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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ANTICIPATION

Posted in Anticipating A Crisis, Crisis Communication Planning, Crisis Communication Response, Crisis Communication Training, Crisis Management Planning on September 3rd, 2010 by mnayor

This post is about crises that require that you and/or your organization be in the public eye. In a previous post the observation was made that you should try to control the dialogue, as long as you don’t overly rush and sacrifice accuracy. All that is true but in many cases you may have to open yourselves up to questions, and the questions may be hard ones. So not only is it important to craft your message honestly and pick your messanger carefully, but it is also important to ANTICIPATE.

That seems easy enough and many organizations do that but the method is usually very haphazard. A bunch of people get in a room and the leader says “what do you think They’ll ask?” And then the brainstorming begins and people feel obligated to spout something out. After an uncomfortable length of time when the perticipants have spent their energy, someone says “Ok, I think that does it” and that does do it.

Not good! First you should list your stakeholders and one by one list those issues in which each is primarily interested. Investors – the bottom line; employees - job security; customers – continuity of supply; suppliers – change orders and continued ability to pay. There are those in the organization who know the stakeholders best. Pull them into the room to tell you. Role-play. List the issues and develop the answers. Finally, brainstorm to develop everything and anything that might go wrong. Anticipate the worst. The crisis gets worse, competitors ponce, the news media tries to hang you out to dry. Make the list and try to develop the reaction. You won’t be able to anticipate every scenerio or have an answer for everything BUT the process will prepare you and get you close enough to most issues so you won’t be caught in the headlights.

Finally, the chief operating officer should certainly be your front-(wo)man. Nevertheless we all realize, and it is not expected, that the CEO is all-knowing. Mayor Bloomberg has a brilliant strategy of talking to reporters about key situations, giving the broad-brush information or account and then handing over the microphone to his deputy – the police commissioner, his financial chief, his environmental guru or whoever is the person with the handle on the situation. This has a dual-fold impact: the matter has the attention of the very top, and the organization has the expertise and knowledge to provide the public with detailed information. Oftentimes it may be necessary even for the deputy to surround himself with additional experts and rely on them to feed information or come forward and provide the additional information directly. That is why it is very good training to have your employees particpate in meetings and have some experience in speaking in front of a group. You never know when they will be needed.

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COMMUNICATIONS – INTERNAL AND EXTERNAL

Posted in Crises Communication, Crisis Communication Planning, Crisis Communication Strategy on August 10th, 2010 by mnayor

When experts expound on crisis communications the immediate perception is that they are talking about communications to the public at large. Oftentimes what comes to mind is PR. How do we look good? How do we get the monkey off our backs? Of course, this type of communication is important. We want the public to know about the problem, what we are doing about it and how it occurred in the first place.  But this is really the tip of the iceberg.

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