14. Crisis Management
14.4 Case Studies
Before proceeding to two specific case studies of contrasting fallout technique, it is useful to repeat a little more bluntly the key point that has been made so far.
Fallout management, public interrogation and response, is a legitimate and desirable aspect of
democratic accountability. Even when the process is misused and Rafferty’s Rules apply, more benefit accrues overall to the corporate image through frank and willing engagement with the public than through resentful reluctance, avoidance or obfuscation.
In these times when political and PR minders and spin doctors seem to abound, there is a danger that managers will be tempted to think cynically of the fallout process. Some see fallout management largely in terms of merely training spokesmen in PR and political minder-style techniques for media appearance. Training is seen too much in terms of preparation to do battle with hostile, unfair and tricky adversaries only - the negative approach rather than a positive bid to win public trust and confidence. Should combat or communication, openness or secrecy, fact or spin, explanation or avoidance, be foremost in one’s approach to fallout management?
The following two case studies may help readers decide between the two approaches. Both cases involved global product recalls. But they have the advantage of being widely applicable. Both are classical illustrations of good and woeful fallout management.
Perrier
One recall was by Perrier of its mineral water in 1990. The other was the recall by Proctor and Gamble in 1986 of its pain relieving Tylenol pain tablets.
Perrier’s fallout was triggered when a US health authority, using advanced technology, detected benzene in a shipment of Perrier water from France. The concentration was allowable under World Health Organisation standards but not under US standards.
Different Perrier spokesmen in the US and France started making factual assertions to the media before the company had established the facts. One claim was that contamination was confined to the US shipment. Another was that the benzene came from bottle cleaning.
These claims were later shown by the media to be false or mistaken. This immediately set back the company’s credibility and aroused the media’s blood scent. Media focus on the Perrier story intensified. The investigative spotlight extended to Perrier’s promotional marketing.
The value of the mineral water product lay in lifestyle image. Perrier claimed that the mineral water was pure at its natural source – that it was naturally sparkling, and that it was calorie and sodium free. Perrier’s image was built around promotional slogans like "It's Perfect, it's Perrier" and words like "Natural" and "Pure" and “Health”. Many consumers obviously saw Perrier as the fashionable drink of choice for those wishing to display a health-conscious, organic sort of lifestyle image.
During the course of the fallout it was revealed that not only did the benzene come from the natural spring source in France, but also that the water was not naturally sparkling as it was in the bottled product. Neither was it calorie or sodium free.
The company got no credit for finally admitting these facts. Its eventual retractions were regarded as forced confessions. Credibility went to the media for dragging the facts out of the Perrier
spokespersons.
The company’s image was also adversely affected by that fact that at no time during the fallout did the company apologise to its customers or express concern. Brand loyalty of its consumers was
decimated. Company spokesmen gave the impression that they regarded public questioning as
something of an unwarranted impertinence. Among the public, many thought the company should have known, perhaps did know, what was in its product.
There was obviously little anticipatory risk management and little or no coordination between risk management and Perrier’s marketing consultants. By overlooking, ignoring or concealing so many potentially explosive risk factors in it’s marketing, Perrier was inviting disaster. As a result, 160 million bottles of Perrier eventually had to withdrawn and disposed of. Ultimate stock market and other business losses exceeded their value many times over.
By the end of the fallout and for a long time afterwards, few saw the corporation’s image in terms of competence, transparency, credibility, and good governance. Re-establishing the corporate image was a slow and painful task.
Tylenol
Now let’s contrast the Perrier outcome with Proctor and Gamble’s handling of the Tylenol incident. Note that in the Perrier case no one was injured and probably no one’s health was really damaged. Benzene is considered potential carcinogenic, but the concentrations involved were small – on a borderline above US but below WHO standards. When a criminal extortionist poisoned Proctor and Gamble’s Tylenol tablets, however, several consumers died.
When the extortion threat was first brought to the company’s attention through the media, Proctor and Gamble had previous assessed the risk and had contingency plans in place - plans thought out in the calm times before any crisis occurred.
It was the corporation’s CEO, not a low ranking staffer, who immediately appeared as spokesperson. He went straight on the nation’s leading media interview show. First, he declared the company’s concern for its customers. He said the company’s first priority was public safety. He said a global recall was already in motion. He announced that 24-hour, toll free, multiply phone-in lines had been set up to handle all inquires and problems. All phone-in staff were fully trained and kept up-to-date by progress briefings
The CEO admitted that in hindsight the product would have been more secure if it had had tamper- evident packaging. This would be corrected. He was the company’s only media spokesman on the issue. He refused to hazard guesses when asked factual questions about which he was uncertain. He explained why the facts were not yet clear and what was being done to establish them.
Willing transparency, demonstrable competence and public interest priorities were the qualities that won the corporation the public’s trust and confidence.
In contrast to Perrier, Proctor and Gamble emerged from its fallout with an enhanced rather than a splattered public image. In a short time, the value of its shares and its product market leadership went back to pre-incident levels.
14.5 Conclusion
Unlike the positive focus required of the enterprising movers and shakers vital to corporate energy and achievement, risk management has the job of looking at the grey sky scenarios - not just the sunny blue ones.
It is right and proper for mainstream managers to keep their hearts and eyes on new fields of conquest. It is the risk management function to spot and mention the minefields that may slow or even prevent them reaching their goal.
The current state of corporate credibility with much of the public is somewhat damaged. This has occurred at the very time that governments and others are putting pressure on corporations to expand good governance. These two trends comprise a sort of pincer movement, creating a fairly rugged environment in which to manage.
REFERENCES
When the Bubble Burst, The Economist, 3rd August 1991. Article on the Perrier incident.
Gideon Haigh (1991). The Business of Managing Crises. The Age. 15th August 1991. Summary article including a review of the Tylenol incident.
Gideon Haigh (1991). Ignorance is not Bliss in Crisis Management. The Age, 16th August 1991. Article on the Perrier incident.
READING
David Elias (1997). Arnott’s Agenda. Textbook case was the template for food threat. The Age. 22nd February 1997. p A20.
Murray Mottram (1995). Going, Going, Gone. The Sunday Age (6th August 1995). Article on the Iron Baron incident.