FCPA CHINA TRIPLE PLAY

Posted in Bribery in China, Business Crisis Management, Crisis Communication Response, Crisis Communication Strategy, Crisis Communication Success Stories, Foreign Corrupt Practices, Las Vegas Sands, Microsoft Corp., Wall Street Journal on March 25th, 2013 by mnayor

The Las Vegas Sands. The Wall Street Journal. Microsoft Corporation. What could these three companies possibly have in common? Try China. Each is being investigated by the SEC and the Department of Justice for violations of the Foreign Corrupt Practices Act (FCPA).

 

Last year the Sands disclosed that it was being investigated. It received a subpoena from the SEC in February, 2011 and was advised that DOJ was investigating as well. Some allegations that have come to light are that Sheldon Adelson, the head of the Sands, instructed a top executive to pay about $700,000 in legal fees to aMacaulegislator whose law firm was outside counsel to the Sands. As a result of the government’s investigation the Sands authorized its independent Audit Committee to look into the matter and it recently released its preliminary report. The internal investigation is ongoing.

 

Also last year, the DOJ opened an investigation into allegations of bribery in Chinaby the Wall Street Journal. The WSJ also embarked on its own internal investigation which is close to finished.

 

Finally, a news story broke this week that Microsoft Corp. is being investigated as a result of allegations of potential bribery by employees in China (as well as inRomania and Italy). This is such a new story that Microsoft has not yet begun its investigation.

 

Three different stories with the same tag line, all within the month of March, 2013. So far it seems as if this is the year of the FCPA, even though, in fact, FCPA cases have declined over the last two years. All three of these investigations were prompted by whistleblowers of one type or another. How did each company react and which reaction would appear to best serve its corporate interests?

 

First, the Sands. To its credit the Audit Committee found that there was a likely violation of the books and records and internal controls provisions of the FCPA and this was reported in the Company’s form 10-K filed with the SEC. But the 10-K went on to say in a rather self-serving way that the Company has improved its practices with respect to books and records and internal controls. It also states that the preliminary findings do not have a material impact on the financial statements of the Company, do not warrant a restatement of previous financial statements and do not represent a material weakness in the Company’s internal controls over financial reporting as of December 31, 2012.

 

The Wall Street Journal investigation is part of a much larger DOJ criminal investigation into the News Corporation, WSJ’s parent company, related to revelations that its British newspapers hacked phones and bribed officials in order to obtain information for articles. As part of the overall internal investigation, the Chinese allegations were thoroughly reviewed. The WSJ found no evidence to support the claim or any impropriety, and maintains that the informant is most likely a government official seeking to disrupt or retaliate against the WSJ for reporting on Chinese leadership corruption.  It is not clear that DOJ has closed the matter.

 

Microsoft’s matter is new. But its response to the news report that it is being investigated was straight forward. It said that the matters raised were important and that allegations of bribery should be reviewed byU.S.agencies and its own compliance unit. A spokesperson said that allegations of this nature arise from time to time, that it is possible that sometimes an individual employee or business partner may violate the Company’s policies or break the law, and that its responsibility is to train its employees, build a system to prevent and detect violations, and to investigate allegations and take appropriate action.

 

What can we learn about crisis communication from these three stories. The Sands reaction leaves something to be desired. While it is admirable to admit that the company may have violated the law it is presumptuous and self-serving to draw conclusions that basically are up to the government. The SEC and DOJ may have a hard time swallowing the Sands’ conclusions. It would have been far better to state that it is cooperating with the agencies to resolve all issues and reach determinations that will not have far reaching consequences to the Company.

 

If we take the WSJ’s comments at face value, there is no reason not to aggressively maintain one’s innocence. Yet, it might have been better to acknowledge more clearly that DOJ had not yet signed off on the WSJ’s findings and that the WSJ was working with DOJ to conclude the matter. Instead in a buried paragraph in its own story it states that it is unclear whether the Justice Department considers the matter resolved or still open.

 

The Microsoft reaction is  the best. It is the most honest and direct and states the facts of corporate life: We know our responsibility. We do our very best. Occasionally, a bad apple may slip through. Crisis communication does require that a company assess and anticipate the concerns of stakeholders. Good judgment is needed to walk that fine line between allaying those concerns, and acting appropriately and respectfully to those who have control over the outcomes of your investigations.

 

 

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HURRICANE SANDY AND THE MARATHON

Posted in Crisis Communication Failures, Crisis Management Strategy, Crisis Management Success Stories, dealing with a natural disaster, DECISIONS IN A VACUUM, Doing the right thing, Hurricane Sandy, negative publicity, New York City Marathon, Poor crisis management on November 12th, 2012 by mnayor

One of the most evident communications failures in the aftermath of Hurricane Sandy involved the ING New York City Marathon. Unquestionably the success of the Marathon paled in comparison to the misery heaped on New York (and New Jersey and Connecticut) residents who should of course have received and should continue to receive immediate and effective relief.

 

However, I cannot understand why the Marathon could not have been transformed into a major vehicle for focusing attention on and creating relief efforts for the residents of Staten Island, and The Rockaways, the areas ofNew Yorkthe most severely damaged.  I believe that the event could have been salvaged and made into something extraordinarily constructive instead of seemingly distractive and frivolous.

 

During the week of the storm Mayor Bloomberg kept announcing that theMarathonwould go on. He justified the decision by saying it would be good for New Yorkers. It  would bring the City together and lift everyone’s spirits. He also stated that no resources would be diverted from the relief effort. This comment, although true, was weak in light of the dozens of generators seen being transported toCentral Park  for the traditional pasta dinner, and the numerous port-a-potties being installed near the starting line. Granted these resources were private but it all seemed so selfish. This was crisis management and crisis communication at its worst.

 

What might have happened if the following had occurred? Mayor Bloomberg and Mary Wittenberg, president and CEO of the New York Road Runners (NYRR) jointly announced that theMarathonwas being renamed the Sandy Relief Marathon. The prize money was being donated immediately to the relief effort. The pasta dinner was cancelled and all generators and other private resources were being transferred to stricken areas. All port-a-potties were available immediately to the public. A telethon was being established for call-in donations during the race. All runners were being encouraged to donate their time in the coming days to support efforts. And so on.

 

The perception and the reality of theMarathonwould have been transformed into a humanitarian effort. That’s the way it should have been, instead of being billed as a cheer-leading, feel-good effort. Good crisis management in the Mayor’s Office and the NYRR was lacking. They had the time to make it happen but not the imagination or creativity. The resulting cancellation on the Friday before the event was a fiasco. An embarrassment for both the Mayor and the NYRR. The financial loss to the City is in the untold millions. The damage to the reputation to the event and the Road Runners organization remains to be seen. Certainly the thousands who travelled from abroad to participate now have a bitter taste in their mouths. The most common reaction was – We understand cancelling the event but why wait until Friday. If you had cancelled earlier in the week we could have saved the trip and our airfare.

 

We can only hope that nothing befalls the tri-state area again likeSandy, but if it does more intelligent and creative minds should grapple with a situation like theMarathonand utilize the notoriety of such an event to good and productive use. Obviously it is easier in hindsight to come up with ideas, but doing what’s right, sacrificing certain elements of an event and willingly taking two steps back in order to take one step forward would have burnished the image of the Marathon instead of tarnishing it. Trying to salvage an event in its entirety was and is perceived as putting yourself first. Placing the needs of those devastated bySandyfirst, and sacrificing some of theMarathon’s bells and whistles might have just garnered a lot more respect and kept a version of the race intact. Now NYRR has to renegotiate with product sponsors, ESPN and local affiliate WABC, and the participants themselves. It difficult to envision it coming out a true winner.

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FAILURE TO ANTICIPATE: THE WALMART EXAMPLE

Posted in Anticipating A Crisis, Anticipation, Business Crisis Management, corporate integrity, Crisis Communication Strategy, Crisis Management, Crisis Management Planning, Doing the right thing, Ethics and Crisis Management, Honesty and directness in dealing with a crisis, Wal-Mart on May 3rd, 2012 by mnayor

On April 22nd, 2012 The New York Times broke a huge story on Wal-Mart’s Walmex subsidiary. The subsidiary is alleged to have systematically engaged in bribery in order to grease the wheels of  its store expansion program in Mexico. Two of its most senior executives have been directly implicated in the scheme and the subsequent cover-up. The fallout has been dramatic including upcoming Congressional and Justice Department investigations and investigations within Mexico, a precipitous drop in Wal-Mart’s stock price, and perhaps worst of all, a huge black eye to WalMart’s reputation for integrity.

 This is a story that will not go away soon, even with the short collective memory for which the U.S.public is noted, and even with the perception we have, mistaken or not, about how business is done inMexico. The investigations and potential lawsuits will wend their way forward but Wal-Mart has an immediate problem: how to revive its reputation which was essentially snuffed out by one newspaper story. Unless there are very clear explanations that go beyond mere flim-flam, cut your losses Wal-Mart. Cooperate with investigations to ensure that they are completed rapidly. Develop your best explanations. Negotiate your fines for violating the Federal Corrupt Practices Act. Make restitution wherever it is required. Terminate those who were complicit. Get your house in order as quickly as you can.

 But this article is not about what to do now. It is about what should have been done. Wal-Mart’s story is as old as the hills. It is the same story as Richard Nixon and Watergate, Bill Clinton and Monica Lewinsky, Enron, Goldman-Sachs. And on and on and on. It is the story of hubris. It is the story of deceit. It is the story of the ostrich.

 Faced with a calamitous issue, a powerful person, a powerful company, a powerful country is most likely still to believe that there is a good chance of getting away with something. Lie low and time will make the issue recede into history. Put a band aid on and no one will dare to pierce your impenetrable shell. What would have happened if Wal-Mart had entertained a genuine independent internal investigation when it had the opportunity, and made those findings known to the Justice Department and toMexico? There would have been a much smaller story. Wal-Mart would at least have been accused of being honorable. Its reputation for integrity would have been burnished. It would have paid a price but perhaps not as steep a price as it will now pay.

 Why don’t people get it? Because there is a gambler in all of us, even when the odds are poor. Is there a chance we can get away with something? Let’s give it a try. What do we have to lose? Ask Richard Nixon. Ask Bill Clinton. Ask all those who have tried to wheedle their way out of messes only to get caught. Ah but then again there is always that other guy, the guy who got away with it. We should follow him. He’s a smart guy. He knew the angles. If he could do it, we can too.  Right now things are calm. Let’s not rock the boat. But in the long run the straight-shooter almost always wins.

Crisis management is not only activated when a cris occurs. It begins prior to a crisis in order to avoid a crisis or lessen its severity. Preparation and right-thinking separate those companies and organizations from those that merely kick the can or determine to ignore or purposefully hide a potentially serious issue.

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PENN STATE AND OLYMPUS CORP.: WHAT THEY HAVE IN COMMON

Posted in Crisis Communication Response, Doing the right thing, Ethics and Crisis Management, Olympus Corp., Penn State, reputation management, Sacrifice the Little Guy, Taking Responsibility for actions of an organization or its employees on November 19th, 2011 by mnayor

Two scandals this week couldn’t seem more different. One involves allegations of pedophilia sex at a university, Penn State and the other financial shenanigans at a large Japanese corporation, Olympus Corp. Most in the public relations field would exclaim that both matters require “crisis management”, but there is a closer commonality than that. We have to look at the underlying cause of these scandals to see what they share in common.

In many crisis situations the crisis comes about by an outside force or a factor beyond an organization’s control or ability to anticipate. There are, of course, natural disasters. There can be strikes, new legislation, unexpected competition, employee dishonesty, product contamination and the list goes on. Most organizations are “forgiven” or the matter is soon forgotten if the issue is dealt with promptly. Even the BP Gulf oil spill has receded from our memories because the company dealt with the calamity, no matter how ineptly.

But certain “crises” are either created or exacerbated by an organization itself. There are many participants, willing or scared or just amoral who put the organization first. These types of issues should not be looked upon as crises but as severe ethical failures. Oftentimes the principal players either feel they have no choice, or stick their collective heads in the sand or worst of all, feel they won’t be caught and therefore have no compunction about doing what they see as best for the organization. This is what Penn State and Olympus have in common –people have done something unconscionable and others who know about it do nothing or as little as possible. No one wants to be a whistle blower. Willingly or unwillingly, everyone wants to be a loyal team player.

From politicians to entertainers to corporate CEO’s, there is an ever-growing tendency to believe “I can get away with it”, or “it’s not my problem”, or “let’s not rock the boat” or “I’m not going to stick my neck out”.

These days the words “ethics” and “morals” are used interchangeably Elijah Weber described the difference this way:

“Morals, quite simply, are beliefs about right and wrong conduct….They do not require reason, consistency, or thorough analysis in their initial shaping or practical application…. I can believe that lying is wrong because my grandmother told me it was, and that is what I believe. No further justification is required. Ethics, on the other hand, is a reason based cumulative system of moral decision making. It is built upon one or a few basic principles and requires that we be thorough, honest, and comprehensive in making statements about right and wrong. Ethics is about building the kind of world we want to live in, and developing a consistent process by which to achieve this. Ethics is an advanced expression of morality.”

I like this analysis of ethics: a few basic principles that require that we be thorough, honest, and comprehensive in making statements about right and wrong. It is about building the kind of world we want to live in…Do we wish to live in a world where we turn a blind eye to child sexual abuse? Do we want to turn a blind eye to Ponzi schemes and product failings and financial manipulations built on sand that will have severe consequences to investors, employees, and consumers? I think not.
No one is naive enough to think that every company, every charitable organization, every university will adhere to the straight and narrow but wouldn’t it be refreshing if we could count on ethical behavior most of the time. Wouldn’t it also be nice if every honest whistle blower who performed a public service wasn’t maligned and attacked as a weasel or turn-coat? Wouldn’t it be interesting if every organization that breached ethical norms, faced its predicament responsibly Since it is not possible to have a perfect world, shouldn’t we at least shine a spotlight on those who perpetuate bad conduct no matter how revered, competent and respected they may have been?

I fear that the opposite usually occurs. The whistleblower is a turncoat. The person who tried to do the right thing didn’t do enough. The head honcho and the organization are protected as best as possible. The little guy gets thrown under the bus.

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NETFLIX: A GOOD BUSINESS DECISION ON PAPER

Posted in Business Crises We Create, CONSIDER YOUR STAKEHOLDERS, Crisis Communication Failures, Crisis Management Consulting, DECISIONS IN A VACUUM, NETFLIX on September 21st, 2011 by mnayor

You sit around the conference table and throw out ideas. You think outside the box. You think inside and around it. You crunch numbers. The numbers point in a logical direction. You come up with a winning profit strategy that makes sense. You implement the strategy and blow yourself out of the water. Hello Netflix, which recently announced a restructuring that would divide its business into two segments – providing entertainment by mail and by download – at a hefty increase in customer fees.

Business decisions aren’t made in an isolation booth. Stakeholders, stakeholders, stakeholders. Why do businesses always forget some of their stakeholders? The word has become trite; it’s been used so often. Nevertheless the concept just doesn’t seem to sink in for many business executives. Granted, you can’t please all stakeholders all of the time, and certain stakeholder interests may conflict with those of other groups – but the least you can do is be awake.

Stakeholders are any group or even individual(s) whose interests are important to your company and must be served. If a stakeholder interest is not served, it should at least not be harmed especially if harming the stakeholder will harm you. Here are the most common of them: shareholders and/or investors, customers, suppliers, governmental regulatory agencies, employees, the public at large for health and safety issues and finally, even the media. It’s quite a list and of course not everyone can be happy all of the time.

However, management must always try to forecast the effects of its decisions on its stakeholders. What may be an excellent decision on paper may have disastrous results. Enter Netflix. It is difficult to believe that executives of that company gave any heed to the reaction of its customers. And if they did, they wrongly concluded that there would be some grumbling but they could just hunker down and it would blow over.

Blow over? Netflix is facing an angry customer base. Will it face mass defections? Perhaps. Maybe Netflix concluded that it should take the backlash at all once. Perhaps it feels that its new higher prices and a smaller, better quality customer base better suits its model. The risk, however, is that its base will shrink too much and the company’s revenues will decrease dramatically.

What does a company do after it does its homework and knows that a good corporate decision will have adverse consequences for one or more stakeholder groups? It can be a difficult and agonizing decision. One course of dealing, and the one that makes the most sense when considering an elective course of action, is to implement changes in steps. MODERATION is the key. The first benefit is that you can get a handle on reaction. Similar to a test market, you can assess the effects of your action, make adjustments, refine, modify, go to plan B, etc. Secondly, by going slow, you don’t shock the stakeholders who are affected. It’s the difference between giving a stakeholder a rash versus a blow to the solar plexus.

Don’t make decisions with your head in the clouds. Know the effects of your decisions on others, anticipate what the reactions will be and the effects those reactions could have on your company.

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CRISIS MANAGEMENT VERSUS HUBRIS

Posted in Business Crises We Create, Business Crisis Management, Crisis Communication Failures, Crisis Management Services, Crisis Mitigation, David cameron, News of the World, reputation management, RUPERT MURDOCH on July 18th, 2011 by mnayor

Does history merely repeat itself instead of teaching us anything? Based on business news about movers and shakers one could deduce that many corporate executives just don’t get it and never will.

After the debacle of 2008 when many financial CEO’s were caught in the proverbial headlights, you would think that a tough lesson would have been taught – and learned. Instead even Teflon-coated Warren Buffet decided that his power, authority and standing in the world were enough to allow him to initially stonewall the public about his executive Dave Sokol’s purchase of Lubrizol stock. Not to be outdone Rupert Murdoch has raised the bar even higher.

In a scant two weeks his empire, headed by the subtly named The News Corporation, has experienced what many would not wish on their worst corporate rival. After approximately four years of an on-again, off-again Scotland Yard investigation of phone hacking by News of the World tabloid, that paper has folded, Murdoch’s attempt to acquire the remaining interest in British Sky Broadcasting (BSkyB) has been aborted, and a slew of his corporate executives have been arrested, resigned or otherwise had their reputations besmirched. Rebekah Brooks the CEO of News International, the parent of the late News of the World resigned in disgrace, after two attempts at resignation that were not accepted by Murdoch. Also, Les Hinton, publisher of the Wall Street Journal tendered his resignation the same day.

The details of the outlandish accusations are certainly important but how they were handled by Murdoch is equally important and instructive. For a “media” guy, you would think he would know how to handle as big a story as this. Instead, up until yesterday we heard nothing from Murdoch – and then when we did, we heard the hrrumphing of a corporate big-wig instead of the measured pronouncements of a savvy media executive. Last week Murdoch flew to England from the U.S. Very quickly News of the World was closed, after a 168 year life. Yesterday he told a reporter for the Wall Street Journal that the matter was handled “extremely well in every way possible”. He further stated (apparently referring to his upcoming testimony before Parliament’s select committee on culture, media and sport on July 19th at which initially he and his son, James, declined to appear) that he was eager to address things said in Parliament some of which “are total lies”. Finally, he refuted the allegation that he might spin off his newspaper operations into a separate company as “total rubbish”. He did visit the family of Milly Dowler, the thirteen year old who was killed and whose phone was hacked; and extended apologies to the family. This last weekend he placed full page apology ads in British newspapers.

What kind of media executive fails so miserably in handling a business crisis like this? Who leaves a yawning time gap of two weeks before stating anything? If we assume the complete innocence of a CEO, we would then expect that leader to dig for the truth and let the public know immediately. Silence can only foster the impression of knowledge and guilt. An announcement that the matter is being extensively investigated and that such conduct is not tolerated in the organization goes a long way to safeguarding one’s reputation and possibly the organization itself (many pundits found the sudden closure of News of the World suspicious, based on protecting the Murdoch empire from legal liability). There were and may still be ways to staunch the bleeding, but it may now be very difficult to do. Clearly Murdoch did little or nothing immediately. As a result his empire is suffering and will continue to do so, as stakeholders in Britain and worldwide continue to question his tactics and the integrity of his enterprises.

Many people in the newspaper industry who have been interviewed about the phone hacking scandal find it implausible that editors and publishers wouldn’t know about the sources of stories. They must have known about the hacking and therefore it was both a bottom up and top down conspiracy. Rupert Murdoch may have had knowledge and thus the reason for the code of silence to date. It will be interesting to hear his testimony. At all costs he must avoid appearing out of touch with his businesses, imperious because of his power, or delusional that his connections will protect him. From David Cameron on down, the flight to high ground has begun.

Events seem to be gathering speed as this is being written for publication. Rebekah Brooks was arrested and released on bail. The leader of London’s Metropolitan Police Services, or Scotland Yard, Paul Stephenson, and his deputy have stepped down under growing allegations that the respected organization was very cozy with members and agents of the Murdoch empire; and more information is surfacing about David Cameron’s personal relationships and frequent meetings with similar individuals.

As individual reputations begin to crumble, little effort seems to be directed towards salvaging the Murdoch enterprises, some of which are very much worth saving. Placing someone who is untainted in a position of authority would appear to be necessary and Joel Klein would seem to be the man to take charge right now. The businesses must be separated from the personalities and be made to run as business as usual. There is no sense in allowing individuals – any individuals – to drag down an entire business empire. Klein has a good reputation (a lawyer who was head of the New York City School System until he joined Murdoch), and can direct the “clean” Murdoch business units on a steady course until the mess can be sorted out or until it at least simmers down.

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SONY’S RESPONSIBILITY FOR CYBER ATTACKS

Posted in Anticipating A Crisis, Crises Communication, Crisis Communication Implementation, Crisis Communication Response, Cyber Attacks, negative publicity, Responsibility for date losses, Sony on May 22nd, 2011 by mnayor

Sony has been raked over the coals these last few weeks. Has there been just cause? And has Sony exercised good crisis management and crisis communication skills?

Between April 17 and April 19th the Sony PlayStation Network and the Company’s Qriocity service which streams video to Sony televisions and Blu-ray devices were hacked and knocked offline. Besides knocking out service, unauthorized persons obtained access to personal information including credit card numbers. An estimated 77 million PlayStation users and 12 million of their credit cards were affected, plus 24 million Sony Online Entertainment customers and over 10,000 of their cards. The services have just recently come back on line (Japan itself is an exception because the government is not yet sure they is secure) as of approximately May 14th.

There are two main issues that have gotten the public very agitated. First, did the Company handle its communications well? It took almost a week to publicly acknowledge the attacks and advise its customers that credit card information could have been compromised. This length of delay surely provided hackers with a large window of opportunity to utilize the information it had mined to the obvious detriment of millions of customers.

One of the basic tenants of crisis communication is to act quickly and have as much control of the dialogue as possible. The basic problem was evident, even if a great deal of operational research had to be done to identify the extent of the damage. The first goal should have been to minimize the vulnerability of its customers through immediate notification. By delaying, Sony allowed speculation to build up and therefore it positioned itself defensively, instead of taking vigorous proactive steps.

The other communications gaff came directly from Sony’s CEO, Howard Stringer. In a discussion with reporters on May 17th, he defended the actions of Sony when asked why it took almost a week to notify customers. He observed that the Company reported quickly, noted that many companies don’t report these breaches at all or only after a month, and then said “you’re telling me my week wasn’t fast enough”. This sounds a bit defensive and imperious for a CEO. Most customers would probably disagree with him, especially those whose credit cards could have used by the hackers, or those whose personal information may now be used for identity theft purposes.

The second main issue is operational. Sony must quickly tighten its security and provide safe and secure networks for its customers. The U.S. Congress and the New York Attorney general almost immediately jumped on the bandwagon to “investigate” this technological lapse, but hopefully these actions will not drain efforts away from identifying vulnerabilities and making data protection paramount. Customers need to be confident of Sony’s ability to protect them. Otherwise, it will lose out big time to Microsoft and Nintendo. That should be motivation enough to make Sony create one of the most secure networks available out there in cyberspace.

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THE SKINNY ON WEIGHT LOSS PROGRAMS

Posted in Anticipating A Crisis, Crisis Communication Failures, Crisis Management, Jenny Craig ranked first, poor reaction to bad press, Slim Fast ranked high, THE RHODELL GROUP, weight loss programs, Weight Watchers reaction to Consumer Reports on May 11th, 2011 by mnayor

Whoa! The news is in. According to Consumer Reports, Jenny Craig is the winner. Based on factors such as weight loss and drop-out rates, Jenny left its competitors in the dust. Slim Fast came in second and Weight Watchers third.

Talk about being blind-sided and needing a crisis plan. This is certainly a classic case in point.

Crisis planning is sometimes looked upon by companies as seriously as a fire drill – and by employees as akin to root canal work. We don’t have the time! I could be doing something that affects the bottom line, not this stuff! The excuses go on and on. But brainstorming potential crises is the starting point and competitive reviews ranks high on the list.

So it was surprising to read the reaction of Weight Watchers. There is rarely room for sour grapes in responses to less-than-favorable news. Word-smithing is the ability to get your messages and facts across clearly without sounding like you are whining. Weight Watchers failed.

Instead of exclaiming that it was disappointed that Consumer Reports left certain key points of the JAMA (Journal of the American Medical Association) study “were left unsaid” the Company’s statement should have begun with what it believes its program does well: WW advocates and teaches how to live in the real world – people learn to make smart choices etc. It should then have stressed how proud it is of its long history, its success in changing the lives of countless individuals. It should have stated that everyone should recognize that most people cannot afford the luxury of having food prepared for them daily and its program is a much more realistic approach to weight loss. Finally it should have underscored that clinical data on its new PointsPlus Program will be published shortly, that it looks forward to the conclusions of the data and are confident that this study, along with over 60 other WW studies will once again show the extraordinary effectiveness and success of the Weight Watchers program for millions of people.

The Consumers Report story was an opportunity for WW to blow its horn. The media wanted to hear what it had to say. Instead they just blew it. Slim-Fast, which actually came in second with its snack bars and shakes, capitalized on the story. It was “thrilled to once again be ranked among the top U.S. weight loss plans evaluated by Consumer Reports”. It then went on to describe its 3-2-1 Plan and invited people to check them out on Facebook and website. Slim-Fast believes in itself.

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TACO BELL: HELP I’M BEING SUED

Posted in Business Crises We Create, Crisis Communication Response, Liability Communications, Litigation Communications, RETAIL FOOD CHAINS, Taco Bell, What to do when you are sued on February 16th, 2011 by mnayor

Ouch! On January 25th it was reported that Taco Bell had been hit with a class action suit asserting that the company’s claim that it uses seasoned beef or seasoned ground beef in its products is false. Plaintiffs allege that the Company’s beef mixture is only 35% beef with the rest a mixture of oats, soy, maltodrextrin and soy lecithin and water. Monetary damages are not claimed. The plaintiffs want to compel Taco Bell to be honest in its advertising.

After a couple of weeks we have not heard from Taco Bell other than it will “vigorously defend the suit”. No damage control here.

Perhaps the Company feels the public will soon forget all about the suit. And maybe it will. After all, not too many people expect ground fillet mignon in their $1.00 wraps. But then again, not too many people expect adulterated food either. Time will tell whether sales are negatively impacted. So what’s a company to do?

Honesty. It’s a difficult concept to play with sometimes. The public likes your product the way you make it. You actually disclose some information on your website (how many people research product ingredients on a website before purchasing?). No harm has apparently been done (although some of the additives are common allergens).

How about some real facts. Instead of ducking down and waiting for the shots to subside (along with the jokes), why not deal with the issue head on. Research carefully. Analyze your products and make full disclosure. Publicize the nutrition value of each product as well.

Most companies and their attorneys play it very close to the chest when they are being sued. But it is not always necessary to be 100% tight-lipped. The goal of any company in this type of circumstance should be to be as up-front as possible without exposing itself to greater liability. In this instance Taco Bell isn’t even being sued for monetary damages. And as for potential suits in the future, any good laboratory can discover the ingredients in Taco Bell products. There are no secret formulas.

After analysis, the Company should make a determination whether it wants to change its recipes or not. It is conceivable that TB may announce that it is retaining its recipes because of their good nutritional values. It may change the wording of its “beef” content. It may upgrade its recipes (with great fanfare). Or it may just let the marketplace decide and let the chips fall where they may. If it chooses the latter it takes a risk (that may be justified in its mind) but it has not taken advantage of the opportunity to sell itself and burnish its image if it can inform the public about some positive information.

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THE NEGATIVE PUBLICITY ENIGMA

Posted in Anticipating A Crisis, Business Crises of our own making, Business Crises We Create, Business Crisis Management, Corporate Crisis Management, Crisis Communication Strategy, Crisis Management, Crisis Mitigation, negative publicity on December 1st, 2010 by mnayor

Robert Walker wrote an article recently in the New York Times Magazine section entitled Good News, Bad News, about the negative publicity the GAP received over its attempt to change its iconic logo; and, in general, the fallout or lack thereof that can be expected from negative attacks.

He’s got a point. The old adage that any publicity, negative or positive, is good publicity is certainly not always true. But some forms of negative publicity don’t always do harm. Such is the case with the GAP logo fiasco.

What forms of negative publicity can hurt an organization? Clearly, reports of poor goods and/or services can be harmful. Reports of Johnson & Johnson’s tainted products over the last year have not helped its image. Reports of poor airline service have the effect of customers shopping for alternatives. A hotel devastated by a hurricane or earthquake or a terrorist incident has the same effect.

Stories about poor management will also turn customers off. Look at the banking and investment banking industry. All of these kinds of negative publicity have the effect of creating a crisis, and require skilled crisis management to counter the effects. The crisis management needed has to tackle two fronts: operationally to truly “fix” the problem and crisis communication to inform the public.

But there are other forms of negative publicity that don’t affect products, services or management, such as the GAP logo situation. True, some people were offended or reacted poorly to the proposed change, but what of it? It would take an extraordinarily sensitive GAP shopper or potential GAP shopper to boycott GAP because of this event.

A business crisis is one that effects a company’s reputation or bottom line. Did an unpopular proposed logo change genuinely affect GAP’s reputation? Did it affect the company’s bottom line? I think not. If it did, it was very short-lived and very ineffective. In fact, most stories about the incident stressed the many attributes about the business, its clothing products and its branding success. While GAP would most likely have opted for no publicity over its logo, no harm was done.

The moral of the story? Manage well. Provide excellent products and services. You may still be unable to avoid negative publicity or a crisis that is beyond your control but if your base is solid you will weather the storm.

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