CHAPTER NINE
Crisis managemernt
Management text books hail US pharmaceutical giant Johnson & Johnson’s response to the 1982 Tylenol poisonings as the gold standard for crisis management. Johnson & Johnson’s handling of the incident not only got the company through the storm, it turned the crisis into a triumph. Like many chief executives, Johnson & Johnson’s then-CEO James Burke could have pleaded plausible deniability, declaring hand on heart that his company had done everything prudently possible to stop trouble happening. Instead, Johnson & Johnson spent hundreds of millions on a recall and embarked on an enormous public information campaign. It immediately called a news conference, posted a reward for finding the culprit, established 24-hour help lines to deal with inquiries, and instructed doctors to suspend supplies. It stopped the production of capsules, and introduced tamper-proof caplets.
This is in stark contrast to the ham-fisted way many managers handle crises. Examples include the1989 Exxon Valdez oil spill, where the company’s leaders initially refused to talk to media, and then blamed them for damaging the company’s reputation. It is also in contrast to Union Carbide’s poor handling of the poisonous gas leak at Bhopal in India that killed nearly 4000 people in 1984. Likewise, McDonalds ignored the people of the small town of Tecoma (in the Dandenong Ranges outside Melbourne) who opposed a proposal to set up a restaurant. People signed a 99,000-strong petition to stop the company but McDonald’s remained unmoved. Refusing to meet the company’s critics demonstrated a gap between what McDonalds practises and what it preaches about connecting with communities. Or take the way Qantas handled its plans to sack 5000 staff. Just hours after CEO Alan Joyce delivered the devastating news, Qantas international business travellers were reportedly emailed with an offer to win complimentary Qantas Club invitations. Again, a gaping chasm between company actions and public trust and goodwill.
All these cases relates to how the company manages an external crisis. Then there are the internal crises, where management has to ensure that staff remain focused and business is not interrupted. Certainly the Qantas case is an example of how an internal crisis led to an external crisis. One example of those internal and external forces lies with the events that took place at SPC Ardmona earlier in 2014.
The 93-year-old fruit processing company was facing closure when the Abbott government bluntly rejected a plea from its owner Coca-Cola Amatil for $25 million to help modernise the SPC processing plant, citing Coca-Cola Amatil’s healthy profits as a reason not to use government dollars to assist. SPC Ardmona argued that the high Australian dollar and cheap imports had made it hard to compete. When the Abbott government refused assistance, it looked like workers at the plant could lose their jobs, devastating the Victorian regional town of Shepparton.
The company was only saved when the Napthine government chipped in $22 million to keep the fruit processor operating in the Goulburn Valley, combined with SPC parent company Coca-Cola Amatil offering $78 million as part of a $100 million package to refit the company’s processing plant.
SPC managing director Peter Kelly’s handling of the issue shows that internal crisis management is as critical as handling the external forces as they could shape the external outcomes.
Kelly said he knew the company looked like going under when he took over in April 2013. He said the way to handle it was to be up front with managers and staff, spell out exactly what the problem was and what they needed to change. There was no alternative.
“I just got in and we had some real come-to-Jesus meetings with the top level executives,’’ Kelly says. “I remember one of the first things we did was put all the products out on the table and we made everyone eat them. We looked at the products that were being imported and looked at our products, and then asked ourselves how we explain to our mums why they should buy our products when there was a huge premium in price and we looked similar. It wasn’t a very strong compelling reason for change
“I also remember all the financial forecasts were wildly optimistic versus what was actually happening, and people were in a bit of denial about the trajectory.
“So the first thing we did was have the realisation about how our brands looked and what the trajectory of the business was. Some people looked nervous and we told them that if you don’t believe we need to change, you’re going to have to leave. Not many people did.
“As a team we sat down and decided we had to find a higher purpose rather than our own jobs. We were going to have to find something more highly principled than that — to grow food in Australia.”
That was how Kelly handled the company’s executives. He used a similar strategy with its 1,500 employees.
“We told all our staff,’’ he says. “We used the expression ‘five minutes to midnight’ [and told them] that we had this plan, that we would go after unfair tariffs, unfair dumping, try to get some assistance from the government to rebuild and that we didn’t really have a plan B.
“The remarkable thing was people had never been told that before. They had it explained very openly and very plainly.
It was all done face-to-face.
“I had a policy that I wanted to speak to every employee so we hit every shift and every location around the country,’’ he says. “We talked to small groups, to big groups and we presented what’s going on with an unlimited Q&A. We were brutally honest about what we know, what we don’t know what we think we should do, what we’re afraid of. We totally had it out in the open.
“You would think everyone would capitulate but people rallied around the fight. This is what you hope would be the Australian cultural norm. You don’t give up and that’s surely what differentiates us as a country.”
Kelly made sure the company stood by its workers when the Abbott government knocked back that request from the northern Victorian food processer. At the time, the Prime Minister claimed SPC Ardmona needed to renegotiate workplace conditions which were “way in excess of the award” and “extraordinary”.
To the workers’ delight and surprise, Kelly hit back and said the government was wrong.
“It was implied that people were the problem,’’ he says. “That’s why we came out so strongly in the public to say absolutely that’s not correct.”
He says staff were “overwhelmed because they all knew we could have had the money.”
“I think we could have had the money if we said it was an industrial relations issue. We passed every other test along the way. It was quite a shock to us that we didn’t get that through and when that became a key issue we couldn’t let that fly.”
As a result of this grassroots approach, staff engagement at the SPC Ardmona has soared to as much as 60 per cent. “I don’t see engagement going up at Qantas,’’ he says. “I reckon that’s about how open and truthful we were and how we pressed people’s buttons on how to show what we can do, getting people to fight back and show some innovation.”
Things have been looking up at SPC Ardmona after the Victorian Government and owner Coca-Cola Amatil jointly produced a $100 million package to keep the company afloat. Since then, Woolworths has handed SPC Ardmona a $70 million contract. Under the deal, SPC is to supply Woolworths with all its home-brand fruit and Australian canned tomato soup products for five years.
While some might question whether SPC Ardmona deserved the support, the company’s crisis management delivered results.
Marjorie Johnson, who runs Wordmakers and who developed BHP Billiton’s crisis management plan when she worked there running their communications, says companies need to have a protocol and plan before they enter a crisis.
“You can actually get organised and think a lot of these things through ahead of anything happening and you can actually brief people within the company and designate the roles and communicate with the internal stakeholders who would need to know who the spokesperson and what the steps are,’’ Johnson says.
“In an uncertain situation, that provides certainty. In theoretical terms, that’s an effective approach and then you need to follow the process.”
She says managers in these situations cannot over-communicate, both to external stakeholders and to staff.
“A well organised and executed plan is about keeping people informed and you have to mirror the communications with the external audience to the internal audience and treat them as equally important.”
PR specialists cite six golden rules:
Writing in the Harvard Business Review, John Baldoni says managers need to step back and figure out what’s going on. They should also act promptly but not hurriedly. There is a difference. “A leader must provide direction and respond to the situation in a timely fashion,’’ Baldoni says. “But acting hurriedly only makes people nervous. You can act with deliberateness as well as speed.’’
He says managers should keep their composure. And most importantly, they should manage expectations of the people looking up to them as managers. That’s important because it keeps their own levels of stress and panic at a minimum, and at the same time, you are helping others do so, all the while maintaining productivity and morale. “When trouble strikes, people want it to be over right now — but seldom is this kind of quick resolution possible,’’ he says. “It falls to the leader in charge to address the size and scope of the crisis. You don’t want to alarm people, yet do not be afraid to speak to the magnitude of the situation.”
Managers should set down guidelines for crisis prevention and early detection. They have to make sure they communicate quickly when stuff happens. When there’s a crisis, managers need to gather the affected team members, key decision-makers and problem-solvers together as soon as possible. They must avoid spin and focus on what’s really happening, unpleasant as it may be. It’s important to identify and verify the issue so that they can soothe the affected parties and solve the problem.
“It is the nature of business that a crisis will happen at some point. Projects and innovations increase the level of uncertainty in our operations, yet it just isn’t possible to account for all the uncertainty inherent in our risk management. An effective crisis management plan and preparation will distinguish an organisation as a company that manages well in those situations that do happen, whether it’s a result of an internal fault or one in the supply chain, or just plain dumb luck. Forewarned is forearmed.”
During a crisis, management has to be open and honest. Even if managers probably can’t share every detail of what’s happening, providing their team with information in a timely and professional manner will reduce staff speculation and fear. Also they have to to allow people to ask questions and share their concerns. When things are changing quickly, the one thing that helps us maintain a sense of control is information. Try sending a once-a-day email update or organising an informal team huddle each morning to share updates and hear concerns.
It’s important the company does everything it can to stay productive and organised during this time — not only to stay afloat, but to help the team view the situation as being under control or at least, to make it feel like less of a tornado.
It is important to have a crisis management team in place. A team consisting of team members from PR, HR, legal, marketing, and other relevant teams that can come together to quickly craft and post a response that would quiet down the chatter and will help solve the issue at hand.