Crisis Class 2 Jan 19 2012

Class #2January 19, 2012

Judith Muhlberg & Bruce Harrison

Corporate Crisis Communications

Spring 2012

Jan. 19, 20121Georgetown University Crisis Communications

What is a corporate crisis?(Created by 2012 Spring Class, Crisis

Communication, Georgetown University)

A disruptive event that threatens the organization’s reputation, relationships with stakeholders and long-term sustainability.

Jan. 19, 2012Georgetown University Crisis Communications2

What are some characteristics of company crises? From Dezenhall’s ‘Damage Control’

A crisis means CONFLICT between company and opposing forces; otherwise it’s a problem

We easily cast VILLAINS and VICTIMS, helped by VINDICATORS—media, social, legal and political activists

Companies can SURVIVE the “torpedo” if they CONTROL the immediate damage, take charge of the communications, and the OUTCOME of the crisis

CONTEXT—time, place, external and internal conditions– shapes the nature of, and response to, crises.


‘Classic’ Crisis Case Studies,With Consideration of ‘Pre-Digital’ and ‘Digital’ Contexts

Audi crisis, 1986: a public drama CRISIS with sympathetic VICTIMS, compelling STORY, scary THREAT, public OUTRAGE, feeding frenzy MEDIA, ready LITIGANTS and PLAINTIFFS’ LAWYERS

J&J crisis, 1982: a popular product is center of a CRISIS that becomes classic COMMUNICATION case

HP crisis, 2006: a quiet, internal failure to deal with a PROBLEM, becomes CRISIS, with a sequel in 2011.

Exxon crisis, 1989: biggest oil spill in US history – with a low mark in CRISIS COMMUNICATION

BP crisis, 2010: the new ‘biggest oil spill’ – with new lessons in taking charge of CRISIS COMMUNICATION


Tonight: we analyze case studies using questions drawn from Dezenhall

1. Was the company seen as a victim or villain? Has that status changed since the crisis reached the post-climax stage?

2. Did they take the initiative (get off defense, go on offense, do aggressive damage control)? If so, how…and how soon?

3. What was the company’s main message? To its stakeholders, to government?

4. Did the company wrap messages with principle? Security, Safety, Privacy, Choice, Justice, Economy…?

5. Did the company apologize? If so, how, and did it help?

6. What will be the outcome? Will there be life after the crisis? Will the torpedoed ship survive?

5Georgetown University Crisis Communications Jan. 19, 2012

Audi 1986 (pre-digital context)J&J/Tylenol 1982 (pre-digital)HP 2006 & 2011 (digital)

Three Companies/Four Case Studies

6 Jan. 19, 2012Georgetown University Crisis Communications

Case Analysis: Audi, 1986Victims:

Reverend (Rev. Bradosky)Reverend’s wife (Kristi Bradosky)6-year-old son (Joshua Bradosky)Audi 5000

Event:

Kristi alleged that her Audi 5000 lurched forward in her garage, unprompted, killing Joshua.

Disruption from the Event:CBS’s 60 Minutes broadcast a segment (11/23/86) called “Out of

Control”Rev. and Mrs. Bradosky were interviewed – very emotional


Case Analysis: Audi, 1986CBS showed their own “field demonstrations” of a runaway car –

with no one in the driver’s seat.Audi executive tried to explain the physical impossibility CBS and Ed Bradley created a new mechanical syndrome

“sudden acceleration” (no matter how hard a driver pressed on the brake, the car would keep zooming ahead)

Threats to the organization’s reputation, relationships with stakeholders and long-term sustainability:Audi could not prove to the public that “sudden acceleration =

driver error (facts were “not heard”)Government investigations ensuedPlaintiffs’ lawyers created a support group “Audi Victims Network”

– leading to more lawsuits8 Jan. 19, 2012

Georgetown University Crisis Communications

Case Analysis: Audi, 1986CBS repeated the broadcast (9/87) with 1,200 reports of

“sudden acceleration” – 5 deaths/400 injuriesAudi’s reputation (motto: The Art of Engineering) took a huge

nose-dive in North America (not in Europe)Audi sales plummeted (from 74,000 to 14,000 and a market

share loss of 80%). They lost billions of revenue, and did not recover in the North American market for a decade

Truth: In 1989, NHTSA concluded there was no mechanical basis

for “sudden acceleration” and the accidents were caused by driver error. The drivers had most likely placed their foot on the accelerator (instead of the brake).


Desenhall Analysis1. Was the company seen as a victim or villain?

Has that status changed since the crisis reached the post-climax stage?

2. Did they take the initiative (get off defense, go on offense)? If so, how…and how soon?






Case Analysis: J&J Tylenol 1982


Case Analysis: J&J Tylenol 1982Disruption from the Event:

JNJ recalled all Tylenol in the Chicago area immediately and began working with the police and FBI

Reaction spread nationwide as companies (Safeway, Revco, CVS) pulled Tylenol from their shelves

JNJ found 2 additional cyanide pills in recalled bottlesOn Oct. 5, JNJ recalled all Tylenol products nationwide.

Threats to the organization’s reputation, relationships with stakeholders and long-term sustainability:CCO Larry Foster had a reputation for openness and honesty with the media, and many reporters trusted/respected himRelying on the J&J Credo as a guide, the CEO and crisis team acted quickly to warn the public and destroyed 31 million Tylenol capsules.


J&J Credo



The FBI and FDA did not find evidence of tampering at the 2 JNJ plants where Tylenol was produced and shifted the focus to an external source – “a malicious psychopath” who bought Tylenol, laced it with cyanide and put it back on store shelves

While Tylenol’s future hung in the balance, it did not affect the sustainability of JNJ. JNJ was (is) a very diversified company, and other products were not affected. There was no boycott vs. JNJ

On Nov. 11, JNJ announced a triple-seal safety package for Tylenol. News conference was satellite-fed to 29 sites where media were gathered. Toll-free number for consumers received 200,000 calls

Other pharmaceuticals followed JNJ’s lead with their packaging



New Tylenol packaging was back on the shelves 10 weeks after the start of the crisis

The crisis cost JNJ $100MTylenol regained 100% of its market share post-crisisJNJ was viewed as a responsible company that saved lives by

their rapid response, openness and honesty

“What began as J&J’s darkest hour turned out to be its brightest in terms of corporate reputation.”

Larry Foster, CCO


J&J Sequel: Motrin MomsTimed for International Baby Wearing

week, J&J ran the following commercial


J&J Sequel: Motrin Moms

Within hours, it was on YouTube and became the most tweeted topic on Twitter – and mommy bloggers went into full gear…

J&J pulled the ad from its site, the VP of marketing emailed the most active bloggers to apologize


Case Analysis: HP, 2006Victims:

9 journalists (WSJ, NYT, CNET, etc.,)2 HP employees from “pretexting”/3 from involvement7 HP Board Members

Villan:Patricia Dunn, interim HP Chair and Lead Director, HP

Event:In late 2005, concerned about boardroom leaks, interim HP

chairman, Patricia Dunn, set in motion a private investigation, including the collection of private phone records through pretexting. “Pretexting” is gathering info through misrepresentation – pretending to be the person to whom the private phone records belonged.


Case Analysis: HP, 2006Disruption from the Event:The investigation to plug leaks did more damage than the leaksCongressional hearings were called on the “pretexting” issue


Case Analysis: HP, 2006


Case Analysis: HP, 2006HP’s general counsel, chief ethics officer and security

manager were forced to resignPatricia Dunn resigned

Felony charges against her were dropped.Unfortunately, she died in December 2010.

Threats to organization’s reputation, relationships with stakeholders and long-term sustainability:Media outrage over the actions. At Hurd’s first news

conference on the issue, he took no questions “legal issues at stake.”

New CEO, Mark Hurd, apologized to those who were “spied upon”/ hired a former US prosecutor to review the actions

HP shares did not take a hit. Analysts remained bullish on the stock, and Hurd’s takeover as CEO positively impacted HP business fundamentals.


Desenhall Analysis (’06 & ‘11)1. Was the company seen as a victim or villain?








Case Analysis: HP Sequel Mark Hurd became CEO of HP (following Carly Fiorina’s firing by

the Board) in March 2005 and succeeded Patricia Dunn as Chairman (following her firing by the Board) in September 2006

Hurd was fired on August 6, 2010, after an internal investigation uncovered “expense-account irregularities” and inappropriate conduct in an investigation into a claim of sexual harassment made by former reality TV actress

The probe concluded that the company's sexual-harassment policy was not violated, but that its standards of business conduct were.

HP lost $9 billion in market cap the week after he “resigned.” A letter, containing details of the sexual harassment claim, was

published by the NYT on December 29, 2011 He is now Co-President at Oracle Meg Whitman is now CEO of HP


Desenhall Analysis (’06 & ‘11)1. Was the company seen as a victim or villain?








Exxon Valdez 1989 (Pre-digital)BP 2010 (Digital Contexts)

Two Case Studies (Contexts of Time, Impact on Communication)


Case Analysis:

Exxon ‘Valdez’: 1989What, when? just after midnight on a

calm sea, March 24, 1989Huge crude-oil tanker hits reef in AlaskaWorst oil spill ever in American waters (11

million gallons into Prince William Sound)Victims?

Wildlife: 1 million migratory fowl; 2,500 sea otters; seals, sea lions, clams, fish

Workers: lost work, fishing income, tourists…Villain?

Company culture, CEO, ship’s captain…?28

Georgetown University Crisis Communications Jan. 19, 2012

Case Analysis: Exxon ‘Valdez’: 1989

Disruptions…and threats:Heavy media, local and three major TV networksMobilized foes: fishermen, environmentalists, othersAngry customers: protest, cancel their Exxon credit cardsExxon accused of lacking plan to deal with incident..and

of causing harm, income loss, basis for LAWSUITS Communication/response:

Unanswered negatives on ‘feeble containment effort’Understaffed Exxon center in Valdez overwhelmed by

mediaIncorrect, hostile information, with Exxon in Houston

scrambling to correct—while protecting CEO Rawl who refused to go to scene

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Post-climax impact (in digital era)Attorneys for plaintiffs continue to argue that

Exxon was responsible because they “put a drunk in charge of a tanker”

Exxon argues that punitive damages greater than $25 million not justified because the spill resulted from an accident and because Exxon spent $2 billion cleaning up the spill and another $1 billion to settle civil and criminal charges.

ANCHORAGE JURY AWARDED $287 MILLION DAMAGES AND $5 BILLION PUNITIVE

A separate settlement of damages with seafood producers, cost the company $63.75 million


Post-climax impact (in digital era)AND THE CASE GOES ON:2002 – CIRCUIT COURT CUTS PUNITIVE TO

$4.5 BILLION2006 – CIRCUIT COURT CUTS TO $2.5

BILLION2007 – COURT DENIES REQUEST FOR

THIRD HEARING, COMPANY APPEALS TO SUPREME COURT

2008 – SUPREME COURT CASE IS REMANDED TO LOWER COURT…


Case Analysis: BP Oil Crisis: 2010• Cause

– April 20, 2010: Gulf of Mexico: drill rig explodes, 11 workers are killed

– Leaks in the pipeline/formation…25,000 barrels/day of oil, pour into water, reach shore

• Public awareness/concern– Immediate, virtually nonstop intensive

traditional media and social media coverage– Starting April 26: leak is seen by public 24/7

via BP’s undersea camera…Internet, TV, SM• Climax

• August 8: Leaking well is plugged; bubbles are clear. Jan. 19, 2012

Georgetown University Crisis Communications33

BP Crisis: Stakeholders

Fishing industry…46,000 sq. mile ban on commercial fishing…boats, operators, oyster/fish harvesters, processors…

Tourism…hotels, resorts, air travel, ground transportation…

Local businesses…restaurants, supplies, fishing, tourism, Gulf sports…

Others…environmentalists, fish/wildlife/ habitat stakeholders…


BP-government interactions

• President Obama goes to Gulf, holds news events, puts ban on offshore drilling and on Gulf fishing.

• Obama joined by AL, GA, MS, FL governors in expressing interest, concern, reassurance, etc.

• Former FL Senator Graham & EPA Chief Reilly head commission to look into causes/impact

• Congressional hearings: (5/11/10) execs from BP, Transocean, Halliburton; (6/17/10) CEO Hayward


BP Corporate AccountabilityVoluntarily sets up compensation fundHires out-of-work boat-owners,

fishermenAgrees with White House, to finance $20

billion fund to pay claims of people whose jobs and lives have been damaged

Mid-2010: BP says spill (now capped) cost the company $6.1 billion so far


BP Crisis: Communication (2010-Now]• BP communications team on site within hours• Crisis US media base, websites, social media,

interactive Twitter activated; BP’s undersea camera shows the leak 24/7 on Internet

• CEO Hayward (U.K.) arrives, acts as spokesperson– Downside: CEO does poorly at Congressional

hearings , has media gaffe (“want my life back”) (Chmn: ‘small people”)

– Correction: spokesperson role goes to Dudley (U.S.)

– Coast Guard spokesperson expands credibility• Print and TV ad campaign in major US outlets (still

running)– Themes: accountability, environment, economy;

local people – BP employees, local officials, boosters – as spokespersons


BP Crisis: Communication (2010-Now]

BP continue paying victims’ claims at high rates – 9,000 of 23,000 so far – and the company gets some halo recognition in the media.

BP says failed safety systems and irresponsible behavior of contractors led to the explosion.] The firms deny the allegations.

BP files $40 billion in lawsuits against rig owner Transocean, cementer Halliburton and blowout preventer manufacturer Cameron. Not yet resolved.


BP Crisis: Communication (2010-Now]

BP internal report admits some blame, holds others responsible for decisions that caused explosion

Incoming CEO Bob Dudley tells analysts that the claims filed may add up to less than $20 billion put in escrow

Dudley speeches in London and in New York: We get it. We’re sorry. We’ll fix it.

Favorable media includes New York Times op-ed by respected business columnist Joe Nocera


Desenhall Analysis1. Is the company seen as a victim or villain? Has

that status changed since the crisis reached the post-climax stage?




5. Did the company apologize? If so, how, and did that help?



Pre-Crisis Intelligence Project


What company or companies are you tracking?1: Pharmaceutical industry2: Technology3: Automotive4: Financial5: Food/Beverage


Searches you can use…not necessary to build a ‘listening station’

• Google• Yahoo• LEXIS-NEXIS • Twitter Search• Filtrbox• NYTimes, Wall Street

Journal, Financial Times, Fortune, etc.

• Technorati.com• And look at the

Guide handout you received 1/12/12


Next WeekWork on your PIP and be prepared to

comment on your progress “listening to stakeholder perception”What you know about your companyWhat you’ve picked up by accessing stakeholder

information, news and commentary.Guest Lecture

Eric DezenhallIn addition to heading Dezenhall Resources, Ltd., Eric is

a published author of fiction and non-fiction books, a frequent media commentator, and a sought-after speaker.


Crisis Class 2 Jan 19 2012

Documents

Transcript of Crisis Class 2 Jan 19 2012