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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NICKEL DIMED AND FIGHTING BACK

Posted in Anticipating A Crisis, Bank of America, Banking Industry, Business Crises of our own making, Business Crisis Management, Crisis Management Consulting, Crisis Management Response, DECISIONS IN A VACUUM, Excessive consumer fees, negative publicity on November 6th, 2011 by mnayor

The first time I noticed the flagrant imposition of an additional fee for a business service was when ordering Broadway tickets on line. It was a six dollar “service fee” per ticket. I paid the fee but was puzzled. I was paying the company for a service which they were in business to provide. Strange. Do architects charge an extra fee for putting their plans on paper?

Since then of course things have gotten much worse for American consumers. Airlines seem to charge for everything except the air you breathe, and probably don’t, in order to avoid a debate on how inferior that air is. Everywhere you turn there are extra fees for services and “things” that were once free. Understandably businesses and industries are trying to maintain their financial positions. Many want to bring back the good times when they were flush. Because of the weak economy, and the higher cost of resources, they must extract more from the customers who keep them in business in the first place. Obviously, much analysis has gone into the “cost” (interpreted to mean loss of customers and bad press) of implementing new fees. It is clear that most businesses are willing to sacrifice a certain percentage of customers who will bolt in anger, if the economics work.

But it appears as if we are entering into a new phase of business/customer relations. Customers are fighting back, asserting essentially that business has to have skin in the game too. In bad times business cannot expect to maintain the same level of profits or to ride on the backs of consumers in order to do so. Case in point: Bank of America’s announcement in September that it was going to impose a $5.00/month fee for debit card use. A debit card fee is a charge for you to access your own money for commercial or other financial transactions. It is the same money you have deposited with a bank and the same money it needs to conduct its lending business.

Some analysis definitely went into the Bank’s decision. New regulations have reduced the payments merchants pay the Bank for processing debit card payments and BofA didn’t want to just absorb the loss of income. Fair to say that many other banks also entertained the idea of customer debit fees. Some have implemented them. But, after witnessing the backlash from BofA customers, many backed off. BofA itself announced at the end of October that it would allow customers to avoid the fee if they maintain a minimum balance, or arrange for direct deposit of paychecks or use BofA issued credit cards. But just a couple of days later, it fully capitulated to the pressure and scraped the plan in its entirety.

Unlike Netflix which lost 800,000 customers after announcing a 60% price increase a couple of months ago, BofA will likely weather the storm without a major loss. Why? First, it announced its new fee well in advance and wasn’t the only bank contemplating debit fees, so it didn’t look like the only bad guy. Secondly, many of its customers are locked in to BofA with automatic bill paying, multiple accounts and complicated relationships. Unraveling a bank relationship can be complicated. Finally, BofA certainly calculated the loss of customers it would have to endure if it implemented the plan and decided it was worth it. Now that it has jettisoned the fee, many fewer people will transfer their banking relationship. But unquestionably, some damage has been done. There is a strong movement currently underway in the country to pursuade the public to withdraw from national banks and transfer business to community and regional banks and local credit unions.

People are no longer rolling over. They are fighting back, and businesses should realize that weathering an economic storm (or a regulatory reversal) is something to which all segments of society are subject. One segment is not entitled to be made whole at the expense of another. Profits made in good times cannot always be sustained – especially if they can only be sustained on the backs of others who are suffering just as much. Businesses and industries should be rewarded for innovation and creativity, for new and better goods and services, not for figuring ways of squeezing the hand that feeds them. The moral of the story is quite simple: a business can create its own crisis by being too greedy. Before making a dramatic decision that could adversely effect one or more of your stakeholders analyze both the short-term and the long-term costs. Many of your investors may also be your customers. Aiming for profit maximization may not necessarilly please everyone, especially if bonus maximization is the underlyiong motivation and result.

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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 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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PREEMPTION: THE TWO EDGED SWORD IN CRISIS MANAGEMENT

Posted in Business Crises of our own making, Business Crises We Create, Crisis Communication Strategy, Crisis Litigation, Crisis Management, Crisis Mitigation, Liability Communications, Litigation Communications on November 3rd, 2010 by mnayor

 Crisis management and product liability are inextricably linked. Whenever a product fails and causes injury or damage to buyers, a crisis can erupt. The liability of manufacturers and vendors have tightened dramatically over the last hundred years, from the theory of caveat emptor or let the buyer beware, to today, in some cases, strict liability. State laws on matters of health (including the environment) and safety have provided consumers with greater and greater protections over the years.

Businesses of all kinds must be more diligent than ever. Even if negligence and/or misrepresentation are not at issue, a company can still find itself in a great deal of trouble. Accusations concerning causation, erroneous manufacturers’ claims, and customer-product incompatibility can raise the specter of liability and place a company at risk.

Not all products are 100% safe for all people at all times. Thus the concept of warning labels has taken on greater importance, especially in those situations where use may be abused, inappropriate or be accompanied by additional risks. We see this more and more in such industries as pharmaceuticals, foods, toys, automobiles and cosmetics. In today’s world some warnings may not be deemed sufficient because they are either not perceived as strong enough or not evident enough on packaging.

In recent years some companies and even whole industries have looked to preemption as a form of product liability protection from individual and class action suits. Federal preemption is the trumping of federal law over state law when that is the express or implied intention of Congress. Most product liability law is state law through a state’s police powers, and ultimately its state statutes, its common law and court decisions. Oftentimes, federal laws are not as tough as state laws and therefore afford more protection to business. Federal legislation, and even federal regulations, sometimes takes precedence. In fact several agencies of the federal government such as the U.S. Food and Drug Administration, The Federal Trade Commission and its Bureau of Consumer Protection, the Consumer Product Safety Commission, and the National Highway Traffic Safety Administration have declared that some of their specific regulations preempt state law and bar or limit consumer redress. 

Federal court decisions have been mixed. In one recent Supreme Court decision the Court ruled that a medical device manufacturer could not be sued by a consumer because the manufacturer had won FDA approval. But in another, the Court held that a patient was not barred from suing a pharmaceutical company for damages just because the product displayed an FDA-approved label.

Preemption may create a dilemma for a company. Certainly, successful preemption can provide the type of protection that can avoid financial calamity. On the other hand, combative and bellicose pursuit of a safe harbor can have an extremely negative effect on a company’s reputation. It is quite easy to appear as consumer-be-damned if preemption coverage is not handled discretely. Reputation management is equally as important, and a company must strike a balance between finding that safe harbor and doing the right thing, between securing financial escape and retaining and developing public support, respect and even admiration.

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BP’s TROUBLES

Posted in Anticipating A Crisis, Corporate Crisis Management, Crisis Communication Failures, Crisis Communication Implementation, Crisis Management, Crisis Management Planning on May 18th, 2010 by admin

When it rains, it pours. So many crises involving nature. Volcanic ash. Bubbling oil. I have very strong hopes that the earth doesn’t crack open. Disasters of this nature make one feel that protecting a corporate reputation is not all that important in the total scheme of things. But protecting a reputation is very important – as long as the entity being protected is worthy of the effort.

BP in general has manned-up. It has acknowledged its responsibility (at least in part). It has gone before the public almost daily it seems in order to give status reports. It is trying many different schemes to cap the oil gushing into the Gulf. Yet, it is the butt of jokes and is not coming off as a responsible corporate citizen. Something is lacking. Read more »

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