Crisis Class 2 Jan 19 2012

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Crisis Communication class, Georgetown January 2012

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Crisis Class 2 Jan 19 2012

  1. 1. Corporate Crisis Communications Spring 2012 Class #2 January 19, 2012 Judith Muhlberg & Bruce Harrison1 Georgetown University Crisis Communications Jan. 19, 2012
  2. 2. 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.2 Georgetown University Crisis Communications Jan. 19, 2012
  3. 3. 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.3 Georgetown University Crisis Communications Jan. 19, 2012
  4. 4. ‘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 COMMUNICATION4 Georgetown University Crisis Communications Jan. 19, 2012
  5. 5. 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?5 Georgetown University Crisis Communications Jan. 19, 2012
  6. 6. Audi 1986 (pre-digital context) J&J/Tylenol 1982 (pre-digital) HP 2006 & 2011 (digital) Three Companies/Four Case Studies6 Georgetown University Crisis Communications Jan. 19, 2012
  7. 7. Case Analysis: Audi, 1986  Victims:  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 emotional7 Georgetown University Crisis Communications Jan. 19, 2012
  8. 8. Case Analysis: Audi, 1986  CBS 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 ensued  Plaintiffs’ lawyers created a support group “Audi Victims Network” – leading to more lawsuits8 Georgetown University Crisis Communications Jan. 19, 2012
  9. 9. Case Analysis: Audi, 1986  CBS repeated the broadcast (9/87) with 1,200 reports of “sudden acceleration” – 5 deaths/400 injuries  Audi’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).9 Georgetown University Crisis Communications Jan. 19, 2012
  10. 10. Desenhall Analysis 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)? 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?10 Georgetown University Crisis Communications Jan. 19, 2012
  11. 11. Case Analysis: J&J Tylenol 198211 Georgetown University Crisis Communications Jan. 19, 2012
  12. 12. Case Analysis: J&J Tylenol 1982 Disruption 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 bottles  On 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 him Relying 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.12 Georgetown University Crisis Communications Jan. 19, 2012
  13. 13. J&J Credo13 Georgetown University Crisis Communications Jan. 19, 2012
  14. 14. Case Analysis: J&J Tylenol 1982  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 packaging14 Georgetown University Crisis Communications Jan. 19, 2012
  15. 15. Case Analysis: J&J Tylenol 1982  New Tylenol packaging was back on the shelves 10 weeks after the start of the crisis  The crisis cost JNJ $100M  Tylenol regained 100% of its market share post-crisis  JNJ 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, CCO15 Georgetown University Crisis Communications Jan. 19, 2012
  16. 16. Desenhall Analysis 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)? 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?16 Georgetown University Crisis Communications Jan. 19, 2012
  17. 17. J&J Sequel: Motrin Moms Timed for International Baby Wearing week, J&J ran the following commercial17 Georgetown University Crisis Communications Jan. 19, 2012
  18. 18. 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 apologize18 Georgetown University Crisis Communications Jan. 19, 2012
  19. 19. Desenhall Analysis 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)? 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,19 how, and did it help? Georgetown University Crisis Communications Jan. 19, 2012
  20. 20. Case Analysis: HP, 2006  Victims:  9 journalists (WSJ, NYT, CNET, etc.,)  2 HP employees from “pretexting”/3 from involvement  7 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.20 Georgetown University Crisis Communications Jan. 19, 2012
  21. 21. Case Analysis: HP, 2006 Disruption from the Event: The investigation to plug leaks did more damage than the leaks Congressional hearings were called on the “pretexting” issue21 Georgetown University Crisis Communications Jan. 19, 2012
  22. 22. Case Analysis: HP, 200622 Georgetown University Crisis Communications Jan. 19, 2012
  23. 23. Case Analysis: HP, 2006  HP’s general counsel, chief ethics officer and security manager were forced to resign  Patricia 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.23 Georgetown University Crisis Communications Jan. 19, 2012
  24. 24. Desenhall Analysis (’06 & ‘11) 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)? 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?24 Georgetown University Crisis Communications Jan. 19, 2012
  25. 25. 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 companys 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 HP25 Georgetown University Crisis Communications Jan. 19, 2012
  26. 26. Desenhall Analysis (’06 & ‘11) 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)? 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?26 Georgetown University Crisis Communications Jan. 19, 2012
  27. 27. Exxon Valdez 1989 (Pre-digital) BP 2010 (Digital Contexts)Two Case Studies(Contexts of Time, Impact on Communication)27 Georgetown University Crisis Communications Jan. 19, 2012
  28. 28. Case Analysis: Exxon ‘Valdez’: 1989 What, when? just after midnight on a calm sea, March 24, 1989 Huge crude-oil tanker hits reef in Alaska Worst 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
  29. 29. Case Analysis: Exxon ‘Valdez’: 1989  Disruptions…and threats:  Heavy media, local and three major TV networks  Mobilized foes: fishermen, environmentalists, others  Angry customers: protest, cancel their Exxon credit cards  Exxon 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 media  Incorrect, hostile information, with Exxon in Houston scrambling to correct— while protecting CEO Rawl who refused to go to scene29 Georgetown University Crisis Communications Jan. 19, 2012
  30. 30. 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 million30 Georgetown University Crisis Communications Jan. 19, 2012
  31. 31. Post-climax impact (in digital era) AND THE CASE GOES ON: 2002 – CIRCUIT COURT CUTS PUNITIVE TO $4.5 BILLION 2006 – CIRCUIT COURT CUTS TO $2.5 BILLION 2007 – COURT DENIES REQUEST FOR THIRD HEARING, COMPANY APPEALS TO SUPREME COURT 2008 – SUPREME COURT CASE IS REMANDED TO LOWER COURT…31 Georgetown University Crisis Communications Jan. 19, 2012
  32. 32. Desenhall Analysis 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)? 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?32 Georgetown University Crisis Communications Jan. 19, 2012
  33. 33. 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.33 Georgetown University Crisis Communications Jan. 19, 2012
  34. 34. 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…34 Georgetown University Crisis Communications Jan. 19, 2012
  35. 35. 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 Hayward35 Georgetown University Crisis Communications Jan. 19, 2012
  36. 36. BP Corporate Accountability Voluntarily sets up compensation fund Hires out-of-work boat-owners, fishermen Agrees 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 far36 Georgetown University Crisis Communications Jan. 19, 2012
  37. 37. 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 spokespersons37 Georgetown University Crisis Communications Jan. 19, 2012
  38. 38. 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.38 Georgetown University Crisis Communications Jan. 19, 2012
  39. 39. 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 Nocera39 Georgetown University Crisis Communications Jan. 19, 2012
  40. 40. Desenhall Analysis 1. Is 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? 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 that help? 6. What will be the outcome? Will there be life after the crisis? Will the torpedoed ship survive?40 Georgetown University Crisis Communications Jan. 19, 2012
  41. 41. Pre-Crisis Intelligence Project41 Georgetown University Crisis Communications Jan. 19, 2012
  42. 42. What company or companies are you tracking? 1: Pharmaceutical industry 2: Technology 3: Automotive 4: Financial 5: Food/Beverage42 Georgetown University Crisis Communications Jan. 19, 2012
  43. 43. 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 1/12/1243 Georgetown University Crisis Communications Jan. 19, 2012
  44. 44. Next Week Work on your PIP and be prepared to comment on your progress “listening to stakeholder perception” What you know about your company What you’ve picked up by accessing stakeholder information, news and commentary. Guest Lecture Eric Dezenhall  In 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.44 Georgetown University Crisis Communications Jan. 19, 2012

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