COSTA CONCORDIA: A CRISIS WAITING TO HAPPEN

Posted in cruise industry, sinking ship on January 18th, 2012 by mnayor

“The public has a short memory. We might have some concerns for a few weeks. But so far, we have had no fallout.” So says Neil Gorfain CEO of the Cruise Outlet a booking agent, commenting to the New York Times about the reaction to the partial sinking of the cruise liner, Costa Concordia, off the coast ofItalylast week.

How is the world ever going to become a better place, how are companies going to become more responsible, how are the lives of individuals going to improve if this observation is true? Have we become so immune to tragedy that, after the initial shock waves, we all just go back to our normal routines and in time we forget? The short answer is yes, we do forget. The BP explosion in the Gulf of Mexico, the tsunami inJapanare already only vague recollections. Are there people now diligently working on better drilling safety? On better nuclear plant safety? Let’s hope so. After all, people died.

 Carnival Lines, parent of the Costa Lines, has felt the backlash. Its shares dropped significantly in theU.S.on the first day of trading after the partial sinking. Crisis management on the part of Costa Lines has been weak, amounting basically to shrill accusations of negligence against the ship’s captain, Francesco Schettino, in guiding the ship too close to shore. While the blame game does take some of the heat off of the company, it underscores the weakness of management control and loose cruise industry regulations. A more intelligent and responsible reaction would have been for Carnival and Costa to both hammer home the need to thoroughly investigate every aspect of the tragic accident, including human error, in order to identify every possible cause; and to pledge to take whatever steps necessary to ensure that nothing like this is ever repeated. Expressions of deep regret, which are not automatically interpreted as admissions of guilt, are in order as well.

 As an immediate step, the public needs to know that a company recognizes itself as the major player, willing to undertake that role for the public good. Expensive? Perhaps. Worth it? Most often a resounding yes, in terms of public perception and goodwill. As a responsible corporate citizen, act sensitively, investigate and devote whatever resources available to help fix the problem and keep the public informed regularly along the way.

 Preserving reputation and directing efforts to problem-solving are the first order of business. Assessing blame comes later and is best left to third parties. No one ever looks good saying it is someone else’s fault. An insurance investigation, a public hearing, a regulatory investigation, a private investigation that is made public are just some of the opportunities you have to provide input to show the root causes of a crisis. Let a neutral source absolve you of blame. In the end it carries far more weight, and is more persuasive and acceptable.

 Could Carnival and Costa avoid tragedies like this? Could the industry do something about it? Yes, on both counts. With sophisticated GPS navigational systems available, every cruise line can and should monitor its ships on the water as closely as planes are monitored in the sky. 

The cruise industry has over 12 million passengers a year and deals with many issues such as health and environment matters, safety, security, and employee conduct. The industry has far to go to achieve a high level of public acceptance and respect.

 Recent public concerns reached a point that The Cruise Vessel Security & Safety Act of 2010 (sponsored by Representative Doris Matsui D-CA and Senator John Kerry D-MA) was passed and signed into law by president Obama. The legislation primarily covered passenger safety from assaults. Cruise Lines International Association (CLIA) the industry’s trade association, devoted significant resources to unsuccessfully counter the legislation, and believes the industry can better handle matters by voluntary compliance. Yet the public has seen only attempts to stone-wall needed improvements. Because of Costa Concordia there is renewed call for stricter regulation. CLIA, dedicated to promoting and growing the cruise industry, will certainly be very active in countering future regulatory and policy developments.

 As responsible corporate citizens companies themselves need to do more to enhance their own reputations. They must become more proactive to sustain and augment their “brands” and corporate reputations. The public perception is that cruise lines are not transparent. Even after a crisis event has passed, a company is more apt to stay mum than to discuss its actions, thereby fomenting the idea that secrecy is the order of the day.

 Major efforts by the industry and individual companies to ensure all aspects of passenger safety, are vital to instill public confidence and customer loyalty, and to grow. Unquestionably, proactive management needs to implement continual training, accountability and monitoring.  Otherwise the call for renewed government regulation will rightly escalate.

 

 

 

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THE YAHOO LESSON: LINE UP YOUR DUCKS AND CONTROL THE DIALOGUE

Posted in Anticipation, Business Crises of our own making, poor succession planning creates concern, succession planning avoids a crisis, YAHOO fires its top exec on September 8th, 2011 by mnayor

On September 6TH Yahoo fired its CEO Carol Bartz after 2 ½ years of lackluster performance.

The firing was done abruptly over the phone and Bartz immediately controlled the dialogue by emailing the story to all Yahoo employees. Yahoo announced that its current CFO, Tim Morse, would be interim CEO.

What’s wrong with this picture? Plenty!

First, as a very visible public company, you try to do things with class.

Second, before you take significant action, you have a plan. In this case, either a solid succession plan with a new CEO waiting in the wings; or a takeover or a restructuring or other dramatic announcement. This current action feels like it is adrift in the middle of nowhere, adding to the perception that Yahoo is essentially rudderless and is floundering.

Third, if all else fails, at least control the dialogue. Make the announcement, explain the need for the company to get back in the ball game, relate what it is it wants to accomplish, thank the fired CEO for her efforts on behalf of the Company, express a long-term vision and state you are looking forward to the future.

Although Yahoo’s Board is probably congratulating itself on the stock surge that resulted from the firing, that little boost may be short-lived. The fact is that Yahoo is behind the times and needs to play catch-up. It has failed to cater to the new digital world of social networks, video creation, mobile apps and smart phone screens. Once investors realize that Yahoo has to do more than fire someone, its stock price will settle back down. To take over, or be taken over, or mount a monumental internal surge – that is the question. An executive looking for an extraordinarily interesting challenge should not be impossible to find.

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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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WHAT TYPE OF RESPONSE DOES YOUR CRISIS NEED?

Posted in Crises Communication, Crisis Communication Failures, Crisis Communication Response, Liability Communications on November 10th, 2010 by mnayor

On November 4th, a Rolls Royce engine on a Qantas A380 Airbus blew apart near Singapore. While there were no deaths or injuries there will likely be financial consequences to the three main players in this story: The Australian airline itself, Qantas; Airbus, the pan-European aerospace company; and Rolls Royce Group, plc the manufacturer of the Trent 900 engines.

There has been much press about the incident and the consequences would appear to be a direct function of how quickly the problem is diagnosed and resolved. Qantas and Rolls Royce are both busily inspecting and analyzing specifications, tolerances and operations that could affect performance.

Because Qantas has the most direct relationship with passengers, it has been the most visible and, seemingly, the most direct and quickest in taking action in this crisis. It has taken its fleet of six A380’s out of service at least temporarily and has made major efforts to redeploy aircraft around the world. Additionally it has provided its passengers with a multitude of assistance in order to avoid as much disruption as possible. Its website has detailed instructions to aid passengers.

Rolls Royce made a statement on November 4th and published it on its website.It stated that safety was its first priority and calmly explained that it has “well established processes to collect and understand information relating to the event and to determine suitable actions”. It then finished with a list several self-serving statements about how terrific the company is, the most recent expenditures on R&D, its revenues and its order book. Its November 8th statement advised that it was working closely with Airbus, and that the incident was unrelated to any of its other engines. While the statements exude a coolness and stiff upper lip mentality that Americans are not quite used to, they also reflect competence and a no-nonsense approach that should reflect well on the company, if it is able to determine and fix the problem in a matter of days.

Finally, turning to Airbus itself, the manufacturer of the A380, a search of its website uncovers nothing. There is a highlighted special report on the latest updates on the WTO Boeing-Airbus dispute but no reference to the Qantas incident. The Press Centre tab brings up many articles, all good, about Airbus. A search of its website does not uncover one mention of the incident.

Three different companies, three different types of response. And perhaps rightly so. Obviously, the closer to the consuming public the more urgent the need for a corporate public response. In the case of Qantas there are passengers who need to be immediately tended to. And potential customers need to be considered. One step down is Airbus whose customer base is the airlines themselves, a much smaller market in numbers. At the bottom rung is Rolls Royce whose customer base is tiny. The bottom line is that crisis communication has to be tailored to the complexity of the situation, a company’s responsibilities, and its stakeholders. Crisis communication is not one-size-fits-all. Less communication and more technical expertise and greater effort to solve the problem would have been far more preferable in the BP Gulf oil spill debacle.

Rolls must make good. Qantas can always buy different planes, although it might take awhile. Airbus could always buy different engines, although that could take awhile. Both Qantas and Airbus could suffer financially in the process but can always rebound. But Rolls will certainly suffer the most if it doesn’t fix the problem fast. Strange that it would be criticized for its lack of communication at a time when 100% of its energy appears to be devoted to fixing the problem, as reported by The Wall Street Journal writer Daniel Michaels, on November 9th. Crisis management is more than communication. If Rolls Royce makes a quick diagnosis and resolves all issues expeditiously, it should be praised for its efforts.

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QUICK RESPONSE VERSUS INTELLIGENT RESPONSE

Posted in Anticipating A Crisis, Crisis Communication Strategy, Crisis Management, Crisis Management Planning, Crisis Management Response on July 27th, 2010 by admin

A maxim in crisis management is that you should control the dialogue. It is better to leap out in front rather than be reactive to questions and probing which often leads to the deer caught in headilghts phenomenon.

What is not said quite so often is that a quick response must be an intelligent response that is backed up by facts and knowledge. Which brings us to the Obama Administration. Early in his term President Obama held a press conference and was asked why it took him a couple of days before he made a statement on AIG bonuses. He gave the CNN reporter an icy stare and stated that he liked to know what he was talking about before he made public statements. Bravo I thought.

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