ETHICS AND CRISIS MANAGEMENT

Posted in Crisis Management, Ethics and Crisis Management, ETHICS FROM THE TOP DOWN, guidelines for ethical standards, including ethics as part of your corporate culture, problem employees, Setting ethical standards on September 12th, 2012 by mnayor

 On September 8, 2012 The New York Times ran a front page story about Marcone, a company that may well be the largest authorized dealer of appliance parts in theU.S.  it’s been around since 1932.The reason for its front page notoriety is due to one of its senior vice presidents, Carlos Garcia, buying, essentially smuggling, and reselling large quantities of a banned refrigerant for appliances such as refrigerators and air conditioners. Garcia imported the gas, HCF-22 which damages the ozone layer, without the necessary approvals, thereby violating international treaties andU.S.law. The substance has been prohibited in new appliances since 2010. In June, Garcia was sentenced to 13 months in jail.

 

Faced with a tempting or risky 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. This is what happened to Wal-Mart in April of this year when its Mexican subsidiary was exposed as having engaged in  pervasive bribery as a normal course of business. 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 to the State ofMexico? 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.

What’s the lesson for CEO’s of organizations? It’s simple really. Every organization has  a “culture”. An integral part of that culture should be a requirement for high ethical standards, communicated from the top down. Transmitting the idea of winning at any cost will most likely ensure that some manager or employee down the chain will misconstrue the message and take ridiculous liberties in order to be noticed. Turning a blind eye to actions that are suspect bears the same message, even if it takes a little longer to filter down. Excessive emphasis on the bottom line can put extraordinary pressure on executives and managers to wring blood out of a stone and look for routes that will pay huge rewards, oftentimes the risk be damned. Johnson & Johnson has certainly paid a huge price to its reputation under the leadership of William Weldon, who retired as CEO just a few months ago. Under his guidance J&J’s wonderful standing in the eyes of the public has plummeted. The number of recalls, dirty facilities and end-runs around regulations over the last several years have contributed to the erosion of its sterling reputation of putting the consumer first as it did in the Tylenol scare of 1982.

 

What can a CEO do? First establish a no tolerance rule for non-ethical behavior. Anyone whose conduct exceeds the bounds of propriety is gone. Second, very careful employment screening is a must. Thirdly, establish ethical standards. Easier said than done? Perhaps but the effort should be made. Obviously if certain conduct is illegal, then it clearly has no place in the organization. beyond that if conduct is egregious enough to create the valid claim of negligence or breach of contract it should not be tolerated. Finally, if conduct would offend any one class or more of your stakeholders then it should be carefully considered. No organization should take an action that has the potential for angering its customers or clients, its investors, suppliers, employees, government officials, the public at large or the media. Of course, angering your competition is a different story, unless it angers the public at large and boomerangs.

 

No organization can protect itself against the errant employee who may jeopardize its reputation, legal standing or success. Nevertheless, it is imperative that the CEO and the board of any entity establish the rules of conduct by which it wishes to be known and respected.

 

 

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WHAT WE CAN LEARN FROM THE JPMORGAN DEBACLE

Posted in analyze the problem, Business Crisis Management, Corporate Crisis Management, Crisis Management, Crisis Management Planning, Crisis Management Response, don't white wash the crisis, fix the problem, Jamie Dimon, JPMorgan Chase, problem employees, Taking Responsibility for actions of an organization or its employees, Throw an employee under the bus on May 23rd, 2012 by mnayor

The JPMorgan $2 billion debacle stunned me as it did everyone else. It was like catching the self-righteous little kid with the smoking slingshot in his hand.

Well, not quite. I got to thinking. Yes, it’s true that Jamie Dimon has this holier than thou attitude and perhaps it’s nice to see him knocked down a peg or two. But many crises are without question caused by those employees who you think you know – but don’t. Or caused by the hierarchy or the controls you’ve established but which really don’t work. You look out over your domain and deem it good, but there is always someone or some circumstance or some poor decision that puts you and your company in the hot spot.

 Yes, the buck stops here and the CEO should always take the rap (instead of throwing someone or a few  people under the bus and taking the $23 million), but that doesn’t mean the CEO can really plug every hole that springs a leak. It would require too many thumbs. Dimon was frank and honest, but he did forget to say it was on his watch and he accepted full responsibility. You can’t have everything. But, what do you do when your trusted employee or employees do something dumb, or worse.

 Several months ago I wrote about Charlie Sheen. I also wrote about Christian Dior’s John Galliano. For those who don’t recognize the names, suffice it to say that both of these guys gave their employers and themselves black eyes and heartburn. CBS and C.D. each acted fairly quickly and dumped its famous and talented employee, regardless of his value. They restructured. They went on and in a matter of a couple of weeks after their decisions, the crisis each faced disappeared.

 Crisis management calls for decisive action. That doesn’t mean just dumping a perpetrator. It means analyzing a situation to see if the organization continues to be vulnerable. It means identifying the basic problem and rectifying it. Do potential employees have to be tested? Drugs? Psychological testing? Do they have to be supervised more closely? Should they be cleared to give public statements? Do employment contracts have to be tightened up? Do the work environments have to be more closely supervised? Do supervisors have to have greater responsibility for the conduct of their departments? Do department managers and regional vice presidents have to be more hands on? Should they be required to know all the employees under them? Should the work environments be evaluated for potential risk? Are there checks and balances? Are there activities being conducted that are beyond the scope or the purposes of the business  or the established guidelines or policies of the company?

Crisis management should lead to problem solving not problem white-washing. JPMorgan Chase has to look well within itself to answer these types of questions. So does the rest of the banking industry. The crucial question that needs to be answered is whether the reins on the biggest banks should be tightened: re-institute Glass-Steagall? Put real teeth into the Volcker Rule? Something has got to give and the big boys should act like big boys. The financial fate of the nation depends on it and the right to massive profits is not justification  for behavior that jeopardizes the well being of the country.

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CHRISTIAN DIOR – MEET CHARLIE SHEEN

Posted in Charlie Sheen, Christian Dior, Crisis Management, Crisis Management Consulting, managing your reputation in good times as well as bad, negative publicity, problem employees, reputation management, THE RHODELL GROUP on May 11th, 2011 by mnayor

Ah, to be blessed with an employee as talented as John Galliano. The problem is the more creative and (in)famous an employee is, the larger his head becomes and the more difficult it is for a company to reign in the beast.

What to do with an uncontrollable employee who is as much or more in the limelight as the company itself. The first rule of thumb is that the COMPANY is more important in the scheme of things than the employee (unless they are one and the same. See Martha Stewart). Certainly a Company can turn a blind eye to little things if those things do not really reflect poorly on the Company. After all you can’t go around canning every employee who gets a speeding ticket.

Nevertheless, there are very visible employees who act out in public and when such actions reflect poorly on the Company, emphatic, decisive action must be taken. The public for the most part applauded the actions of Christian Dior. John Galliano, its head designer, was canned on February 28th for making racist and anti-Semitic remarks caught on video. But prior to that, on February 25th, he had been suspended (pending the results of an inquiry into the matter) for assaulting a couple in a Paris bar, using similar anti-Semitic and racial slurs.

Now, here’s the rub. Did it take a venomous and outrageous video to get Dior to take its final action or was Dior at that point already. Perhaps the Company had already chosen the guillotine for Galliano. And if so, good for them. But the small time lapse brings up the real issue which should count as a lesson for most companies.

Most corporate executives when faced with a crisis like the Galliano affair want to accomplish two things: 1. Look like they are doing the right thing and 2. Salvage the talent in order not to harm the company. It’s the old slap on the wrist routine with fingers crossed that no one is really watching. In the case of Dior only a few days elapsed from the time of the first reported incident to the announcement of his firing. Assuming Dior had no prior information that executives chose to ignore, let’s give the nod to Dior, for realizing that there are thousands of talented designers out in the world waiting to be discovered and for decisive action that reflected very positively on this venerable house.

Contrast this with the affaire Charlie Sheen. On March 7th it was announced by CBS and Warner Bros. Television that Sheen had been fired from the hit TV show Two and a Half Men. It is not necessary to catalog the antics of Sheen over the last months to the present. Suffice it to say that the drunken rampages, coked up babble and other extraordinary behavior reflects a troubled, delusional mind and reflects poorly on both CBS and Warner. But what reflects even more poorly on them is their handling of the crisis. Inaction and vacillation seemed to have guided them until they were backed against a wall. The most telling comment to be made on behalf of the companies was that he was a good employee, was never late, knew his lines etc.

Having your cake and eating it too, is not always possible. A more respectable and man-up approach would have been to at least put Sheen on indefinite suspension from the onset until he got the help he needs. This would have shown more concern for the actor as an individual and would have shown that doing the right thing was more important than squeezing out as many episodes as possible before the implosion. Look where it got CBS and Warner. Egg on its face as well as a suit.

But that’s human nature. No one wants to self immolate. Companies almost always want to salvage what they can. But the moral of the story is that when you do take the right course of action, you almost always live to see another day. Perhaps bruised but with more dignity and respect. Just make sure your employment contracts allow you to make subjective judgments about the injury to your reputation that an employee is creating. An employee’s job description should always contain the obligation not to undermine, and even to bring honor to, your institution. Christian Dior – what would you have done?

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