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Crisis Management


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This lecture focuses on crisis management techniques and case studies in public relations.

Published in: Economy & Finance, Business

Crisis Management

  1. 1. Crisis Management
  2. 2. Crisis Management Basics <ul><li>“ No comment” fuels hostility </li></ul><ul><li>Always try to be helpful </li></ul><ul><li>Be aware of deadlines </li></ul><ul><li>Befriend journalists before the crisis hits </li></ul>
  3. 3. Crisis Management Tips <ul><li>Appoint a spokesperson who is personable and credible </li></ul><ul><li>Set up a central place where media and the public can get info </li></ul><ul><li>Keep the information coming </li></ul><ul><li>Be accessible and return all calls </li></ul><ul><li>Be honest </li></ul>
  4. 4. Examples of Crisis Management <ul><li>Odwalla </li></ul><ul><li>Exxon </li></ul>
  5. 5. Case Study <ul><li>Odwalla juice e-coli outbreak in 1996 </li></ul><ul><ul><li>Health officials in Washington state informed the company that they had discovered a link between several cases of E. coli 0157:H7 and Odwalla fresh apple juice. </li></ul></ul>
  6. 6. Case Study <ul><li>One child died and more than 60 people in the Western United States and Canada became sick after drinking the juice. </li></ul><ul><li>Sales plummeted by 90%, Odwalla's stock price fell 34%. </li></ul><ul><li>Customers filed more than 20 personal-injury lawsuits and the company looked as though it could well be destroyed. </li></ul>
  7. 7. What did the company do? <ul><li>Odwalla acted immediately. </li></ul><ul><li>Although at the point where they were first notified the link was uncertain, Odwalla's CEO Stephen Williamson ordered a complete recall of all products containing apple or carrot juice. </li></ul><ul><ul><li>This recall covered around 4,600 retail outlets in 7 states. </li></ul></ul><ul><li>Internal task teams were formed and mobilized, and the recall - costing around $6.5m was completed within 48 hours. </li></ul>
  8. 8. Taking Responsibility <ul><li>On all media interviews, the CEO expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs. </li></ul><ul><li>This, allied to the prompt and comprehensive recall, went a long way towards satisfying customers that the company was doing all it could. </li></ul>
  9. 9. Internal communications <ul><li>The CEO conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. </li></ul><ul><li>This approach proved so popular that the practice of quarterly calls survived the crisis. </li></ul>
  10. 10. External communications <ul><li>Within 24 hours, the company had an explanatory Web site (its first) that received 20,000 hits in 48 hours. </li></ul><ul><li>The company spoke to the press, appeared on TV and carried out direct advertising with the Web site address. </li></ul><ul><li>All possible attempts were made to provide up to the minute, accurate information. </li></ul>
  11. 11. Fixing the Problem <ul><li>The next step was to tackle the problem of contamination. </li></ul><ul><li>The company switched from unpasteurised juice to a process called &quot;flash pasteurization&quot; which would guarantee that E-coli had been destroyed without compromising flavor. </li></ul>
  12. 12. Fixing the Problem <ul><li>Within months of the outbreak, the company had in place what some experts described as &quot;the most comprehensive quality control and safety system in the fresh juice industry.&quot; </li></ul><ul><li>On December 5, the company brought back its apple juice. </li></ul><ul><li>The new process was communicated in all advertising and public outreach campaigns </li></ul>
  13. 13. Cost and benefit <ul><li>Odwalla made a rapid recovery. </li></ul><ul><li>Much of the good will and trust it had built up over the years remained. </li></ul><ul><li>Sales picked up again quite quickly. </li></ul>
  14. 14. Cost and benefit <ul><li>The company did pay a large cost. Odwalla pleaded guilty to criminal charges of selling tainted apple juice and was fined $1.5m - the largest ever assessed in a food industry case by the US Food and Drug Administration. </li></ul>
  15. 15. Case Study <ul><li>In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards California. </li></ul><ul><li>The ship ran aground and began spilling oil. Within a very short period of time, significant quantities of its 1,260,000 barrels had entered the environment. </li></ul>
  16. 16. Case Study <ul><li>At the moment of the collision the third mate, who was not certified to take the tanker into those waters, was at the helm. </li></ul><ul><li>The probable cause was established that the Captain and many of the crew had been drinking alcohol in considerable quantities. </li></ul>
  17. 17. What did the company do? <ul><li>The action to contain the spill was slow to get going. </li></ul><ul><li>The company refused to communicate openly and effectively to the public about the incident. </li></ul><ul><ul><li>The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly. </li></ul></ul>
  18. 18. Poor Crisis Management <ul><li>Media coverage escalated while Exxon dodged the media </li></ul><ul><ul><li>The Chairman refused to be interviewed on TV and said that he had no time for “that kind of thing.” </li></ul></ul><ul><li>A company spokesman misrepresented the extent of the spill and clean-up efforts </li></ul><ul><ul><li>This was in contrast to the footage of the ecological disaster shown on TV </li></ul></ul>
  19. 19. Failure to Fix the Problem <ul><li>While Exxon stalled and attempted to cover up the problem, the clean-up operation was slow to begin </li></ul><ul><li>Around 240,000 barrels had been spilled, with another million still on the ship. </li></ul><ul><li>During the first two days, when calm weather would have allowed it, little was done to contain the spillage. </li></ul><ul><li>This spillage spread out into a 12 square mile slick. </li></ul>
  20. 20. The Problem Compounds <ul><li>Then the bad weather struck, making further containment almost impossible. </li></ul><ul><li>After more than a week, the company was still giving no ground on the request for better communication. </li></ul><ul><li>The media clamor became so hostile that eventually Frank Larossi, the Director of Exxon Shipping, flew to Valdez to hold a press conference. </li></ul><ul><li>It was not a success. Small pieces of good news claimed by the company were immediately contradicted by the eyewitness accounts of the present journalists and fishermen. </li></ul>
  21. 21. Outrage Builds <ul><li>John Devens, the Mayor of Valdez, commented that the community felt betrayed by Exxon's inadequate response to the crisis, in contrast to the promises they had been quick to give of how they would react in exactly this eventuality. </li></ul>
  22. 22. Poor Communication <ul><li>Eventually, Chairman Rawl was interviewed live </li></ul><ul><li>He was asked about the latest plans for the clean-up. </li></ul><ul><li>It turned out he had neglected to read these, and cited the fact that it was not the job of the chairman to read such reports. </li></ul><ul><li>He placed the blame for the crisis at the feet of the world's media. </li></ul>
  23. 23. The Aftermath <ul><li>The spill cost around $7 billion, including the clean up costs. </li></ul><ul><li>$5 billion of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility. </li></ul>
  24. 24. The Aftermath <ul><li>Exxon lost market share and slipped from being the largest oil company in the world to the third largest. </li></ul><ul><li>The &quot;Exxon Valdez&quot; entered the language as a shortcut for corporate arrogance and damage. </li></ul>
  25. 25. What went wrong? <ul><li>The company failed to show that they had effective systems in place to deal with the crisis - and in particular their ability to move quickly once the problem had occurred was not in evidence </li></ul><ul><li>They showed little leadership after the event in showing their commitment to ensuring such problems would never happen again </li></ul><ul><li>They quite simply gave no evidence that they cared about what had happened. They appeared indifferent to the environmental destruction. </li></ul>
  26. 26. In-class Analysis <ul><li>We will break into teams to examine some recent PR crisis scenarios </li></ul><ul><li>See the class blog </li></ul>
  27. 27. Final Review <ul><li>Covers: </li></ul><ul><ul><li>Ch. 8 – Pitch Letters, Advisories, Media Kits & Op-Ed </li></ul></ul><ul><ul><li>Ch. 9 – Radio, Television & Webcasting </li></ul></ul><ul><ul><li>Ch. 10 – Distribution: Snail-mail to Internet </li></ul></ul><ul><ul><li>Ch. 12 – Newsletters, E-zines & Brochures </li></ul></ul><ul><ul><li>Ch. 13 – World Wide Web </li></ul></ul><ul><ul><li>Ch. 14 – E-mail, Memos, Letters, Proposals & Reports </li></ul></ul><ul><ul><li>Ch. 15 – Direct Mail and Advertising </li></ul></ul><ul><ul><li>Ch. 18 – Program Planning </li></ul></ul><ul><ul><li>Ch. 19 – Measurements & Evaluation </li></ul></ul>
  28. 28. Final Review <ul><li>The test will consist of written response/Writing examples </li></ul><ul><ul><li>Open-book/notes/Internet access </li></ul></ul><ul><ul><li>Worth 60 points </li></ul></ul>