible to overstate the importance of building goodwill before you need to draw on it.  Leno and O’Brien have that goodwill; Jeff Zucker and NBC do not.
3. Don’t lose control of the agenda!  NBC did that when the media grabbed this before the network was ready (they originally said they’d deal with this AFTER the winter Olympic games), and NBC found itself in the position of playing catch-up to all the pundits (and it’s own hosts) chattering about this.

Looking back on the New Coke experience, we see that Coca-Cola executed the recovery better than the launch, possessed goodwill it could draw on, and regained control of the agenda.

At the end of the day, this Late Night debacle is terribly inconsequential; particularly in view of the current tragedy revealing itself in Haiti.  But it serves as an abject lesson for those of us who don’t want to become the next “New Coke.”

November 22, 2009

Lloyd Blankfein, Goldman Sachs’ chairman and CEO, may wish he never retrieved today’s New York Times from his driveway this morning.

On the heels of Blankfein’s apology last week for “things that were clearly wrong,” and pledge of $500 million to assist small businesses, the Times had not one, not two, but three pieces that dissected the banks actions in a not-so-favorable light.

·         “Taking Spin out for a Spin” – an analysis of the bank’s apology;

·         “Goldman’s Non-Apology” – an editorial; and

·         “Revisiting a Fed Waltz With A.I.G.” by Gretchen Morgenson in the Sunday Business section, which challenges Goldman’s assertions about the A.I.G. bailout and the federal funds it received as a counterparty through A.I.G.

Indeed, the media and bloggers are chattering away this week about Goldman’s apology, whether it was sincere, whether it worked and what Goldman’s true intentions are.

The central question the media seem to be asking is, “Will it work?”

Of, as I put it, does it pass the ‘So what?’ test?

But to get to the answer to that question, one has to pose another question:  “Who is Goldman trying to impress?”

Lawmakers?  The media?  The public?  Investors?  Employees?  Competitors?  Who???

I think one has to look at this from two perspectives. 

As a competitive move, it certainly puts the other banks in a tough spot, because it creates separation from the rest of the pack.  Being first is a coup.  From a competitive standpoint, this may be smart.  Everything done by others afterward will look like catch-up, unless it is larger by magnitudes, or more innovative. 

To be sure, the other banks are probably cursing Goldman for raising the bar, and legislators will likely be looking to the others and asking, “Well, where is your $500M mea culpa?”

But on the  broad question of whether this helps Goldman’s reputation with many of the stakeholders listed above, and whether this does anything to improve the lot of the sector, I’m not so sure.  This is nice, and it is productive, but juxtaposed against record Wall Street earnings, hideously outsized bonuses and the overhang of Madoff, Galleon, Dreier, etc, it won’t get them out of the doghouse.  Moreover, I don’t think anyone is convinced that the final shoe has dropped vis a vis Wall Street fraud, malfeasance, unethical behavior. 

In short, I don’t think people are yet convinced that there is any behavioral change that has accompanied the apology.  After all, people have been upset with the behavior of Wall Street (defined broadly to include investment banks, brokerages, mortgage lenders, etc.) and its share of responsibility for the current global recession.

Last year at this time I wrote on this blog in the topic of apologies:

Companies successfully work their way out of a problem because they address the problem, and not just the perception of the problem.  In other words, a business problem requires a business fix.  A letter of apology or regret published in a newspaper solves nothing.  And the fact that such a tactic is now seen as “required” in the PR tool kit diminishes its value even more, precisely because it is seen as required and thus not genuine.

In the context of the Goldman Sachs apology, I think these words still ring, and may explain the skepticism that it has received.

Goldman and its peers will be judged over time for their behavior far more than for their words or gifts.

When I first learned of the Blankfein apology and $500 million pledge (or, as the Times called it, “crumbs from its table”), the image I had in my mind was of the person who was just caught cheating, and who tries to make up for it with an apology, a vague admission of guilt, and an effort to buy-back the love of his spouse.  How much is enough?  Roses?  Dinner out?  Diamonds?

In Goldman’s case, there is no shortage of critics passing judgment on “how much is enough?”.  And from the looks of the initial reviews, that $500 million hasn’t bought Goldman even a week’s worth of goodwill.

If history is any indication of the future, it will require a sustained commitment, a reshaped culture and some fundamental change to get this monkey off their backs. 

So we give it time.  Maybe we should wait a year before answering the question, “Will it work?”

 # # #

I was having lunch recently with a client.   Through three years we’ve weathered several imminent threats to her company due to potentially explosive crisis situations. But none had materialized into a full-scale crisis.  As we finished our coffee, this client asked a thoughtful question.

“Is it possible to predict whether a situation will remain just a mere nuisance, or instead morph into a full-blown, pants-on-fire crisis?”

Why, in other words, do some situations escalate to crises while others do not, even though they seem to pose the same characteristics?

In fact, by examining various crises that have dominated headlines in recent years shows it’s possible to identify common combustion factors that can cause a matter to ignite.

And while there is rarely a single reason why a situation erupts into a Defcon 1 event, using the following factors should enable communications managers to predict with some degree of accuracy whether a situation holds the potential to escalate.

·         Is it real?  Of course, the first question to be asked is whether the situation poses a legitimate threat to the enterprise.  Think Lehman Brothers, GM or Countrywide Financial.  Their respective fates were not caused by a PR problem (although their mishandling of PR didn’t help).

·         A Clearly defined, tangible, measurable risk.  It is easier for the public and media to go hysterical over H1N1 or salmonella in the food supply than over the gradual threat of the icecaps melting due to climate change.  When the risk appears real rather than abstract, the issue has a greater likelihood of escalating.

·         A sympathetic victim or set of victims.  Cynical as it may sound, the media are far more interested in conflict where there is a vulnerable party.  Children, the elderly and animals are the most attractive to the media.  This is why scandals involving day care centers and nursing homes are so compelling.  It also explains why the Michael Vick/dog-fighting scandal captured far more headlines than it really deserved.  On the other hand, I read a news report last month of a gender discrimination lawsuit brought by a former senior communications executive at Anheuser-Busch.  This woman might have a legitimate case, but when I read that she was entitled to millions of dollars in salary, benefits and other compensation as part of her employment agreement, I quickly lost interest in the story.

·         Scale – Together with the need for a sympathetic set of victims, this is perhaps the most significant combustion point. Consider the Madoff scandal: Investor fraud is common, but not when so many billions of dollars and thousands of investors are involved.

·         Topicality and trends.  I call this the shark attack syndrome.  Each year (typically at the beginning of the summer), there is a news report of a swimmer attacked by a shark.  Then another and another.  It would seem the memo went out to all sharks – “Attack!” (And let the media know)” In fact, media love trends .  If a situation fits into an existing pattern, or is otherwise topical for other reasons, the greater chance it will escalate.  When I was heading media relations @ Texaco in 1996, the company faced a mammoth crisis caused by the release of audiotapes of executives seeming to use racial epithets  in discussing a race discrimination case the company was facing.  It made national headlines because of the nature of the matter.  But the media attention was compounded because the day after the matter was first reported in the press, Californians went to the polls to vote on Proposition 29, a referendum challenging affirmative action.   So the Texaco case became the poster child of the larger issue of the state of race relations and opportunity in America and the media attention was disproportionately large relative to the incident itself.

·         Timing.  Speaking of race, the alleged discrimination by the Valley Swim Club in suburban Philadelphia against a local day camp ignited into a national story. Why? Timing.  Not only did the story deal with a summer day camp at a time of year when millions of children are enrolled in summer camps, but the story also broke on a weekend, when the amount of news to be covered drops, forcing the 24-hour news programs to milk every last bit of life from an event.  Here we see a number of these combustion factors at work – timing, topicality, and a sympathetic set of victims.  (Post-script:  In early November the Valley Swim Club filed for bankruptcy, citing the subsequent lawsuit around this controversy as a contributor to its problems).

·         Hypocrisy.  When a politician who has based his career on law and order or in promoting religious or family values is caught soliciting prostitutes or cheating on his spouse, that politician shouldn’t be surprised at the tsunami of media attention.

·         Compelling Images.  What nearly wrecked Michael Phelps’s career in product endorsements was not that he smoked pot, but that someone happened to have a camera to capture the moment and then post it to the internet.   In another example, the recent fire at the gasoline storage facility in Puerto Rico captured enormous amount of media interest.  Why?   Certainly not because of any death or injuries, or widespread destruction (injuries were minor, there was virtually no damage outside of the facility itself, and it didn’t impact the availability or price of fuel in the area.)  In other words, a non-event.  But the images made for good television.

·         Viral videos.  We live in a YouTube world.  The Internet and personal technology can spread a scandal faster than Al Gore could have imagined when he invented the internet (J).  Just ask Dominos Pizza, United Airlines, Michael Richards, or player on the University of New Mexico’s women’s soccer team who is famous for all the wrong reasons due to her rough play, captured on video. 

·         Mismanaging the crisis.  Last year’s episode involving auto company CEOs, their corporate jets and Congressional hearings about bailouts has become a case study in mismanaging a crisis (or at least one element of it).  Typically one doesn’t see big companies mismanaging a crisis, as there are enough checks and balances in place (and consultants).  Celebrities often seem to have two left feet when it comes to handling their own problems.  While Don Imus’ joke about the Rutgers University women’s basketball team was in bad taste, it was the way in which he so completely mismanaged the fall-out that led to his demise. All he had to do was to use his own radio program – where he already enjoyed a reputation of hosting provocative discussions of topics of the day — to have a frank talk about race in our society. Instead, he hesitated with his apology and then relied on bad advice that just compounded his problems.  He may be back on the air with another network, but the episode will follow him (and his Wikipedia entry) forever.

·         Deceit – They lied and they got caught lying. Eliot Spitzer, Rod Blagojevich, Mark Sanford.  Sammy Sosa, Pete Rose.  Enron, Worldcom, Adelphia, Tyco.  Say no more (also see #7, above, Hypocrisy).

·         Irony – Generally, when a company or public personality (politican, entertainer, etc.) turns out to be the opposite of what they purport to be, that’s irony.  BP spent hundreds of millions of dollars (maybe more) over the better part of a decade in an effort to convince the public that they were different than other oil companies, better than their competitors, and were committed to the environment, clean energy technology and reshaping the energy sector (“Beyond Petroleum”).  Perhaps employees didn’t get the message about this radical shift.  In short order, the company faced a fatal explosion at its Texas refinery (subsequently linked to decisions to cut corners on safety and maintenance), an oil pipeline spill in Alaska, and a criminal investigation of price fixing.  One could argue that the reputation damage suffered by BP would not have been as severe were these same events to occur to another oil company that didn’t try so hard to convince people it was something it wasn’t.

·         Bad luck, or wrong place/wrong time – Sometimes companies find themselves in the midst of a nightmare through no fault of their own; they just happen to be in the wrong place at the wrong time.   For instance, in early 2006 DP World, a company with a stellar record and reputation, was set to announce that it had won the contract to manage port operations in six major U.S. markets.  However, because of internal political issues in the U.S. and the anti-arab xenophobia which was unfortunately still too prevalent in post 9/11 America, this became a major political firestorm in the U.S., and the company was forced to withdraw from the contracts.

So, what is the lesson here?

A Monday morning quarterback will always look smart in conducting a forensic autopsy of a crisis.  But such Monday morning analysis doesn’t help on the preceding Saturday.  Of course, if I could predict the future with certainty, I would have won the Powerball lottery many times over.    The problem is, I cannot.  Nor can anyone else.  So for us mere mortals, we can use these combustion points as yardsticks to guesstimate how severe a crisis may become, and we plan accordingly.  But the really smart reputation manager will have plans ready for all levels of crisis, and be able to throttle up or down depending upon the course the crisis takes.

Yesterday’s incident involving the six year-old boy who was believed to be in a runaway helium baloon is certain to become one of the strangest episodes in history.  And with the boy vomiting on live national television this morning and questions over whether this was a hoax, it is certain to get even weirder.

But aside from its entirely bizarre nature, this incident has illuminated what I call the “Jon & Kate Syndrome” — the perverse marriage of publicity-seeking people willing to exploit their own children in their quest of riches and fame, and 24-hour cable networks, who put sensationalism and voyeurism ahead of values (journalism AND family).

I don’t fault the networks for covering the story — it is certainly interesting.  However, what I do challenge is the decision of the parents to allow their children to be included in television interviews, and the networks for allowing the children to be included; even asking questions of the children.  Is there not a single producer or booker out there who is willing to say, “Hey — let’s think this one through.  Are we compromising the story if we interview the parents WITHOUT the children being on the air?”  Evidently not.

All I can imagine is that these parents are so blinded by the klieg lights and their own quest for fame (in other words, just like Jon and Kate) that they either lose sight of, or abandon, their obligations to protect their children, and act in the best interests of their kids.

Does anyone believe that these children will benefit from the spotlight?

As for the cable networks, does anyone believe their ability to tell the story is compromised if the kids are not on camera?

The answer to both questions, of course, is “no.”

I was watching Campbell Brown’s program last evening, and she was doing a competent job in exploring this story, and all its possible angles (including the exploitation of the kids).  And she describes the personal anguish she felt, as a parent, as she watched this incident unfold.  But at the end of her program, what does she do?  She puts in a plug for the Larry King Live program, which will feature the “balloon” parents and their children!

It’s simply a matter of time before a legislator proposes a law to criminalize such parental bad behavior.

What does this have to do with crisis communications?

Not much really, but as a parent of 4 young children, my horror at the idea of a small child being carried away by a runaway balloon was second only to my disgust at parents and networks exploiting vulnerable children.

This incident is further proof that the networks will choose sensationlism ahead of sound journalism.  And just as drug pushers enable drug addicts, so too do the networks enable these publicity-seeking irresponsible parents.

As communications and reputation managers, we should keep that in mind should we find ourselves in a situation that is “made” for television news.