1

A PROJECT REPORT ON
CRISIS MANAGEMENT
SYBMS (2009-10)
PUBLIC RELATION (SEMESTER 4)
SUBMITTED By:
ROLL NO
1. Roopa Bhingardeve. 10
2. Swati Biramane. 11
3. Lynn D’mello. 19
4. Rasika Jadhav. 24
5. Suchita Paradkar. 41
6. Preeti Salve. 46
7. Upasana Varma. 54
8. Anamika Vispute. 55

SUBMITTED TO: PROF. HARBIR SIR

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“A crisis is an opportunity riding the dangerous wind” Chinese Proverb

Crisis management is a relatively new field of management. Typically, proactive crisis

management activities include forecasting potential crises and planning how to deal with them, for
example, how to recover if your computer system completely fails. Hopefully, organizations have
time and resources to complete a crisis management plan before they experience a crisis. Crisis
management in the face of a current, real crisis includes identifying the real nature of a current
crisis, intervening to minimize damage and recovering from the crisis. Crisis management often
includes strong focus on public relations to recover any damage to public image and assure
stakeholders that recovery is underway.

Are public relations and crisis management planning important to your

business?
The answer is simple and direct. Public relations and crisis management planning are not only
important to your business, they are both CRUCIAL to your business, regardless of your type of
business. In today’s fast-paced and ever-changing world, business is news. Plant closings, mergers
and acquisition, unemployment, strikes, labor negotiations, company expansions, building
projects, construction-related accidents and catastrophes are often the lead story on the front page
or the six o’clock news. Yet many organizations are totally unprepared or at least ill-prepared to
handle the public relations and crisis management aspects of these events. This unpreparedness
can lead to many negative and undesirable results for you, your employees, your clients and
customers, your company and your business and industry sector.

Many businesses always have been and always will be in a highly visible position to the general
public and the media. For example, the building and construction industry is important to the
economy, as well as the overall health, safety & welfare of the public. The media are very
interested in the building and construction industry because of the potential “high interest” stories
it can generate, both positive and negative. To succeed in today’s business world, all businesses
must learn to manage rapid change and crises and work diligently to develop strong public
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relations and crisis management plans.

A general public relations program is important to your business to: complement advertising;
provide research capabilities for marketing efforts; provide capabilities for special events to
increase company & industry visibility; monitor governmental organizations; to communicate the
state-of-the-industry to the public, including views on legislation, regulations, economic
conditions, and other factors and events impacting your business; and to communicate with past
and existing clients. A crisis management plan, including public relations aspects, is absolutely
essential to maintain a company’s credibility and positive image in the face of adversity. The
company’s customers, employees, management, financial supporters, industry associates, the
general public and the media need to feel that you are well organized and have the ability to
handle a crisis in a very professional manner. Crises do not afford the luxury of time to pause and
think thoroughly through the specific problem. Therefore, there is a need to be prepared for every
type of emergency most likely to happen . I believe that many crises in business, just as in our
daily lives, are often foreseeable. These crises can be managed and can provide unprecedented
opportunities for positive public relations. A majority of businesses are reluctant to prepare for
adversity because they do not want to admit that their business organization could ever be guilty
of poor performance or mistakes.

A company which does not prepare for the possibility that some plan may not work or that
conditions of business may change quickly - including changes beyond their control - will soon
find it unable to deal with a crisis and therefore will suffer severe negative effects on the business
and its image to the public and its clients.

The most critical time for your business, when it comes to public relations, is when a catastrophe,
scandal, or some other negative event occurs which involves your business or industry sector at
large. Things can and do go wrong in the best managed companies and organizations. Therefore,
by accepting this fact and anticipating certain crises, the potential damage from the crises may be
minimized. Contingency planning for crises is not only a good management practice in any
organization but, in my view, it is a mandatory practice for any business.

Many businesses today have high risk, high visibility, high impact on the public and our everyday
lives, and high exposure to potential crises. Because of these characteristics, the potential damage
from a crisis can be greatly multiplied. An unprepared, misinformed, or ill-at-ease company
spokesperson; a disgruntled employee; and a victim of a tragedy at a building site have the
potential of doing inestimable damage to your business or industry by their remarks to the media.
Yet there are countless times when a company representative is thrust into the spotlight as an
official “spokesperson” with little or no training in dealing with the media, especially in a crisis
situation. In fact, when it comes to dealing with the media, most people would rather “be excused”
from the task, because they are ill-prepared psychologically and professionally to deal with the
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media. In today’s world, you must become prepared psychologically and professionally.

Conducting public relations activities without a plan would be the same as someone trying to build
a quality building project without plans and specifications or a business trying to manage the
growth of their business without any plans. Conducting crisis communications and public relations
during emergencies without a plan and training could be about the same as committing suicide or
at least “shooting yourself in the foot,” because of the potential damage that could result to your
company’s image, business, employees, management, etc. and to the image and impact on your
industry.

If you don’t believe the potential damage that can result from what I have written above, think
about the effect of poor public relations efforts during the TMI accident, NASA’s Challenger
tragedy, the EXXON Valdez oil spill event, or during the last major building site accident and the
impact of the negative image on the companies and their industries. Or think about the effect of
good public relations efforts during the Tylenol incident; during the odometer rollback incident at
Chrysler; or during the last successful rescue at a construction site accident and the impact of the
positive image on these companies and their industries.

It is time to truly recognize the importance of public relations and crisis management and their
potential impact on your business. It is also time to do something about it! There is no better place
to start than within your own organization and industry and professional associations by
developing public relations plans, that include crisis management plans, and by training key
employees on how to deal with the media. With the risks as high as they are in your business,
don’t leave public relations and crisis management to chance or to a “seat of the pants” approach.
Make a commitment and start planning for your future public relations and crisis management
efforts today. The futures of your company and to your industry are at risk. With a strong
commitment to good public relations and crisis management planning, the results can be
Tremendous. Without a strong commitment, the results can be disastrous.

INTRODUCTION

In this age; crises are more likely to happen, irrespective of whether they are small scale crises
which affect only one household/small business or large scale crises which can have an impact on
the social and economical stability of entire countries. More importantly, a crisis may initially
start out small and localized/contained, but has the potential to spread and grow at an alarmingly
fast rate.

One of the most important reasons perhaps as to why this is so could be because the business
world now operates in a dynamic environment i.e. it is constantly changing. This is one of the
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reasons why crisis management has become such an important part of business management as a
whole and why a good leader must also be a good crisis handler. Another reason for the increasing
frequency of crises is the lack of trust between world powers and the decrease in natural resources.
This scarcity issue causes people to play the “blame game”, whereby they see the lack of
resources as a result of different social groups vying for control of said limited resources.

A crisis is an abnormal situation, or even perception, which is beyond the scope of

everyday business and which threatens the operation, safety and reputation of an
organization. It is dangerous or worrying time: a situation or period in which things
are very uncertain, difficult, or painful, especially a time when action must be taken to
avoid complete disaster or breakdown.

Any life event can take on crisis proportions if it is experienced as sudden, intense, unexpected, or
emotionally super-charged. We experience crisis as overwhelming leaving us without means to
cope or to adjust. Somehow, we cannot make sense of what is happening or why it is happening.
Without answers to these important questions, we are left helpless. We simply do not know what
to do to control or master the situation. We do not know how to make it stop. Wave after wave of
emotion sweeps over us and we are unable to predict when or if this awful situation is going to
end.

“A spontaneous situation, in which we are unsure how to react, but requires an

immediate response.”

“Complex event that confound the abilities of those who try to manage it.”
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TYPES OF CRISIS

Crises can be categorized into a wide array of different genres on different bases; they can be
classified according to different social settings or according to frequency or timing of their
occurrence.

ON THE BASIS OF SOCIAL SETTINGS:-

1. DOMESTIC CRISIS

This kind of crisis is related to domestic life of a person. This type of crisis usually occurs
in the home and involves individual and members of his family. For example marital
problems which can in turn lead to divorce or even separation. While this kind of crisis does
not only affect spouses, it can be very devastating to children, who can grow up to be
abusive or even reclusive members of society. Domestic crises also include house fire,
flood, burglary and many more.

2. INDUSTRIAL CRISIS

Accidents caused due to human error including neglect, miscommunication and cost cutting
techniques employed by businesses so that costs can be minimized and hence profits may
be maximized. These can have serious consequences not only for the business but also for
the society as a whole. Such as Oil Spills near Karachi, the sinking of the titanic, Cuban
missile crisis and nuclear fall outs Chernobyl.

3. NATURAL CRISIS

This natural crisis happens in the environment and more often than not the activities of
human beings have nothing to do with it. Examples of a natural crisis include: earthquakes,
volcanoes, floods, fire and tsunami. However now it is widely believed that human beings
may be the cause of natural crises as well. For example fires are created either because of
natural causes or the pollution of the environment (caused by human activity). Earthquakes
can be caused by shift in the earth’s tectonic plates or by building on natural fault lines.

4. PROFESSIONAL CRISIS
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Perhaps at first glance similar to industrial crisis, there is a significant difference between
the two. Industrial crisis involves disasters such as oil spills and nuclear fall outs where not
only an organization but also other sections of the society are affected. A professional crisis
on the other hand is one whose effects are limited to the individual’s profession. For
example, when a person is fired from his job, it results in feelings of inadequacy and even
depression. It can also lead to feelings of hate and anger towards ones boss which could
result in a vendetta against that person.

5. SOCIAL CRISIS

Social crisis is one that affects society as a whole. The most simplistic example of this is
crime. Let us assume that the crimes we are referring to is mugging. When such a crime is
committed, everyone in a society is affected, either in a physical or a psychological way.
Individuals are affected by feelings of fear and anxiety which they can only reduce by
believing in a just world a form of defensive attribution where people assume that bad thing
happen to bad people and good things happen to good people. This in turn increases their
susceptibility to these events that they are trying to defend themselves against.

6. FINANCIAL CRISIS

Crises of this nature are usually monetary crisis that an individual may face during the
course of his/her own life. However, perhaps what is so dangerous about this type of crisis
is that it may potentially lead to the other types of crisis mentioned above. For example,
history is riddled with examples of marriages breaking up due to one partner’s inability to
financially support the other. Social crisis such as crime are a direct result of people not
being able to support themselves via jobs that they are qualified for and as a result have to
resort to criminal activities.

ON THE BASIS OF FREQUENCY AND TIMING:-

1. OPERATIONAL CRISIS

Operational Crises are the day-to-day, minor crises of running the organization and serving
individual customers. Though these crises are minor but cannot be avoided. However, with
small efforts and good management these can be avoided or promptly resolved.

2. SUDDEN CRISIS
It cannot cope with a sudden crisis.
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This briefing focuses on what directors can do when their organization faces sudden and potential
crises. Directors are not normally involved in operational crises unless they are symptoms of
problems in executive performance or strategic planning.

WHAT IS CRISIS MANAGEMENT?

Crisis Management is the process by which the organization manages a wider impact, such as
media relations, and enables it to commence recovery. It involves identifying a crisis, planning a
response to the crisis and confronting and resolving the crisis. It is a systematic response to
unexpected events that threaten the people, property and operating continuity of the organization.
It is a set of procedures applied in handling, containment, and resolution of an emergency in
planned and coordinated steps.

PURPOSE OF CRISIS MANAGEMENT

There are several reasons as to why a crisis response is required. As previously mentioned a crisis
can transform from a minor annoyance to a very large and complex problem that may require the
business to shift large amounts of time and resources towards containing it. Also it can threaten
not only the business itself but the society in which the business operates therefore there is an even
greater need to create safeguards and protocols that can help people to adequately respond to a
crisis. Aside from this there are several other reasons as to why a crisis response should be
initiated.

1. SURVIVAL

It is the most important purpose of crisis management. Crises do occur without any alarm-
ringing and if not managed effectively, can make it difficult to survive. Here tools of Crisis
Management play their role and help a firm, an individual or a nation to survive in and after
crisis. Unfortunately, it is not always possible to prevent a crisis, and often when a crisis has
already occurred the only thing a person or company may do is attempt to survive the crisis
hopefully until it is resolved.
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“Failure to have a workable Crisis

Management Program is akin to playing Geary Sickish,
Russian Roulette with an automatic pistol. “All Hazards’ Crisis Management
You don’t have the luxury of pulling the Planning”
trigger on an empty chamber.”

2. REDUCE PERSONAL LIABILITY

It is generally known and accepted that Directors and Officers of a company are personally at
risk for the action or inaction of the corporation they serve. It is not as well known that senior
managers, agents and sometimes employees can also be at risk. When there is a catastrophic
loss because of a disaster, it is likely that individuals, other than Directors and Officers, can be
held personally liable for the loss if there are actions that should have been taken but were not.
Persons who act for organizations are in a position of trust with that organization. They
manage and protect it in the best interests of the shareholders, who are owners of the
organization. If the responsible persons breach the duty of trust, they may be liable to the
shareholders of the organization.

3. MINIMIZE NEGATIVE REACTION

As history has proven, when an organization experiences a major crisis or physical disaster, the
sudden reactions by external parties can cause more immediate and permanent harm than the
incident itself. A fire, bombing or natural disaster has an obvious and abrupt impact on an
organization’s ability to perform. The reaction of shareholders and customers is concern for
their investment and source of supply and they will act in a manner that best protects them,
without consideration for the affected organization. These actions could prevent any
organization from effectively recovering from their disaster, either for a long time or
permanently.

4. SAFEGUARD COMPANY ASSETS

At the outset of a crisis, most, if not all, company assets could be at risk. Product, facilities,
equipment and people can all be threatened by a disaster situation. Without implemented and
rehearsed emergency response programs, the chaotic atmosphere and stressful conditions will
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prevent an organized and immediate response. The losses that could be suffered will increase
substantially with every passing hour. Only the immediate actions of the organization can
minimize the loss or inaccessibility of corporate assets.

5. MINIMIZE FINANCIAL LOSSES

Only a small portion of possible financial losses can be protected through insurance. The loss
of immediate sales, temporary loss of production capacity, inability to provide services or the
disruption of a distribution capability may all be minor when compared to the permanent loss
of market share through lost customers and weakened product/service allegiance. Not to
mention the huge losses of advertising campaigns. Insurance may cover the short term impact
of a disaster but unless the organization has formal Crisis Management and Crisis Response
programs implemented, the problem will not require a short-term solution. It should be noted
that in the case of small scale businesses where there is unlimited liability such as partnerships
and sole traders there is an even greater need to ensure the continuation of a firm, since the
proprietors actually stands to lose everything if the business goes under.

COMPONENTS OF CRISIS MANAGEMENT

1. EMERGENCY RESPONSE
It consists of all activities pertaining to safe management of immediate physical, health, and
environmental effects of the crisis.

2. BUSINESS CONTINUITY
It is the company's ability to continue delivering goods and services despite the crisis.

3. CRISIS COMMUNICATIONS
It pertains to the internal and external PR management activities during a crisis.

4. HUMANITARIAN ASSISTANCE
The company's efforts to alleviate the physical, emotional and psychological effects of the
crisis on other people

5. DRILLS AND EXERCISES

This component allows personnel to rehearse what they need to do in a crisis situation.
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CRITICAL SUCCESS FACTORS FOR EFFECTIVE CRISIS MANAGEMENT

Following are certain factors for effective crisis management.

1. LEADERSHIP
It is perhaps the most important required factor. To be a good leader, a leader must possess
following capabilities.
◊ The ability to multitask
◊ Excellent delegation skills
◊ Cool under pressure
◊ Ability to empathize
◊ Able to make quick and effective decisions
◊ Listens but comfortable in calling tough choices
◊ Self-awareness
◊ Communication skills
◊ Ability to prioritize
◊ Time management
◊ Empowered to spend company funds

2. SPEED OF RESPONSE

It is often referred to as the ‘golden hour’. This is parallel to the medical golden hour. If a
critically injured person is treated at a centre of excellence within one hour, their chances of
survival increase significantly. Pretty much the same applies to crisis management. If your
crisis response is off to a rapid start, your chances for reputation damage decrease. This will
only occur if you have an effective plan.
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3. A ROBUST PLAN

It is for this good reason you should develop robust workable plans before the crisis. Even
if you have a plan:

◊ Do you have a comprehensive crisis plan?

◊ Or is it just a communication plan?
◊ When it was last updated?
◊ When were the contact details last checked?
◊ Who is on your nominated crisis team?
◊ When they were last trained?
◊ When did you last contact your team out of hours?
◊ When did you test with a simulation exercise?

4. ADEQUATE RESOURCES

A big crisis is going to require a lot of help. These are just a few of the possible areas of
support you will require - and remember crises can and often occur at the most inconvenient
times - the recent tsunami is a case in point! Critical success factors include:

◊ Instant access to cash funds

◊ Ability to handle thousands of phone calls
◊ Able to continue business as usual
◊ Rapid transport to the incident scene
◊ Legal input
◊ Access to your insurance advisors
◊ Incident investigators
◊ Emotional support
◊ Adequately equipped command centre
◊ Ability to manage the media
◊ Able to deal with other communications issues

5. FUNDING
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A crisis is not the time to be ‘penny-wise and pound-foolish’. Here is a short list of where
costs can be generated. Very few of these areas are likely to be covered by your
clients’/customers’ travel insurance or your own corporate insurances:

◊ Travel and accommodation costs

◊ Trauma counseling / professional emotional support
◊ Media / PR support
◊ Use of a telephone call handling facility
◊ Crisis advisors
◊ Staff overtime
◊ Replacing lost items for survivors
◊ Refund of holiday / travel costs where appropriat

6. CARING AND COMPASSIONATE RESPONSE

Often overlooked, but in our opinion VITAL. However good you are managing everything
else, if you are not using every effort to look after your staff and customers, we guarantee
your crisis response is going to fall apart rapidly. Things to consider are:

◊ Teams have necessary people skills

◊ Communicate clearly with affected people
◊ Provide basic human needs at no cost i.e. food
◊ Look after customers emotional needs
◊ Consider your staff's emotional needs
◊ Be prepared to spend funds

7. EXCELLENT COMMUNICATIONS

Many books are written on this subject alone! Here are just a few thoughts:

◊ Develop a crisis communications plan

◊ Identify ALL your stakeholders
◊ Consider crisis media training
◊ Understand how the media works
◊ Work and win with the media
◊ Be on the front foot all the time
◊ Get a press release out within the golden hour
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◊ Express Pity, Praise and Promise

◊ Tell it all, tell it fast and tell the truth
◊ Never get defensive - however tough things get
◊ Be prepared with company information packs
◊ Get professional crisis communications support

All of these measures help ensure that the crisis is dealt with in most smooth manner leaving no
aspect of the crisis untouched. In the business context, this ensures that even during the crisis the
business (a profit maximizing one) can continue doing business and look to make profits while
simultaneously dealing with the crisis in hand. The basic point is that by taking crisis management
seriously, everyone can be sure to perform well under crisis situations. However, even then there
are certain factors, social and psychological which will inhibit optimum crisis mana

METHODS OF CRISIS MANAGEMENT

1. RESOURCE REALLOCATION

Businesses will often resort to managing their resources towards ensuring that minimum
damage is sustained, both to the company’s reputation (if this is a Public Relations crisis
caused by harmful defects in products) and to its manufacturing or operations (destruction of a
major plant).

2. PREVENTION

This is perhaps one of the best if not the best ways to handle a crisis. Prevention involves
ensuring that a crisis never even occurs. While it is not always possible to do this as no one is
capable of monitoring every aspect of their daily lives and operations 24/7, it does make sure
that those crises that could have been avoided do not cause any unnecessary harm. Prevention
has several advantages. First, it ensures that very little to no resources of an individual have to
be reallocated towards subduing a crisis as it never allows one to occur in the first place.
Furthermore it shows initiative on the part of a company which can be used as a unique selling
point. However, it should be noted that often preventative measures need to be planned and
built in to a system (especially with respect to organization systems). This requires foresight on
the part of managers as well as a very large initial investment. However it is safe to say that the
initial costs of integrating preventative measures are far outweighed by the costs of allowing a
crisis to occur unchecked.

3. CONTINGENCY PLANNING
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Often companies with the foresight will adopt pre-placed contingency plans to help them
weather the crisis. It should be noted that contingency planning can be undertaken by people as
well as organizations. Contingency planning is a five stage process:

• Recognizing the need to plan:

Indeed the only way to plan for a crisis is to first admit that such a plan in needed. It was
observed that until very recently, most businesses would never undertake this first step
either due to a short sightedness or ignorance towards the need for planning. It could also
have been because of an overconfidence barrier (the fact that people have too much
confidence in the accuracy of their judgments) that exists in the minds of a few of the
higher decision makers. It is however unknown exactly how many households and
individuals undertake contingency planning, at least with regards to crises on a larger scale
than running out of money or losing all of their possessions. It could very well be that there
is a cultural aspect to this with those in more prosperous countries being a little more likely
to plan ahead as they do not live a “hand to mouth” sort of existence.

“There cannot be a crisis next week. My Henry Kissinger (American Political

schedule is already full.” scientist. b.1923)

• Catalogue as many crisis scenarios as possible:

This stage requires a very pessimistic approach to management and life. This type of
analysis is often called “What If” analysis and should include as many if not all crisis
situations.

• Search for ways to prevent each crisis:

The third stage is connected in part to Prevention of a crisis which was discussed earlier. It
involves using those strategies that will help avoid each crisis which has been identified in
previous steps.

• Formulate plans for dealing with each crisis:

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Having identified all possible crises, plans can be made as to how to deal with them. This
should involve a detailed description of what resources will be required and how they will
be used to handle the crisis situation. Resources would include land, labor and capital (both
financial as well as physical capital). This is of course with respect to firms only.

• Stimulate crisis and the operation of each plan:

After preparing all of the above stages, it is important to try and practice the plan in a
simulation of the crisis. This is done with the idea of gaining enough practice in dealing
with specific crisis so that when the time comes, people will know exactly what protocols to
follow. This also has the added advantage of identifying any weaknesses in the plan and
taking steps to correct it.

“Try to relax and enjoy the Ashleigh Brilliant (English Author and
crisis.” Cartoonist, b.1933)

BARRIERS TO CRISIS MANAGEMENT

• PSYCHO-SOCIAL ISSUES

The first one is concerned with individuals and is sometimes termed as psycho-social
issues. These relate to perception, assumptions, core beliefs and a range of psychological
processes that shape behavior. Furthermore the difficulties people have in perceiving nature
of problems they face can severely inhibit their abilities to make sense of a situation thereby
increasing the risk of error. There are several ways in which this error can be made:

1. First there is the use of schemas in our daily lives. Schemas are part of our automatic
thinking process i.e. the type of thinking that is involuntary, unconscious,
uncontrolled and inadvertent. Even social psychologist agree that schemas are a very
good way to make quick, in the moment decisions, however they will also agree that
sometimes the use of schemas as a guide is a very risky decision as it may result in
the wrong action being taken.
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2. Furthermore people are likely to be affected by overconfidence barriers where they

place too much faith in the accuracy of their
own judgments. This can prevent people from
perceiving a crisis and can also lead to
faulty decision making with regards to how
the crisis should be dealt with.

• CULTURAL AND GROUP ISSUES

The next set of barriers operates on the cultural and

group level of the organization. They reflect the wider set of issues around the ways that the
organization works, the behavior of groups within a specific organizational setting and the role
that management style can play in the creation of cultural norms and behaviors.
It is assumed that a group can make better decision than individual and that is why in crisis
situation, group decision is given more preference than that of an individual. But below are certain
factors which can cause a group to make worse decisions and can create hurdles in crisis
management.

1. Process Loss:

Any aspect of group interaction that may inhibit good and effective problem solving or
decision making. While there are several different forms of process loss, they all
invariably lead to the same problems.

The following is a list of the more prominent forms of process loss:

o Lack of shared information: It is common for people in a group to focus only on

information that is common to all the members of a group. Even in the situation of
DaimlerChrysler this will hold true. Suppose the group were to meet up to formulate
a plan to solve the crisis. They have just finished creating a rough idea of a plan to
solve the current crisis but the plan is flawed because the group has not taken one
piece of information into account. The reason for this is that one member had access
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to this information but was under the impression that the rest of the group was also
aware of it and had, as a result, taken it into account. Therefore he never brought it up
in the meeting. This lack of sharing information could possibly result in a plan that is
ineffective at averting the crisis or even worse, a plan that worsens the effects of the
crisis.

o Groupthink: A kind of thinking in which group cohesiveness and solidarity is more

important than considering the facts in a realistic manner. As can be seen from the
above situation involving DaimlerChrysler, several of the antecedents and symptoms
of groupthink can be identified:

1. It is stated in the article that one of the co-chairmen left his post thus leaving his
partner as the sole individual in charge of the organization. This in turn could have
lead to a classic groupthink symptom where there is a directive leader who
controls all decision making.
2. Furthermore all of the issues that soon followed such as the layoffs, and pulling
out of shareholders etc. could have created a high stress situation for the new
chairman and (assuming he had any) his team of advisers considering that
naturally the group would itself be blamed for not taking preemptive action to
ensure that the crisis did not get out of hand.
3. The fact that profits initially rose could have meant that group cohesiveness may
have increased. People may have felt that it was the decision making powers of
the top management that led to the success, and as a result the interest to be part of
this group may have increased. It may have also created an illusion of
invulnerability in the group, which made it think that it was incapable of making
mistakes.
4. The fact that several German managers were placed into important positions at
Chrysler could be considered a way of creating a group isolation environment. It
could also have been done as a way to set up mind guards to protect the leader
from conflicting decisions that could have jeopardized the cohesiveness of the
group.
5. It is possible that the decisions made in point 4 could have been due to poor
decision making procedures; also it could have been done due to a false belief in
the moral correctness of the group.

6. It is also worth mentioning that the article mentions that discord (that is to say
disagreement) had erupted behind the scenes of DaimlerChrysler. This could have
resulted in pressures to make the dissenters conform to the norm. When this
strategy did not work, they were fired or perhaps even forced into retirement. This
point of view will be further expanded upon in the section on social influences.
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The end result of all of this (that is group think, group polarization and lack of
shared information) is that it disrupts good decision making in the following
ways: because of a need to maintain high cohesiveness the group does not
consider other points of view or other options that may be more viable. Also the
group becomes isolated. Furthermore a group has a directive leader, there is high
stress in the group, and there are a very poor set of decision making procedures.
To protect itself from these potentially group threatening ideas several steps will
be taken including group isolation, self censorship, pressuring those of other
views to conform, creating a false sense of unanimity and implanting mind
guards. In the end the group ends up doing incomplete surveys of alternative ways
to solve the crisis, fails to examine the risks of the chosen plan, there is poor
information search in this regard as well also there is failure to develop
contingency plans which as we have already discussed is a very important way to
avert or at least contain a crisis. To explain further take the example of
DaimlerChrysler provided above. Suppose that there is a way to avert the crisis
described but it involves creating a disruption in the group then it will not be taken
into consideration. The sad fact is that ever individual is susceptible to these
barriers as invariable we all belong to some sort of group and we all face a crisis
situation at some point in our lifetimes.

2. Social Influence:

This is the effect that the words, actions or even the mere presence of other people have
on an individual’s thoughts feelings attitudes or behaviorisms. Primarily, there are two
different variants of social influence and both of them can apply here.

o Informational Social Influence:

The type of social influence that occurs when people do not know what is the
correct thing to do or say. They essentially put their faith in the actions of other
believing that they may know more about a given social situation then the individual.
As such informational social influence may not have played too large of a role in the
crisis faced by DaimlerChrysler. However, for the moment let us assume that one of
the members of the advisory team was a relatively new member of the group. In such a
crisis oriented and potentially ambiguous situation where he is surrounded by people
who in his opinion are experts, he may have had no choice but to conform to the
expectations of his group. It should be noted that in this case there is a situation of
 21

private acceptance in that he individual conforms to group expectations because he/she

genuinely believes what the group is doing or saying is right.

o Normative Social Influence:

A form of social influence that occurs when we change our behaviors to match
those of others as we want to remain a member of that particular group. This form
of social influence can be said to have a very important and profound effect in this
situation. Recall that we mentioned how there was dissention within the ranks of
DaimlerChrysler. In such a situation very powerful normative pressures are placed
on the individual to conform. Initially other group members will try to bring the
dissenter back into the fold by talking to him and trying to persuade him to accept
the general views of the group. Assuming this does not work, the individual is
ignored by the group and may in fact not even be allowed to express his/her own
feelings. This may in turn create an illusion of unanimity within the group.
Furthermore, if the group successfully manages to persuade the dissenter to
conform to the group norms, it may lead to him/her self censoring their conflicting
viewpoints. This is because usually normative social influences result in public
compliance a situation where people overtly conform to the group norms but
privately do not believe what the group is doing or saying is correct. The question
of why we change our behaviors to suit the group’s social norms and rules is in
part due to a phenomenon called the “Looking Glass Self”. Invented by the
sociologist Charles Horton Cooley, the “Looking Glass Self” theory is composed
of three parts. First it states that we imagine how we appear to other people. Next
we imagine the judgments other people make about us based on that appearance.
Finally, we develop ourselves via and based on these judgments. In order to gain
approval and hence earn the companionship of the group we must ensure that they
make a positive judgment about us and then do everything in our power to
maintain this favorable judgment.

• ENVIRONMENTAL PRESSURE

Finally the last set of barriers exists at the system level and include a range of structural and
environmental pressures and constraints that impact upon the organization at various points
in time and space. These also include issues around complexity and its impact upon
management.

Crisis management
 22

Effective crisis management handles the threats sequentially. The primary concern in a crisis has
To be public safety. A failure to address public safety intensifies the damage from a crisis.
Reputation and financial concerns are considered after public safety has been remedied.
Ultimately, crisis management is designed to protect an organization and its stakeholders from
Threats and/or reduce the impact felt by threats. Crisis management is a process designed to
prevent or lessen the damage a crisis can inflict on an organization and its stakeholders. As a
process, crisis management is not just one thing.

Crisis management can be divided into three phases:

(1) Pre-crisis,
(2) Crisis response,
(3) Post-crisis.

The pre-crisis phase is concerned with prevention and preparation.

The crisis response phase is when management must actually respond to a crisis.
The post-crisis phase looks for ways to better prepare for the next crisis and fulfills commitments
made during the crisis phase including follow-up information. The tri-part view of crisis
management serves as the organizing framework for this entry.

Pre-Crisis Phase

The pre-crisis phase is concerned with prevention and preparation.

Prevention involves seeking to reduce known risks that could lead to a crisis. This is part of an
Organization’s risk management program. Preparation involves creating the crisis management
Plan, selecting and training the crisis management team, and conducting exercises to test the
Crisis management plan and crisis management team.

Table 1 lists the Crisis Preparation Best Practices. The planning and preparation allow crisis teams
to react faster and to make more effective decisions.

Table 1: Crisis Preparation Best Practices

1. Have a crisis management plan and update it at least annually.
 23

2. Have a designate crisis management team that is properly trained.

3. Conduct exercise at least annually to test the crisis management plan and team.
4. Pre-draft select crisis management messages including content for dark web sites and templates
for crisis statements.
Have the legal department review and pre-approve these messages.

Crisis Management Plan

A crisis management plan (CMP) is a reference tool, not a blueprint. A CMP provides lists of key
Contact information, reminders of what typically should be done in a crisis, and forms to be used
to document the crisis response. A CMP is not a step-by-step guide to how to manage a crisis.
How a CMP saves time during a crisis by pre-assigning some tasks, pre-collecting some
information, and serving as reference source. Pre-assigning tasks presumes there is a designated
crisis team. The team members should know what tasks and responsibilities they have during a
crisis.

Crisis Management Team

The common members of the crisis team involves

a) Public relations,
b) Legal
c) Security
d) Operations
e) Finance and
f) Human resources.

However, the composition will vary based on the nature of the crisis. For instance,
information technology would be required if the crisis involved the computer system. Time is
saved because the team has already decided on who will do the basic tasks required in a crisis.
Notes that plans and teams are of little value if they are never tested. Management does not know
if or how well an untested Crisis Management Plan with work or if the crisis team can perform to
expectations. Emphasize that training is needed so that team members can practice making
decisions in a crisis situation. As noted earlier, a CMP serves only as a rough guide. Each crisis is
unique demanding that crisis teams make decisions. Summaries the research shows how practice
improves a crisis team’s decision making and related task performance.

Spokesperson
 24

A key component of crisis team training is spokesperson training. Organizational members must
be prepared to talk to the news media during a crisis. There is need to give considerable attention
to media relations in a crisis. Media training should be provided before a crisis hits.

Table 2: Crisis Media Training Best Practices

1. Avoid the phrase “no comment” because people think it means the organization is guilty and
trying to hide something
2. Present information clearly by avoiding jargon or technical terms. Lack of clarity makes people
think the organizations purposefully being confusing in order to hide something.
3. Appear pleasant on camera by avoiding nervous habits that people interpret as deception. A
spokesperson needs to have strong eye contact, limited disfluencies such as “hums” or “uhs”, and
avoid distracting nervous gestures such as fidgeting or pacing.
4. Brief all potential spokespersons on the latest crisis information and the key message points the
organization is trying to convey to stakeholders.

Public relations can play a critical role in preparing spokespersons for handling questions from
The news media. The media relations element of public relations is a highly valued skill in crisis
Management. The public relations personnel can provide training and support because in most
cases they are not the spokesperson during the crisis.

Pre-draft Messages

Finally, crisis managers can pre-draft messages that will be used during a crisis. More accurately,
crisis managers create templates for crisis messages. Templates include statements by top
management, news releases, and dark web sites
The templates leave blank spots where key information is inserted once it is known. Public
relations personnel can help to draft these messages. The legal department can then pre-approve
the use of the messages. Time is saved during a crisis as specific information is simply inserted
and messages sent and/or made available on a web site.

Communication Channels

An organization may create a separate web site for the crisis or designate a section of its current
Web site for the crisis. Research finds that having crisis web sites is a best practice for using an
Internet during a crisis. The site should be designed prior to the crisis. This requires the crisis team
to anticipate the types of crises an organization will face and the types of information needed for
the web site. For instances, any organization that makes consumer goods is likely to have a
product harm crisis that will require a recall.
 25

The Corporate Leadership Council (2003) highlights the value of a crisis web site designed to help
people identify if their product is part of the recall and how the recall will be handled.
Stakeholders, including the news media, will turn to the Internet during a crisis. Crisis managers
should utilize some form of web-based response or risk appearing to be ineffective. A good
example is Taco Bell’s E. coli outbreak in 2006. The company was criticized in the media for
being slow to place Crisis-related information on its web site. Of course not placing information
on the web site can be strategic. An organization may not want to publicize the crisis by placing
information about it on the web site. This assumes the crisis is
Very small and that stakeholders are unlikely to hear about it from another source. In today’s
Traditional and online media environment, that is a misguided if not dangerous assumption.
Emphasize that a web site is another means for an organization to present its side of the story and
not using it creates a risk of losing how the crisis story is told. Refer to the PR News story

“Lackluster Online PR No Aid in Crisis Response” (2002) for additional information about using
dark web sites in a crisis, Intranet sites can also be used during a crisis. Intranet sites limit access,
typically to employees only though some will include suppliers and customers. Intranet sites
provide direct access to specific stakeholders so long as those stakeholders have access to the
Intranet. Mass notification systems designed to reach employees and other key stakeholders. With
amass notification system, contact information (phones numbers, e-mail, etc.) are programmed in
prior to a crisis. Contacts can be any group that can be affected by the crisis including employees,
customers, and community members living near a facility. Crisis managers can enter short
messages into the system then tell the mass notification system who should receive which
messages and which channel or channels to use for the delivery. The mass notification system
provides a mechanism for people to respond to messages as well. The response feature is critical
when crisis managers want to verify that the target has received the message.

Table 3: Crisis Communication Channel Preparation Best Practices

1. Be prepared to use a unique web site or part of your current web site to address crisis concerns.
2. Be prepared to use the Intranet as one of the channels for reaching employees and any other
stakeholders than may have access to your Intranet.
3. Be prepared to utilize a mass notification system for reaching employees and other key
stakeholders during a crisis

Crisis Response
 26

The crisis response is what management does and says after the crisis hits. Public relations play a
critical role in the crisis response by helping to develop the messages that are sent to various
publics.

A great deal of research has examined the crisis response. That research has been divided into two
sections:
(1) The Initial Crisis Response And
(2) Reputation repair and behavioral intentions

Initial Response

Practitioner experience and academic research have combined to create a clear set of guidelines
For how to respond once a crisis hits.

The initial crisis response guidelines focus on three points:

(1) Be quick, (2) Be accurate, and (3) be consistent.

Be quick seems rather simple, provide a response in the first hour after the crisis occurs. That
puts a great deal of pressure on crisis managers to have a message ready in a short period of
time. Again, we can appreciate the value of preparation and templates. The rationale behind being
quick is the need for the organization to tell its side of the story.
In reality, the organization’s side of the story is the key points management wants to convey about
the crisis to its stakeholders. When a crisis occurs, people want to know what happened. Crisis
experts ften talk of an information vacuum being created by a crisis. The news media will lead the
charge to fill the information vacuum and be a key source of initial crisis information.
If the organization having the crisis does not speak to the news media, other people will be happy
to talk to the media. These people may have inaccurate information or may try to use the crisis as
an opportunity to attack the organization.
As a result, crisis managers must have a quick response. Quick early response allows an
organization to generate greater credibility than a slow response. Crisis preparation will make it
easier for crisis managers to respond quickly.

(2) Be accurate

Obviously accuracy is important anytime an organization communicates with publics. People

Want accurate information about what happened and how that event might affect them. Because
Of the time pressure in a crisis, there is a risk of inaccurate information. If mistakes are made,
They must be corrected. However, inaccuracies make an organization look inconsistent.
Incorrect statements must be corrected making an organization appear to be incompetent. The
philosophy of speaking with one voice in a crisis is a way to maintain accuracy.
 27

Speaking with one voice does not mean only one person speaks for the organization for the
duration of the crisis. it is physically impossible to expect one person to speak for an organization
if a crisis lasts for over a day. Watch news coverage of a crisis and you most likely will see
multiple people speak. The news media want to ask questions of experts so they may need to talk
to a person in operations or one from security.

The crisis team needs to share information so that different people can still convey a consistent
message. The spokespersons should be briefed on the same information and the key points the
organization is trying to convey in the messages. The public relations department should be
instrumental in preparing the spokespersons. Ideally, Potential spokespersons are trained and
practice media relations skills prior to any crisis. The Focus during a crisis then should be on the
key information to be delivered rather than how to Handle the media. Once more preparation
helps by making sure the various spokespersons have
The proper media relations training and skills.

Quickness and accuracy play an important role in public safety. When public safety is a concern,
People need to know what they must do to protect themselves. Be quick and accurate to be
Useful. For instance, people must know as soon as possible not to eat contaminated foods or to
Shelter-in-place during a chemical release. A slow or inaccurate response can increase the risk
of injuries and possibly deaths. Quick actions can also save money by preventing further
damage and protecting reputations by showing that the organization is in control. However,
speed is meaningless if the information is wrong. Inaccurate information can increase rather than
decrease the threat to public safety.

(3) Be Consistent

The news media are drawn to crises and are a useful way to reach a wide array of publics
quickly. So it is logical that crisis response research has devoted considerable attention to media
relations. Media relations allows crisis managers to reach a wide range of stakeholders fast.
Fast and wide ranging is perfect for public safety—get the message out quickly and to as many
People as possible. Clearly there is waste as non-targets receive the message but speed and
reach are more important at the initial stage of the crisis. However, the news media is not the
only channel crisis managers can and should use to reach stakeholders. Web sites, Intranet sites,
and mass notification systems add to the news media coverage andhelp to provide a quick
response. Crisis managers can supply greater amounts of their own information on a web site. Not
all targets will use the web site but enough do to justify the inclusion of web-base communication
in a crisis response.

More recently, crisis experts have recommended a third component to an initial crisis response,
 28

crisis managers should express concern/sympathy for any victims of the crisis. Victims are the
people that are hurt or inconvenienced in some way by the crisis. Victims might have lost money,
become ill, had to evacuate, or suffered property damage.
crisis managers should never forget employees are important publics during a crisis. Employees
need to know what happened, what they should do, and how the crisis will affect them.
When the crisis results in serious injuries or deaths, crisis management must include stress and
Trauma counseling for employees and other victims.

crisis managers must consider how the crisis stress might affect the employees, victims, and their
families. Organizations must provide the necessary resources to help these groups cope.
We can take a specific set of both form and content lessons from the writing on the initial crisis
Response.

Table 4 provides a summary of the Initial Crisis Response Best Practices. Form refers
to the basic structure of the response. The initial crisis response should be delivered in the first
hour after a crisis and be vetted for accuracy. Content refers to what is covered in the initial crisis
response. The initial message must provide any information needed to aid public safety, provide
basic information about what has happened, and offer concern if there are victims. In addition,
crisis managers must work to have a consistent message between spokespersons.

Table 4: Initial Crisis Response Best Practices

1. Be Quick And Try To Have Initial Response Within The First Hour.
2. Be Accurate By Carefully Checking All Facts.
3. Be Consistent By Keeping Spokespeople Informed Of Crisis Events And Key Message Points.
4. Make Public Safety The Number One Priority.
5. Use All Of The Available Communication Channels Including The Internet, Intranet, And Mass
Notification Systems.
6. Provide Some Expression Of Concern/Sympathy For Victims
7. Remember To Include Employees In The Initial Response.
8. Be Ready To Provide Stress And Trauma Counseling To Victims Of The Crisis And Their
Families, Including Employees.

Table 5: Master List Of Reputation Repair Strategies

1. Attack The Accuser: Crisis Manager Confronts The Person Or Group Claiming Something Is
Wrong With The Organization.
2. Denial: Crisis Manager Asserts That There Is No Crisis.
3. Scapegoat: Crisis Manager Blames Some Person Or Group Outside Of The Organization For
The Crisis.
 29

4. Excuse: Crisis Manager Minimizes Organizational Responsibility By Denying Intent To Do

Harm And/or Claiming Inability To Control The Events That Triggered The Crisis. Provocation:
Crisis Was a Result of Response to Someone Else’s Actions.
Defeasibility: Lack Of Information About Events Leading To The Crisis Situation. Accidental:
Lack Of Control Over Events Leading To The Crisis Situation.
Good Intentions: Organization Meant To Do Well
5. Justification: Crisis Manager Minimizes The Perceived Damage Caused By The Crisis.
7. Ingratiation: Crisis Manager Praises Stakeholders For Their Actions.
8 Gifts To Victims.
9. Apology: Crisis Manager Indicates The Organization Takes Full Responsibility For The Crisis
And Asks Stakeholders For Forgiveness.

It should be noted that reputation repair can be used in the crisis response phase, post-crisis
Phase, or both. Not all crises need reputation repair efforts. Frequently the instructing
information and expressions of concern are enough to protect the reputation. When a strong
reputation repair effort is required, that effort will carry over into the post-crisis phase. Or, crisis
managers may feel more comfortable waiting until the post-crisis phase to address reputation
concerns. A list of reputation repair strategies by itself has little utility. Researchers have begun to
explore when a specific reputation repair strategy or combination of strategies should be used.
These researchers frequently have used attribution theory to develop guidelines for the use of
reputation repair strategies.

A short explanation of attribution theory is provided along with its relationship to crisis
management followed by a summary of lessons learned from this research.
Attribution theory believes that people try to explain why events happen, especially events that
are sudden and negative. Generally, people either attribute responsibility for the event to the
situation or the person in the situation. Attributions generate emotions and affect how people
interact with those involved in the event. Crises are negative (create damage or threat of
damage) and are often sudden so they create attributions of responsibility. People either blame
the organization in crisis or the situation. If people blame the organization, anger is created and
people react negatively toward the organization. Three negative reactions to attributing crisis
responsibility to an organization have been documented:

(1) increased damage to an organization’s reputation,

(2) Reduced purchase intentions and
(3) Increased likelihood of engaging in negative word-of-mouth

Most of the research has focused on establishing the link between attributions of crisis
 30

responsibility and the threat to the organization’s reputation The research linking organizational
reputation with purchase intention and negative word-of-mouth is less developed but so far has
confirmed these two links

Crisis managers follow a two-step process to assess the reputational threat of a crisis. The first
step is to determine the basic crisis type. A crisis managers considers how the news media and
other stakeholders are defining the crisis.

Post-Crisis Phase

In the post-crisis phase, the organization is returning to business as usual. The crisis is no longer
The central point of management’s attention but still requires some attention. As noted earlier,
Reputation repair may be continued or initiated during this phase. There is important follow-up
Communication that is required. First, crisis managers often promise to provide additional
Information during the crisis phase. The crisis managers must deliver on those informational
Promises or risk losing the trust of publics wanting the information. Second, the organization
needs . to release updates on the recovery process, corrective actions, and/or investigations of the
crisis. The amount of follow-up communication required depends on the amount of information
promised during the crisis and the length of time it takes to complete the recovery process.
Crisis managers agree that a crisis should be a learning experience. The crisis management
effort needs to be evaluated to see what is working and what needs improvement. The same
holds true for exercises. every crisis management exercise be carefully dissected as a learning
experience. The organization should seek ways to improve prevention, preparation, and/or the
response. As most books on crisis management note, those lessons are then integrated into the pre-
crisis and crisis response phases. That is howmanagement learns and improves its crisis
management process.

Table 8: Post-Crisis Phase Best Practices

1. Deliver all information promised to stakeholders as soon as that information is known.
2. Keep stakeholders updated on the progression of recovery efforts including any corrective
measures being taken and the progress of investigations.
3. Analyze the crisis management effort for lessons and integrate those lessons in to the
organization’s crisis management system
 31

How to handle a crisis - 11 communications tips

Tip # 1 – Have a Crisis plan ready to go. Rather than scurrying about when a crisis hits, it makes
a lot more sense to have a game plan in place ahead of time. Start by determining what can happen
(make lists of scenarios) and then assume it will. Crises fall into two categories: (1) uncontrolled
crises (fire, employee injury, deaths) and (2) controlled crises (layoffs, takeovers, major product
changes). Decide what you will need to do; frame the action items. Create a crisis portfolio and
think through what events could set them off. Align the action you will take with the crisis level.
When the crisis hits, work the plan.

Tip # 2 – Build The Crisis Support Infrastructure.

Assign authority and responsibility ahead of time. Build the
crisis response team; get an adequate number of professionals
involved. Prepare content. Identify all your organization’s
publics, not just the obvious ones. Figure out how and where
you’ll establish information centers. Identify the chain of
communication for crisis notification. Predetermine the way
you’ll assemble the team. Constantly train the team by
simulating various crises; practice the plan once or twice a year and modify as needed; change
scenarios each time. Look for things that don’t work; refine the process.

Tip # 3 – Speak With One Voice. When a crisis hits, you can’t have 10 different people running
around speaking on behalf of the company. This is a formula for a damaged reputation. Instead,
identify one central spokesperson – at the highest possible level – and make certain this individual
has the knowledge, sensitivity, interpersonal skills, authority and public demeanor to speak on
your company’s behalf. Make sure this person is very accessible. Strive for consistency in what is
said and how it is said. Make sure there’s a clear chain of command.

Tip # 4 – Be Prepared Before You Talk. Invest the time – proactively - to anticipate key
 32

questions before they get asked. Know the details. Understand what you can, and cannot, say.
Deal honestly with all your publics, but only divulge what’s required. Don’t volunteer damaging
information. Only use confirmed facts; don’t speculate.

Tip # 5 – Remembers Social Media. Twitter is a phenomenal real-time communication channel,

and a great way to keep people informed, make alerts and be continually proactive. Face book is
an excellent two-way medium to monitor what people are thinking and post frequent updates from
your company.

Tip # 6 – Be there. When a crisis strikes, you can’t maneuver your way through it in your
office. Get out there. Be at the scene. Be visible and available. Don’t allow information voids;
keeps communication flowing.

Tip # 7 – Fall On Your Sword. This is the # 1 mistake companies, organizations and even
venerable institutions consistently make… despite decades of “how not to do it” examples. Don’t
fall into this trap because it’s the most debilitating of all. Nothing damages a reputation more
quickly than stalling, deceit and bamboozling. Acknowledge the problem. Express concern. Take
responsibility. Express a sincere desire to cooperate with others to solve the problem. Be human.

Tips # 8 – Protect The Record. Monitor

everything that’s said and written including
social media. Have a system in place to correct
incorrect facts to avoid recirculation of erroneous
information. Make sure your organization gets
public credit for positive actions taken to address
the crisis.

Tips # 9 – keep reading the situation. If a crisis becomes extended, continually measure changes
in public opinion. This real-time monitoring will enable you to modify your crisis plan and
communication as needed.

Tips # 10 – don’t go quiet. If nothing new has occurred, don’t fall into a black hole. Keep
communicating even if the status quo is unchanged. Be proactive in your communication. Always
be concerned about the reputation of your company, organization or institution.
 33

Tip # 11 – learn & tweak. After the dust settles, get your crisis team together in person and
dissect your organization’s crisis response. What worked? What didn’t? What lessons were
learned? What can you improve next time?

Case study
 34

Johnson & Johnson’s response to the Tylenol incident – 1982

What happen?

In the fall of 1982, a murderer added 65 milligrams of cyanide to some Tylenol capsules on store
shelves, killing seven people, including three in one family. Johnson & Johnson was again struck
by a similar crisis in 1986 when a New York woman died on Feb. 8 after taking cyanide-laced
Tylenol capsules

Johnson & Johnson did not share the same fate as Firestone when crisis struck the company in
1982. One of Johnson & Johnson's well-known products, Tylenol was tampered with. Someone
had been placing cyanide pills inside of Tylenol bottles, and it was killing people. Johnson &
Johnson reacted quickly and pulled their product off the selves. Instead of suffering long-term
damage to their reputation, Tylenol regained consumer confidence quickly because their crisis
management plan told them to act in the interest of the consumer.

An unknown terrorist spiked Tylenol capsules with cyanide which resulted in seven deaths. Media
coverage made it clear that Johnson & Johnson had no control over this post manufacture product
tampering, suppressing any could counterfactuals.

What did company do & public relation work?

• Johnson & Johnson recalled

Johnson & Johnson recalled and destroyed 31 million capsules at a cost of $100 million. The
affable CEO, James Burke, appeared in television ads and at news conferences informing
consumers of the company's actions. Tamper-resistant packaging was rapidly introduced, and
Tylenol sales swiftly bounced back to near pre-crisis levels

• Responding swiftly and smoothly to the new crisis

 35

2nd time (after8th Feb) Responding swiftly and smoothly to the new crisis, it immediately
and indefinitely canceled all television commercials for Tylenol, established a toll-free
telephone hot-line to answer consumer questions and offered refunds or exchanges to
customers who had purchased

Tylenol capsules. At week's end, when another bottle of tainted Tylenol was discovered in
a store, it took only a matter of minutes for the manufacturer to issue a nationwide
warning that people should not use the medication in its capsule form

• The Company recalled extra-strength Tylenol

The actions taken by Johnson & Johnson were considered as highly effective: The
Company recalled extra-strength Tylenol from all store shelves across the country,

• Offered a reward for the murderer, and introduced a tamper resistant package. In this case,
although the brand’s market share fell sharply (from 35% to 8%), it has recovered within a
year.

A lot has changed in the two decades since Johnson & Johnson's response to the Tylenol
tampering case set the standard for crisis response and taught companies to take swift action and
run to the light, rather than away from it.

Conclusion:

The features that made Johnson & Johnson's handling of the crisis a success included the
following:
• They acted quickly, with complete openness about what had happened, and
• immediately sought to remove any source of danger based on the worst case scenario - not
waiting for evidence to see whether the contamination might be more widespread
• Having acted quickly, they then sought to ensure that measures were taken which would
prevent as far as possible a recurrence of the problem
• . They showed themselves to be prepared to bear the short term cost in the name of
consumer safety. That more than anything else established a basis for trust with their
customers
 36

The Pepsi Product Tampering Scandal of 1993

Summary:

This case study was developed to evaluate how the Public Relations department for Pepsi handled
the syringe crisis of 1993. Diet-Pepsi was celebrating their 95th anniversary.

The case study analysis is based on the manufacture Pepsi Corporation regarding the syringes that
were found in the Diet Pepsi cans and bottles. In 1993, Pepsi Corporation was celebrating their
95th anniversary and with their reputation and high integrity on the line, the company had to result
in crisis management techniques quickly and effectively to overturn the syringe crisis. The first
complaint regarding a syringe was announced on June 10, 1993. The president, the CEO,
contractors, bottle handlers, line assemblers and the other 50,000 employees began the
investigation proceedings towards these alleged complaints.

Craig Weather up the president and CEO of Pepsi Corporation and the crisis management
department evaluated the two initial cases and did not feel threaten enough to request a recall on
the Diet Pepsi product. The crisis management team felt it was impossible to tamper with the
 37

product without a person noticing before purchasing the item. If the item was tamper with, the
item had to be tamper with in the bottling department and/or after the product has been opened.
By June 13, 1993 Pepsi Corporation urged companies not to remove the product off of the shelves
that the products are tamper-proof. Craig Weather up amongst his fellow management team
evaluated the first two cans that had the syringes and noticed that the two cans were made months
apart and from two different plants, the company then realized that the syringe scare was a scam.
Pepsi Corporation could not just tell the public this information without having substantial amount
of evidence to enforce their claim; the investigation had to continue.

Detailed study:

Sometimes crisis management is used to protect a company from its customers. In 1991, a Pepsi
customer claimed to have found a syringe in a can. Once the story hit the press, there were
numerous reports of people finding screws, syringes and bolts in Pepsi cans. The Pepsi
Company immediately denied that this was possible and that these claims were fraudulent.
Pepsi started running ad campaigns against these incidents saying that they were "copycats"
and Pepsi cans are "99.9% safe." This gave Pepsi enough time to discover what was
happening. A grocery store surveillance camera caught a customer placing a syringe in the
Pepsi can. Pepsi now had the proof they needed to refute the claims that their soda was unsafe
to drink.

On Wednesday, June 9th, retired meat salesman Tex Triplett, 82, of Tacoma, Washington, and his
wife, Mary, 78, reported that while looking into a Diet Pepsi can for a prize-winning word to
complete the phrase "Be young, have fun, drink Pepsi," they instead found a syringe. They turned
the materials over to their attorney, who then contacted the Pierce County Health Department.

Seattle-area TV went with the story on Thursday, June 10th. KIRO anchorman Gary Justice said
that the story merited attention because of a local Sudafed tampering in 1991 that killed two
residents, and that needles evoked the fear of AIDS.

The Seattle Times reported the story Friday morning, adding that Mary Triplett said that neither
she nor her husband had shown signs of being sick. Another Pepsi-needle claim was made in
Washington State on Friday. That weekend, The FDA issued a five-state alert advising consumers
to inspect their Diet Pepsi. FDA chief Donald Kessler told the public to "empty the contents of the
can into a glass or cup before drinking."

On Sunday night came a similar claim from a woman in the Cleveland area. By 9:30 AM Monday,
June 14th, there was another claim. And by the time the day was over, 8 more had been made. At
PepsiCo headquarters in Somers, NY the Pepsi public affairs crisis team huddled, hoping that the
 38

new reports would not hit the media. But on Monday afternoon, a New Orleans man was telling
CNN his syringe story, and by Monday evening it was the number two story on the Associated
Press headlines (Ruth Bader Ginsburg being nominated to the Supreme Court was #1).

What company do?

• That night, Pepsi crisis counselors decided to fight the media crisis with media.-"If you're
going to conduct your trial in the media, you've got to do it with the tools they're used to
working with," said Rebecca Madeira, Pepsi's VP of public affairs. Pepsi North America-
CEO Craig Weather up spoke with FDA Commissioner David Kessler that night, and the
two agreed that a product recall was not necessary. Pepsi set up a crisis command center in
the company's TV room, which became Weather up’s HQ for the week.
• "To make that statement, that the can is 99.9% safe, was our defense. We just tried to
explain that in 50 ways," Ms. Madeira said. Of course, this statement, if true, would imply
1,000 unsafe cans for every million that Pepsi produces.
• By Tuesday, June 15th, dozens more people from all over the country reported finding
needles, pins, screws, a crack cocaine vial, and a bullet in Diet Pepsi cans.
• Pepsi began producing video news releases that would be distributed via satellite to local
TV stations across the country. Pepsi estimates that the footage was shown on 403 stations,
and seen by 187 million viewers.
• Christopher J. Brunette, 25, of Williamsport, PA, became the first person arrested and
charged with making false claims of hypodermic hysteria.
• On Tuesday night, Weather up and Kessler appeared on "Nightline." The penalties for
making fraudulent tampering claims (5 years in prison, $250,000 fine) were emphasized.
During this week, John Triebe, Mr. Weather up’s driver, says his boss developed an
"electric tension that crackled."
• Needle claims were still mounting on Wednesday, June 16th. 24 states had at least one
claim. Thanks to Pepsi's efforts, terms like "copycat," and "hoax" started entering the news
stories written about them.
• By Thursday, June 17th, Pepsi executives had the video of a Colorado woman, Gail Levine.
A supermarket surveillance camera caught her putting objects into a Diet Pepsi can. Pepsi
pressured the FDA to issue a statement calling the incidents a series of hoaxes.
• The Food and Drug Administration apologized to the Triplets’ after CBS-TV and The Los
Angeles Times, quoting FDA officials, reported that the syringe they found may have
belonged to a diabetic relative. The Triplets stopped giving interviews. More than 60 cases
had been reported.
 39

Mr. Weather up and Dr. Kessler spoke again at 1PM Thursday. At 3:30 PM, Dr. Kessler stated
that the FDA had been "unable to confirm even one case of tampering."

• Within minutes, a powerful TV news package containing Dr. Kessler's statements with the
Colorado footage and narrated by Mr. Weather up were video news released to the world.
• On Friday, July 18th, "PepsiCo Inc. declared that its needle-in-the-can scare was over." Ads
were prepared: "As America now knows, those stories about Diet Pepsi were a hoax. Plain
and simple, not true."

John Sedwick of St. Petersburg, a Prozac-taking arrested can tampered, told the world, "It just
doesn't pay to tamper with cans. You're going to get caught eventually. I'm asking everybody not
to do what I did."

Dr. Jonas Rapp port, psychiatric advisor to the Grocery Manufacturers of America said "They
want their pictures in the paper."

• Officials blamed news accounts for helping spread the week's wave of phony Pepsi
tampering. "There are too many crazy people out there," claimed Jack Cox, director of the
Foundation for American Communications in Los Angeles.

Over the weekend, Pepsi took out full page newspaper ads which read "Pepsi is pleased to
announce...nothing."

Several weeks later, over the 4th of July holiday, Pepsi took out more ads celebrating its freedom,
and gave out coupons with the slogan, "Thanks, America."

• The scare cost Pepsi some $25 million in lost sales and higher marketing costs, and another
$10 million in increased coupon.
• The FDA arrested 53 people in some twenty states for lying about consumer product
tampering. None of the people arrested was able to show that Pepsi was at fault. However,
not everyone who filed a claim was arrested for filing false claims.

Later that year, Mexican school teacher Maria Del Consuelo Lazaro sued PepsiCo after finding a
rat the size of a fist in a can of Diet Pepsi during a visit to America. Fearful of causing another
"flurry," federal investigators did not make a public announcement after confirming that, indeed,
rat parts were found in the can. A Pepsi official denied responsibility.

By August, Katherine Wuerl pleaded guilty to a federal charge of making a false statement and
lost her job at the newspaper. In October, Christopher J. Brunette was sentenced to a year in
prison. Gail Levine had her conviction overturned on a technicality.
 40

Three cases remained unresolved at the end of the year, including the case that started it all. Mrs.
Triplett was reported as saying "They took our can and our syringe and our case, and so far
nobody even paid us for it."

• According to a government spokesman, they would probably remain that way. In a

Schroedinger's Cat sort of explanation, Pepsi spokespeople maintained that there were "no
instances where needles or syringes were found in unopened containers."

Corporate Crisis Management:

twitter trends: blog citations:

 41

Search volume:

Description of the crisis:

On the night of April 13, two Domino’s employees engaged in an act of food violation posted
their acts on YouTube (putting cheese in their nose, blowing mucous on a sandwich etc). The
videos went viral online, viewed by millions of people until blocked.

Reactions to the crisis:

Trends Spotting gathered Domino’s immediate actions as covered by different articles published
on Advertising Age

April 14:

1. The employees were fired and warrants were issued for their arrest.

2. Domino’s has also posted a statement on its corporate website.

“The opportunities and freedom of the internet is wonderful, but it also comes with the risk of
anyone with a camera and an internet link to cause a lot of damage, as in this case, where a couple
of individuals suddenly overshadow the hard work performed by the 125,000 men and women
working for Domino’s across the nation and in 60 countries around the world” .

3. On an interview with Domino’s spokesman he says: “Nothing is local anymore, that’s the
challenge of the Web world. Any two idiots with a video camera and a dumb idea can damage the
reputation of a 50-year-old brand.”
 42

4. The company decided not to issue a press release. Dominos spokesman was interviewed on
that: “the company can deal with tens of thousands of impressions, but a strong response from
Domino’s would alert more consumers to the embarrassment.”

5. The company shared an apologetic e-mail from the employees: “It was all a prank and me nor
Michael expected to have this much attention from the videos that were uploaded! No food was
ever sent out to any customer. We would never put something like that on you tube if it were
real!! It was fake and I wish that everyone knew that!”

April 15: Domino’s activated social media activities:

6. In a YouTube video, Patrick Doyle, president of Domino’s USA, apologizes for the incident,
and describes the steps his company is taking to ensure such an incident doesn’t happen again.

“We sincerely apologize for this incident, we thank members of the online community who
quickly alerted us and allowed us to take immediate action. Although the individuals in question
claim it’s a hoax, we are taking this incredibly seriously.” Moreover, he said that the Conover
store has been shut down and is being sanitized from top to bottom and promises to make sure
“that people like this don’t make it into our stores.”

6. Dominos started social media activity on twitter (under the username “dpzinfo” – it receives
1425 followers as for today). With public information and personal twits (for example: “Most of
our stores are designed so that anyone in the lobby can fully see the food prep area.”) information
on the brand and on preventive acts are presented.

Nokia BL-5C batteries

 43

Nokia Corporation (Nokia) has made connectivity truly ever-present. It has emerged as a world
leader in mobile technology and progressively moving towards the company's vision of
creatingaworldwhereeveryoneisconnected.

Problem

although the strong strategic growth and transformation, in mid-2007 Nokia encountered a
problem with the malfunctioning of its handsets due to faulty batteries which might get
overheated, especially the BL-5C batteries which were used in most of Nokia's low-end models.

The Finnish company was sourcing these batteries from the Matsushita Battery Industrial Co Ltd.
(Matsushita) of Japan and several other suppliers.

On August 13, 2007, Nokia issued a warning over its BL-5C batteries across the world, stating
that these batteries may get overheated while charging. It said that about hundred such incidents of
overheating had been reported globally but there were no reports of the batteries being associated
with any serious injuries or damage to property.

It also clarified that the problem was limited to 46 million BL-5C batteries manufactured by
Matsushita between December 2005 and November 2006. Nokia also offered to replace the
batteries free of cost to the consumers. "By reacting swiftly and responsibly, and by being fully
transparent, we believe that consumers will continue to view Nokia as a responsible and
trustworthy brand,"1 said Robert Anderson, head of customer and market operations at Nokia.

Some analysts felt that the replacements of the batteries would cost Nokia as much as US$170
 44

million. The company was working together with Matsushita to investigate the defect related to
the batteries and agree on who would bear the cost of the product replacements. Analysts said that
generally the supplier bears the cost of such replacements.

WHAT COMPANY DO?

However, one of the priorities for Nokia was to handle this crisis well so that its brand image do
not suffer due to the resultant confusion and panic among its consumers. For instance, shortly after
Nokia issued the warning, millions of Nokia mobile phone users in India panicked. They checked
their Nokia handsets and rushed to the nearest service centre for clarification and further
information.

However to their dismay the panicking customers found that the customer care centers were not in
a position to help them and denied having any information from the company regarding the
malfunction. The police had to be called in to lend extra security at one Nokia customer centre as
anxious customers gathered there and demanded that their batteries be replaced.

To appease the growing fear among its customers, Nokia through advertisements in various
national newspapers and TV networks, made it clear that for the safety of its customers it had
issued a product advisory for the BL-5C batteries and not a total recall of the product.

It reiterated that it had sourced more than 300 million BL-5C batteries from many suppliers and
the product advisory applied only to the 46 million batteries manufactured by Matsushita between
December2005andNovember2006.

It advised the consumers not to panic and provided them with phone numbers where they could
check the status of their batteries by stating the 26 character battery identification number.
Consumers could also SMS this battery identification number to a number specified by the
company or check the status of the battery online by logging on to the company Website.

Crisis management experts feel that swift consumer communication is of paramount importance
during such crisis situations. It is also important for the company to communicate clearly and
transparently with the publics. Nokia contended that it had acted swiftly and transparently in the
best interests of the consumers and hoped to come out of this fiasco unscathed.

Bad Crisis Management – Blackberry (RIM)

 45

RIM “remained largely quiet” during an outage that left an estimated five million users of the
popular BlackBerry wireless email device without service. As all crisis managers know, a lack of
immediate response leads to a vacuum which is almost always filled with negative perception and
commentary. The company was sharply criticized for not immediately responding to the public.

Black Berry User Stew in Wake of Outage

• “An outage that left an estimated five million users of the popular BlackBerry wireless
email device without service angering some customers and fueling speculation about what
may have been at the root of the failure.”

• “Corporate BlackBerry users said they found the company’s silence puzzling, given the
unprecedented scope of the outage”

• “I find their reluctance to discuss the event a bit baffling — it undermines their credibility,”
said John Halamka, chief information officer for Beth Israel Deaconess Medical Center in
Boston, who oversees 270 BlackBerry users at Beth Israel and 200 more at Harvard
Medical School. All were affected by the outage for eight hours or more, he said.

• Eugene Stein, chief technology officer at the law firm White & Case LLP, which has about
1,900 BlackBerry users, concurred with that assessment. “They’re very quiet on this,” said
Mr. Stein who said he has kept up with the situation through media reports and was eager to
determine whether the failure is likely to be repeated.

When criticized for not issuing a statement, “a Research in Motion spokeswoman said that
determining the full root causes of the outage would take more time.”

This is the number one mistake made in crisis management. RIM should have immediately issued
a statement, followed by updates, which would have helped control the message and mitigate
negative commentary.
 46

The Firestone Tire Controversy: Introduction

In May 2000, the National Highway Traffic Safety Administration (NHTSA)1 in the
United States (US) issued a letter to the Ford Motor Co. (Ford)2 and Firestone Inc.
(Firestone)3 asking for information about the high incidence of tire failures on the Ford
Explorer Sport Utility Vehicles (SUVs). During July, Ford analyzed the data on tire
failures. The analysis revealed that Firestone Radial 15 inch ATX and ATX II tires
produced in North America and Wilderness AT tires produced at Decatur, Illinois Plant
had very high failure rates with the treads peeling off. When the tires failed, the vehicle
often rolled over and killed the occupants.

In August 2000, Firestone amid concerns over tread separation, accidents, injury and
death announced a voluntary recall of all Radial ATX and ATX II and Wilderness AT
tires. Around 6.5 mn tires were recalled which included 3.8 mn Radial ATX and ATX II
tires, and 2.7 mn Wilderness AT tires. These tires were original equipment on certain
Ford Explorer SUVs, Mercury Mountaineer, Ford Ranger pick up trucks and Mazda

TABLEI
FIRESTONE TIRES INSTALLED ON VEHICLE
MANUFACTURER MODEL MODEL YEARS
Ford Explorer 1991-2000
Mercury Mountaineer 1996-2000
Ford Ranger (pick up trucks) 1991-2000
Ford F series light trucks 1991-1994
Ford Bronco 1991-1994
B-series (pick up
Mazda 1994-1996
trucks)
Mazda Navajo 1991-1994

Source: compiled from various sources.

 47

The Firestone tire recall was perhaps the biggest auto safety crisis in the US history. NHTSA put
the death figure in February 2001 at 174 which has risen from 101 deaths reported in September
2000. However, analysts felt that there were as many as 250 deaths and more than 3000 injuries
associated with the defective tires. Most of the deaths occurred in accidents involving the Ford
Explorer and the victims and their families filed hundreds of lawsuits history of Firestone /Ford
related incidents in the US).

In May 2001, Firestone announced that it was severing its ties with Ford and supposed that the
problems in the Ford Explorer caused 174 deaths. Firestone alleged that Ford was trying to divert
attention from the problems with Explorer.

The Controversy

• Ford and Firestone seemed to have known about the flaws in the tires for almost a year
prior to the recall but it wasn't until NHTSA launched a preliminary investigation that
Firestone announced a voluntary recall. Questions were raised about how Ford and
Firestone responded to the first evidence of tire problems. Ford officials said that the issue
first surfaced in Saudi Arabia, where drivers were prone to deflate their tires for better
traction while driving in the desert sand. When they returned to hard pavement, they failed
to rein late the tires and the combination of low pressure and extreme climate led to tire
disintegration.
• Ford replaced the tires on some 45,000 vehicles in the Middle East and in several other
countries with extreme temperatures. Ford and Firestone then studied 63 vehicles in the
Southwestern US to see if similar failures occurred but concluded in March 2000 that the
tires were fine.

However, when NHTSA launched its investigations in May 2000, Firestone officials were
at a loss to explain the tire failures. The officials however said that its data showed many of
the tires were produced at a factory in Decatur, Illinois plant and that 80% of the incidents
occurred in Arizona, California, Florida and Texas.

Firestone said there was a correlation between heat and tire problems and also blamed the
motorists for not keeping the tires properly inflated. However, that it was Ford Explorer
which was affected more than other vehicles. General Motors Corp4, which used the same
type of tires on many of its 1999-2001 trucks, said their performance has been "excellent".
Ford said that it was affected more because of the sheer volume of Explorers on the road.
• But NHTSA officials felt that Explorers were too heavy for the 15-inch tires. However,
there was no definitive evidence to indicate that Ford's design specification for Explorer's
tires was to blame. But Ford was switching over to 16-inch tires in its redesigned Explorer,
which would be launched in 2002. Commented Ralph Hoar, a lawyer representing some of
 48

the victims, "There are a lot of smoke and mirrors going on, Ford can say it's Firestone's
fault, and Firestone can say it's Ford's fault."5

Firestone's Response to the Crisis

• voluntary recall of Firestone tires in August 2000

Ever since Firestone announced its voluntary recall of Firestone tires in August 2000, its
Chief Executive, Yoichiro Kaizaki (Kaizaki) did not make a public appearance. In
September 2000, Business Week wrote that Firestone's behavior spoke volumes about the
huge gap that existed between the US and the Japanese management. All the Firestone
executives in Japan were unwilling to respond to pleas from investors and the media for
explanations and reassurance. Said an analyst, "This is a huge crisis, but Bridgestone and
Kaizaki are handling it terribly."

In September 2000, Firestone announced that it would offer free inspection of the 1.4 mn tires not
covered in the August 2000 recall. Firestone officials said that the tire models identified by
NHTSA which were subject to higher than average rates of tread separation would be
inspected without charge at the company owned stores and authorized retailers. However,
NHTSA recommended that the tires included in the inspection should be recalled as
preliminary investigation by NHTSA of some of the tires not included in the recall showed
an incidence of tread separation that sometimes exceeded the rate for the recalled tires. But
Firestone declined to include the tires in the recall.

John Lampe, Executive vice president, Firestone, said that Firestone would replace any tires
found to be unsafe. Said Susan Sizemore, public relations manager at Bridgestone's US
headquarters in Nashville, "This is not a recall. It's a customer satisfaction initiative. If
necessary, we are replacing those tires with either our tires or a competitor's."
what did Ford do wrong?

• They didn’t put customer safety and needs first.

– They covered up the safety defects for more than 10 years.
– They didn’t immediately recall the product once it started to fail.
• They had no crisis communications plan in place.
– And even when the situation continued drawing national and international attention,
they held off on any formal plan.
• They were reactive, not proactive.
 49

– Once committed to a recall, they were slow in approaching the public and media.
– They ignored a corrective engineering proposal to enhance the stability of the
Explorer, cited among the worst vehicles for rollovers.
• They weren’t a resource for information on the situation.
– Ford CEO Jacques Nassar didn’t attend early House subcommittee hearings on the
issue.
– They didn’t hold regular press briefings or press conferences.
– They didn’t provide a way, place or site for consumers to find the latest information
on the tires, the Explorers or the situation.
– Consumers were left in the dark about how the company was going to fix the
problem.

• They pointed fingers, rather than take responsibility.

– Ford Motor Company repeatedly blamed Firestone tires, in spite of the fact that crash
statistics showed that the Explorer had a higher incidence of tire-related accidents
than other sport-utility vehicles, no matter the brand of tire.
– Ford released documents showing that Firestone had received a disproportionate
amount of complaints about the Wilderness series since 1997.
– Rather than focusing on fixing the problem, they tried to pass the buck.

BHOPAL
 50

In the early morning hours of December 3, 1984, a poisonous grey cloud (forty tons of toxic
gases) from Union Carbide India Limited (UCIL's)1 pesticide plant at Bhopal spread
throughout the city. Water carrying catalytic material had entered Methyl Isocyanine (MIC)
storage tank No. 610. What followed was a nightmare.

The killer gas spread through the city, sending residents scurrying through the dark streets. No
alarm ever sounded a warning and no evacuation plan was prepared. When victims arrived at
hospitals breathless and blind, doctors did not know how to treat them, as UCIL had not
provided emergency information.

It was only when the sun rose the next morning that the magnitude of the devastation was
clear. Dead bodies of humans and animals blocked the streets, leaves turned black, the smell
of burning chili peppers lingered in the air. Estimates suggested that as many as 10,000 may
have died immediately and 30,000 to 50,000 were too ill to ever return to their jobs.

The catastrophe raised some serious ethical issues. The pesticide factory was built in the midst of
densely populated settlements. UCIL chose to store and produce MIC, one of the most deadly
chemicals (permitted exposure levels in USA and Britain are 0.02 parts per million), in an area
where nearly 120,000 people lived. The MIC plant was not designed to handle a runaway reaction.
When the uncontrolled reaction started, MIC was flowing through the scrubber (meant to
neutralize MIC emissions) at more than 200 times its designed capacity.

MIC in the tank was filled to 87% of its capacity while the maximum permissible was 50%. MIC
was not stored at zero degree centigrade as prescribed and the refrigeration and cooling systems
had been shut down five months before the disaster, as part of UCC's global economy drive. Vital
gauges and indicators in the MIC tank were defective. The flare tower meant to burn off MIC
emissions was under repair at the time of the disaster and the scrubber contained no caustic soda.

As part of UCC's drive to cut costs, the work force in the Bhopal factory was brought down by
half from 1980 to 1984. This had serious consequences on safety and maintenance. The size of the
work crew for the MIC plant was cut in half from twelve to six workers. The maintenance
supervisor position had been eliminated and there was no maintenance supervisor. The period of
safety-training to workers in the MIC plant was brought down from 6 months to 15 days.

Introduction Contd...

In addition to causing the Bhopal disaster, UCC was also guilty of prolonging the misery and
suffering of the survivors. By withholding medical information on the chemicals, it deprived
victims of proper medical care. By denying interim relief, as directed by two Indian courts, it
caused a lot hardship to the survivors. In February 1989, the Supreme Court of India ruled that
 51

UCC should pay US$470 million as compensation in full and final settlement. UCC said it would
accept the ruling provided Government of India (GoI) did not pursue any further legal proceedings
against the company and its officials. GoI accepted the offer without consulting with the victims.

The reaction of these two gases produced a new molecule, MIC. MIC was one of the most

The Journey from Virginia to Bhopal

In the beginning of the 20th century, UCC was born of a merger of four US companies producing
batteries and arc lamps for street lighting and headlamps for cars. By the second half of the 20th
century, UCC had 130 subsidiaries in 40 countries, approximately 500 production sites and
120,000 employees. UCC manufactured industrial gases, such as nitrogen, oxygen, methane,
ethylene and propane, used in petroleum industry as well as chemical substances like ammonia and
urea used in the manufacture of fertilizers.

It also produced sophisticated metallurgical specialities based on alloys of cobalt, chrome and
tungsten, used in airplane turbines. In addition to all these, it produced a whole range of plastic
goods for general use. In the 1950s, parasites were creating havoc in the United States, as well as
Mexico, Central America and several South American countries, destroying fodder crop, and
plantations. These parasites also found in Malaysia, Japan, and southern Europe attacked potato
crops as well as fruit trees and vegetables. The red vine spider was another threat to food crops.
The chemical industry had to come up with something to eradicate this. A number of companies
went into action. One of them was UCC

In 1954, UCC embarked on a mission of devising a product to exterminate a wide range of

parasites, while at the same time respecting the prevailing standards for the protection and safety
of human beings and their environment. Thus was born the 'Experimental Insecticide Seven Seven'
which soon came to be known as 'Sevin.' To manufacture Sevin phosgene2 gas was made to react
with another gas called monomethylamine.

dangerous compounds ever invented in the chemical history. UCC's toxicologists had tested it on
rats and the results had been so terrifying that the company banned publication of their work.
Other experiments had shown that animals exposed to MIC vapours would face instantaneous
death. MIC was so volatile that as soon as it came into contact with a few drops of water or a few
ounces of metal dust, it got off an uncontrollably violent reaction.

No safety system, no matter how sophisticated, would then be able to stop it emitting a fatal cloud
into the atmosphere. To prevent explosion, MIC had to be kept permanently at a temperature near
 52

zero. Therefore, provision had to be made for the refrigeration of any drums or tanks that were to
hold it.

CC's operations in India started in the beginning of the twentieth century. In 1924, an assembly
plant for batteries was opened in Kolkata. By 1983 UCC had 14 plants in India manufacturing
chemicals pesticides, batteries and other products. UCC held a 50.9 % stake in the Indian
subsidiary. The balance of 49.1% was owned by various Indian investors. Normally foreign
investors were limited to 40% ownership of equity in Indian companies, but GoI waived this
requirement in the case of UCC because of the sophistication of its technology and the company's
potential for export.

In 1966, an agreement was signed between GoI and UCIL. Under the agreement, UCIL would
import 1,200 tons of Sevin from the parent company in the United States. UCC would build a
factory in India to produce Sevin within five years.

The location of the factory would be Kali Grounds in Bhopal (Madhya Pradesh). In 1969, UCC
set up its pesticide unit in Bhopal. The GoI granted a license to UCIL to manufacture 5,000 tons
of Sevin a year. UCIL would produce Sevin and all the chemical ingredients required in India
itself. Eduardo Munoz, the Argentinean agronomic engineer, who was with UCC, was entrusted
the responsibility of making the project a success.

Eduardo Munoz felt that manufacturing 5,000 tons of Sevin would require considerable
quantities of MIC to be manufactured and stored. He was not in favour of storing huge quantity
of MIC and suggested an alternative like batch production of MIC to meet production line
requirements as they rose. This would eliminate the need to store large quantity of MIC on site.

However, this production philosophy was against the American industrial culture and UCC
officials turned down the suggestion saying, "You have absolutely no need to worry, dear Eduardo
Munoz. Your Bhopal plant will be as inoffensive as a chocolate factory."3 Eduardo Munoz was
also against the proposed site of the factory as it was too close to areas where people lived, such as
the slums in Oriya Bustee, Jayprakash Nagar and Chola (Refer Exhibit I).

However, UCC officials thought Kali Grounds was the right place to build the plant. These
officials submitted their request for a sixty hectare plot of land on Kali Grounds. According to
municipal planning regulations, no industry likely to give off toxic emissions could be set up on a
site where the prevailing wind might carry effluents into densely populated areas.

At the Kali Grounds the wind usually blew from north to south, toward the slums, the railway
station and finally toward the overpopulated parts of the old town. Under such circumstances, the
application should have been rejected. But the UCC officials did not mention that their proposed
 53

factory would be making pesticides out of the most toxic gases available in the chemical industry.

At the beginning of the summer of 1972, UCC dispatched to UCIL all the plans for the factory's
construction and development. In 1979, the Bhopal plant was inaugurated and work started.
Initially, when the factory was not ready to make the MIC needed to produce Sevin, the UCIL
management decided to import several hundred barrels from the parent company's factory in the
United States. In May 1980, the chemical reactors of the Bhopal plant produced their first gallons
of MIC and dispatched them into three huge tanks. The new CEO of UCC, Warren Anderson,
came over specially from the United States for the event.

All's Not Well With The Bhopal Plant

Since 1980, the Bhopal plant had caused death and injury to many. In December 1981, plant
operator Mohammed Ashraf was killed by a phosgene gas leak. Two other workers were injured.
In May 1982, three American engineers from the chemical products and household plastics
division of UCC came to Bhopal. Their task was to appraise the running of the plant and confirm
that everything was functioning according to the standards laid down by UCC.

The report presented to the UCC officials revealed that all was not well with the Bhopal plant.
The report described the surroundings of the site as being 'strewn with oily old drums, used
piping, pools of used oil and chemical waste likely to cause fire.'

It condemned the shoddy workmanship on certain connections, the warping of equipment, the
corrosion of several circuits, the absence of automatic sprinklers in the MIC and phosgene
production zones, and the risk of explosion in the gas evacuation flares.

It also reported leaks of phosgene, MIC and chloroform, ruptures in pipework and sealed joints,
absence of any earth wire on one of the three MIC tanks and poor adjustment of certain devises
where excessive pressure could lead to water entering the circuits.

At the same time, the report expressed concern at the inadequately trained staff, unsatisfactory
instruction methods and sloppy maintenance reports.

Local newspapers in Bhopal published articles criticizing the poor management of the Bhopal
plant. One newspaper said, "The day is not far off when Bhopal will be a dead city, when only
scattered stones and debris will bear witness to its tragic end."4 In October 1982, MIC escaped
from a broken valve, seriously affecting four workers and causing eye irritation and breathlessness
 54

among people in the nearby communities. This incident was a clear indication of the potential risk
to public life.

In the early 1980s, UCC appointed Warren Woomer as the managing director of its pesticide plant
in Bhopal. Analysts felt that this signaled the degree of control UCC wanted to exercise over
UCIL. In 1982, Woomer retired and Jagannathan Mukund (Mukund) became the managing
director. In 1983, under pressure from the parent company, Mukund devoted all his energies to
cost cutting. Two hundred skilled workers and technicians were asked to resign.

In the MIC unit alone, the manpower in each shift was cut by half. In the control room, only one
man was left to oversee some seventy dials, counters and gauges, which relayed, among other
things, the temperature and pressure of the three tanks containing the MIC.

The issue of the danger posed by the pesticide plant to Bhopal was raised in the Madhya Pradesh
Assembly in December 1982. However, T S Viyogi, labour minister in the Arjun Singh5
government allayed all fears saying, "A sum of Rs. 250 million has been invested in this unit. The
factory is not a small stone, which can be shifted elsewhere. There is no danger to Bhopal, nor will
there ever be." Equally confident was Mukund: "The gas leak just can't be from my plant. The
plant is shut down.6 Our technology just can't go wrong, we just can't have such leaks," he said.

In the autumn of 1983, Mukund ordered the shutting down of the principal safety systems in the
plant. He felt that because the factory was no longer active, these systems were no longer needed.
According to analysts Mukund did not pay heed to the fact that sixty tons of MIC were stored in
the tanks. Interrupting the refrigeration of these tanks might possibly save a few hundred rupees
worth of electricity a day, but it violated a fundamental rule laid down by UCC's chemists, which
stipulated that MIC must in all circumstances be kept at a temperature close to zero degree celsius.

In order to save coal, the flames which burnt off any toxic gases emitted into the atmosphere in
the event of an accident that burned day and night at the top of the flare, was also extinguished.
Other essential equipment, such as the scrubber cylinder used to decontaminate any gas leaks,
were subsequently deactivated. All this served as a signal for many well-trained and
experienced engineers and operators to leave the Bhopal factory in search of more secure and
satisfactory employment.

Between one-half and two-thirds of the skilled engineers who had worked with the plant right
from the project stage had left the plant by 1983. Analysts felt that the top officials at UCC were
neglecting the Bhopal plant because they were no longer interested in it.

The Bhopal plant was licensed to manufacture 5,000 tons of MIC based pesticides per year.
However, peak production was only 2704 tons in 1981, which fell to 1657 tons in 1983. Thus
 55

the quantity of pesticides manufactured in 1983 was only 33.14% of its licensed capacity.

In the first ten months of 1984, UCIL's losses amounted to Rs. 50 million. UCC planned to close
the plant and put it up for sale. When no buyer came forward in India, plans were made to
dismantle the factory and ship it to another country. Negotiations to this end were completed by
the end of November 1984. Financial losses and plans to dismantle the plant exacerbated UCIL's
already negligent management practices.

The Tragedy

On the night of December 2, 1984, during routine maintenance operations at the MIC plant, at
about 9.30 p.m., a large quantity of water entered storage tank no. 610 containing over 40 tons of
MIC. This triggered off a reaction, resulting in a tremendous increase of temperature and pressure
in the tank. 40 tonnes of MIC, along with Hydrogen Cyanide and other reaction products burst
past the ruptured disc into the night air of Bhopal at around 12.30 a.m. Safety systems were
grossly under-designed and inoperative. Senior factory officials knew of the lethal build-up in the
tank at least one hour before the leakage, yet the siren to warn neighbourhood communities was
sounded more than one hour after the leak started.

By then, the poisonous gases had covered an area of 40 sq.kms. killing thousands of people. Over
500 thousand experienced acute breathlessness, pain in the eyes, and vomiting as they inhaled the
deadly vapours. They ran in panic to get away from the poisonous cloud that hung close to the
ground for more than four hours.

When people poured into hospitals by thousands, their eyes and lungs in burning, choking agony,
the doctors called up the plant medical officer to find out what they ought to do. Dr Loya, UCIL's
official doctor in Bhopal replied, "It is not a deadly gas, just irritating, a sort of tear gas."7

Unofficial estimates put the death toll at over 16,000. A study carried out by a Non Governmental
 56

Organization in March, 1985 showed that between 50% - 70% of the non-hospitalised population
in exposed areas of Bhopal had one or more symptoms of MIC poisoning.

According to an epidemiological study sponsored by Jawaharlal Nehru University, New Delhi, in

October 1989, 70% to 80% of the people in the severely affected communities and 40% to 50% in
the mildly affected communities continued to suffer from MIC exposure related illnesses five
years after the disaster. A house to house symptom survey in one community, conducted as part of
a doctoral dissertation in Delhi University in early 1993, showed 65.7% people suffering from
respiratory symptoms, 68.4% with neurological problems and 49% with ophthalmic symptoms.
Among the women in the reproductive age, 43.2% suffered from reproductive disorders.

Exxon Valdez
 57

Many companies have faced a crisis during their history, whether due to external forces beyond
their control, through their own failings or management problems, or a combination of the two.
Only a few, however, come to personify corporate irresponsibility through one pivotal event. Such
a one is Exxon's experience with the Exxon Valdez.

What happened?

In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards
California. In spite of the fact that the weather and sea conditions were favorable and the Bligh
Reef clearly marked on the maps, the ship ran aground and began spilling oil. Within a very short
period of time, significant quantities of its 1,260,000 barrels had entered the environment.

At the moment of the collision the third mate, who was not certified to take the tanker into those
waters, was at the helm. The probable cause was established that the Captain and many of the
crew had been drinking alcohol in considerable quantities.

What did the company do?

• The action to contain the spill was slow to get going.

According to most observers, too little and too late. The action to contain the spill was slow
to get going. Just as significantly, the company completely refused to communicate openly
and effectively. The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the
media, and reacted accordingly.

• world's media had piled in to begin extensive coverage,

Shortly after the accident had taken place, and the world's media had piled in to begin
extensive coverage, a company spokesman pointed to the existence of procedures to cover
the eventuality - procedures which the TV shots showed were demonstrably failing. When
asked in Rawl would be interviewed on TV, the response was that he had no time for that
kind of thing.

• Meanwhile the operation on the ground was getting nowhere fast.

Around 240,000 barrels had been spilled, with another million still on the ship. During the
first two days, when calm weather would have allowed it, little was done to contain the
spillage. This spillage spread out into a 12 square mile slick.
 58

• Then the bad weather struck, making further containment almost impossible.
• After more than a week, the company was still giving no ground on the request for better
communication. The media clamor became so hostile that eventually Frank Iarossi, the
Director of Exxon Shipping, flew to Valdez to hold a press conference.
• It was not a success. Small pieces of good news claimed by the company were immediately
contradicted by the eyewitness accounts of the present journalists and fishermen.
• John Devens, the Mayor of Valdez, commented that the community felt betrayed by
Exxon's inadequate response to the crisis, in contrast to the promises they had been quick to
give of how they would react in exactly this eventuality.
• Eventually, Rawl deigned to go onto television. He was interviewed live, and asked about
the latest plans for the clean-up.

It turned out he had neglected to read these, and cited the fact that it was not the job of the
chairman to read such reports.

• He placed the blame for the crisis at the feet of the world's media. Exxon's catastrophe was
complete.

Cost and benefit

• The consequences for Exxon of its two-pronged disaster - the spill and its environmental
consequences, alongside its disastrous communications - were enormous. The spill cost
around $7bn, including the cleanup costs. $5bn of this was made up of the largest punitive
fines ever handed out to a company for corporate irresponsibility.
• The damage to the company's reputation was even more important, and more difficult to
quantify. However, Exxon lost market share and slipped from being the largest oil company
in the world to the third largest.
• The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and
damage.

Conclusion

The features that made Exxon's handling of the crisis a failure included the following:

• The company failed to show that they had effective systems in place to deal with the crisis -
and in particular their ability to move quickly once the problem had occurred was not in
evidence
• They showed little leadership after the event in showing their commitment to ensuring such
problems would never happen again
 59

• They quite simply gave no evidence that they cared about what had happened. They
appeared indifferent to the environmental destruction.

TOYOTA'S NEW PR ISSUE - TELLING THE TRUTH ABOUT THE RUNAWAY

PRIUS

To Tell The Truth?

Imagine you are the head of communications at Toyota and this assignment gets dropped into your
lap.
 60

What do you do with a situation where a person may have allegedly faked a runaway
incident in order to receive a new car?

As a PR pro, do you “out” the person and tell the world that he did this as a stunt to get a free car?

Do you just give the person a “free” car and wipe this situation out of the books?

Does the principle “the customer is always right” apply in this situation?

Do you go to great lengths to expose any wrong-doing, when you have so many other civil
lawsuits going against your company?

Would you be irresponsible for not telling the truth in this case, no matter the judgment on the
driver?

Toyota is in a pickle. This is a case study no one could have ever dreamed up-but it may have
allegedly happened to them, per last week’s runaway Prius incident in San Diego.

Here’s the latest on the story from the Wall Street Journal on Monday.

DOW JONES NEWSWIRES

Toyota Motor Corp. (TM, 7203.TO) said there are “strong indications” that a dramatic incident
on a California highway involving a Prius last week was inconsistent with the findings of the auto
maker’s preliminary analysis.

The Japanese auto maker said its engineers completed an investigation of the 2008 Prius driven
by James Sikes that was subject to an emergency call a week ago, when the driver reported the
vehicle was traveling at a high rate of speed and couldn’t be stopped.

For its part, Toyota said the accelerator pedal in Sikes’ car was tested and found to be working
normally. It said the front brakes showed “severe wear and damage from overheating,” with the
rear and parking brakes in good condition.

The company also said its engineers believe that the assertion the vehicle couldn’t be stopped
with the brakes is “fundamentally inconsistent with basic vehicle design.” An investigation is
ongoing.

So The Real Question Becomes, If James Sikes Did Fabricate The Runaway Stunt Do You
Accuse Him Of It? Is It Best To Tell The Truth In This Case?
 61

What a Potential Mess

I believe that Toyota is actually handling this situation well. Anyone who has been following this
incident is aware of Sikes financial status. The guy is heavily in debt and his actions are not
consistent with the other runway cars. I like how Toyota has not come out and accused him of
anything and how they are choosing their words carefully to explain the matter…they said that
there are “strong indications” that the situation is inconsistent (with the real consistent problem the
Japanese auto maker is having – parenthesis are my words and not Toyota’s).

For all the mistakes that Toyota has been making in cheapening the quality of their cars, this “fake
runaway” incident is something that needs to be exposed so copy-cat incidents do not flare up.
Toyota is just as responsible handling this case as they are the others.

There have been no accusations made in the Sikes case and everything is alleged. So allegedly
speaking, my heart stops at the thought of others who might attempt a foolish stunt to get a free
car. If Toyota did not expose the potential truth in this situation, they could have a epidemic of
sorts on their hands.

Desperation causes people to behave in ways that they never would have dreamed of. Financial
debt breaks the souls and hearts of men-so if one person gets a free car, I hope others don’t try and
mimic a runaway car that really isn’t. But, again nothing has been proven in this case and the
Officer who pulled him over said he looked visibly shaken. So who knows?

But some good did come out of this incident. We all learned through news reports what to do if
we have a runaway situation on our hands. To be truthfully honest here, I don’t think I would
have thought of putting my car in neutral if it was me. But now I do know thanks to the news
reports telling us how to handle the problem. I own a 2007 Prius and I have loved my car, but for
the first time after this incident I felt afraid driving my car for fear that this same situation would
happen, my accelerator would get stuck.

This Toyota situation is like peeling an onion. There’s layers upon layers upon layers that keep
getting discovered as to why there was a shift in their quality control. There is so much that
Toyota needs to own up to regarding those who have lost life and limb due to the construction of
 62

the car, and on top of all that, for Toyota to have to face alleged “fake” incidents is just as
egregious and unnecessary.

If you are not sure how to turn off your car if it speeds out of control, here’s a great video showing
you how from ABC NEWS.

Toyota, public relations and product recalls

Never has so much public relations advice been given, totally free of charge, to a company as
we’re seeing directed at Toyota following its global recall programme.

As with Tiger Woods late last year, the predicable crisis management, and online communications
mantra is spouted: be open, tell all, tell it now. “Tweet, tweet, tweet” because social media is the
solution to every and any situation facing any brand – supposedly.

Numerous “PR experts” are cited slating Toyota’s PR actions – as one “specialist” tells Reuters:

“People want to see a company take full responsibility, be empathic to the victims and their
families and be in control by outlining the problem and how they intend to solve it. They also
expect the CEO doing all this,”

The media seem to want more as the Guardian berates Akio Toyoda for his recent apology: “there
were no tears, no lingering semi-prostration or pleas for forgiveness”. It seems nothing short of
high level ritual suicide will satisfy some of the commentators.

Yes, Toyota has a major reputational problem to manage, it has to investigate its processes and
procedures, and needs to demonstrate that if quality really is a core value, it must be reinstated as
its number one priority. I say, “reinstated”, because I used to work in PR at Toyota GB in the
early 1990s and saw how the Japanese parent company put quality at the heart of the business.

There are also questions for every organisation operating on a global platform, where situations
such as a standard car recall can escalate to be a lead news item – stealing the headlines away
from the major humanitarian disaster in Haiti.

What those issuing demands for immediate explanations and apologies seem not to understand is
that life, and the problems it throws up, are not that simple to resolve.
 63

Cars operate virtue of a complicated combination of mechanical, electronic and human actions.
They are driven in a wide variety of situations, often have multiple owners over their lifetime, and
probably don’t receive regular daily/weekly safety checks or routine servicing.

Things will go wrong – that’s true of even simple products. There’s the story that GM issued a
press release in response to a boast by Bill Gates about computer technology – highlighting what
would happen if a car was like a computer. Cars are largely driven by technology today – and
GM’s comparisons may not be as far-fetched as we’d like.

The reality in organizations such as Toyota is that the PR people are not to blame for originating
product-related issues and crises. Their role in a product recall is normally quite small – as the
issue is rightly addressed direct with customers via bodies such as VOSA and the DVLA in the
UK.

It should also be remembered that most recalls are precautionary – that something could happen,
not that it definitely will. Fire, failing brakes, “unintended acceleration” are all scary – but we are
most at risk from our own driving behavior or those of others, every time we venture on the roads.
Even if a problem does occur, the likelihood is that you will be able to stop and get help – which
makes knowing what to do in crisis situations something of vital importance to every driver.

Of course, the issue with cars is that a failure can be a life or death situation – and the necessity
for a recall needs to be recognized and undertaken with effective monitoring and reporting
systems. Communications between car retailers, their service departments, company customer
relations. technical functions and production facilities need to enable issues to be identified early.

Then, solutions need to be found – which isn’t always easy. Sometimes finding a fault is like an
episode of House – it is a matter of trial and guesswork if onboard computer “blackbox” systems
do not produce the answers and there is no obvious mechanical cause.

When a solution is identified, it needs to be implemented in terms of manufacturing components

or developing software updates. Then, the solution needs to be communicated (in a host of
languages), parts shipped, training undertaken and work scheduled as and when it suits the
customer.

Whilst this process is going on, the PR people are fielding media questions (as well as being pro-
active), liasing with colleagues internally and around the globe, advising executives, marketing
and others on how and what to communicate – which is a constantly moving matter.

Meanwhile the media are reporting individual customer cases of problems in a “we told them so”
manner, after calling for viewers and readers to contact them with their stories (which seem to be
 64

then accepted at face value). Many of these are probably unrelated to the actual issue, but each
needs the PR team to investigate and respond.

Communications with other stakeholders – from employees to shareholders, politicians to

motoring groups, insurance companies to suppliers – need to be co-ordinate, updated and reported
so that feedback is used as part of the ongoing process of being clear about what is happening and
what needs to be done.

Existing PR plans and everyday tasks may still need to be implemented – or sidelined – as
everyone works round the clock to do the best they can in managing the crisis.

It is easy to call Toyota’s woes a PR disaster, nightmare, or similar insult of the hard-working
public relations team who are doing their best with what they know and can do or say (remember
there are legal constraints to consider).

It is easy to call for more social media engagement – ignoring the fact that Toyota (here in the
UK) is using a blog (from the front page of its main website) as well as Twitter. Its staff may not
be leaving comments in response to every post or re Tweet – but in terms of priorities, when
you’ve a small team and only 24 hours in the day, mainstream media reaches more viewers and
readers, particularly those who are Toyota customers.

I’m not saying that Toyota couldn’t have done things better – and it will undoubtedly learn from
this experience now and when there’s time to reflect. But the classic ideas – or is that ideals? – on
how to manage an emerging crisis are, as Eric Denzenhall says, a ridiculous cliché.

This is a complex world for PR management, as those such as Gilpin and Murphy have observed,
noting a need to understand the “changeable and complex nature of crises” and how to operate
within the “real-world environment of confusion, unforeseen events, and missing information”.

The PR world would do better to understand that there are no simplistic responses to issues and
crisis management – and help our publics to realize that we live in a (post-modernist) world where
things go wrong, where risks are a fact of life.

It is ironic that the value of high profile brands is that they indicate that we can trust them. This
also means that when things go wrong, these organizations act to resolve problems. Car
companies routinely undertake recalls – even with old and worn vehicles – and implement
rectifications often without charge to customers (including those who were not the original
purchaser).
 65

They are obligated to do so for legal reasons – as well as the pressures of falling share prices,
declining sales and long-lasting damage to a hard-earned reputation, and a sense of corporate
responsibility.

And, let’s not forget that Toyota built its reputation on the basis of kaizen (continuous
improvement) as part of the Toyota Way. It needs to reflect its Gemba attitude and truly embrace
genchi genbutsu as Mr Toyoda has promised.

I really hope that as Toyota’s reputation was built on solid foundations, it will recognise the
necessity of this authentic approach and not follow the superficial “PR advice” in addressing the
current crisis. The only values that count are those that are worth protecting, even when that
hurts.

Odwalla and the E-coili outbreak: -

What happened?
Odwalla (pronounced "odewalla") is the health-conscious juice company which began a couple of
decades ago when Greg Stelt enpohl, Gerry Percy and Bonnie Bassett began squeezing fresh
oranges on a $200 hand juicer. The company was growing strongly with annual sales rising 30%
per year and approaching $90m. The company had established a strong brand with enormous
customer loyalty.
 66

On October 30, 1996, everything changed. Health officials in Washington state informed the
company that they had discovered a link between several cases of E. coli 0157:H7 and Odwalla
fresh apple juice.

The link was confirmed on November 5. As the crisis played itself out, one child died and more
than 60 people in the Western United States and Canada became sick after drinking the juice.
Sales plummeted by 90%, Odwalla's stock price fell 34%. Customers filed more than 20 personal-
injury lawsuits and the company looked as though it could well be destroyed.

What did the company do?

Odwalla acted immediately. Although at the point where they were first notified the link was
uncertain, Odwalla's CEO Stephen Williamson ordered a complete recall of all products
containing apple or carrot juice. This recall covered around 4,600 retail outlets in 7 states. Internal
task teams were formed and mobilized, and the recall - costing around $6.5m was completed
within 48 hours.
What the company didn't do was to avoid responsibility. On all media interviews, Williamson
expressed sympathy and regret for all those affected and immediately promised that the company
would pay all medical costs. This, allied to the prompt and comprehensive recall, went a long way
towards satisfying customers that the company was doing all it could.

Internal communications were key: Williamson conducted regular company-wide conference

calls on a daily basis, giving employees the chance to ask questions and get the latest information.
This approach proved so popular that the practice of quarterly calls survived the crisis. External
communications were just as vital. Within 24 hours, the company had an explanatory web site (its
first) that received 20,000 hits in 48 hours. The company spoke to the press, appeared on TV and
carried out direct advertising with the website address. All possible attempts were made to provide
up to the minute, accurate information.

The next step was to tackle the problem of contamination. The company's entire approach had
been founded on fresh unpasteurised juice because only juice which had been untampered with
could have the best flavor. The company decided quickly that this had been wrong. The company
moved quickly to introduce a process called "flash pasteurization" which would guarantee that E-
coli had been destroyed whilst leaving the best flavored juice possible.

Within months of the outbreak, the company had in place what some experts described as "The
Most Comprehensive Quality Control And Safety System In The Fresh Juice Industry." On
 67

December 5, the company brought back its apple juice.

Williamson's explanation of how the company found its way is instructive. "We had no crisis-
management procedure in place, so I followed our vision statement and our core values of
honesty, integrity, and sustainability. Our number-one concern was for the safety and well-being
of people who drink our juices." (Source: Fast Company)

Cost and benefit

• Odwalla made a rapid recovery. Much of the good will and trust it had built up over the
years remained. Sales picked up again quite quickly.
• The company did exactly the right things to achieve this. For instance during the lean
months, Odwalla refused to lay off any of its delivery people. They were sent out to
maintain customer relations - an approach that not only earned the loyalty of the employees,
but helped to secure the company's reputation with its customers.
• Even the most grievous victim of the crisis gave Odwalla credit. "I don't blame the
company" the father of the girl who died said. "They did everything they could".

• The company did pay a large cost. Odwalla pleaded guilty to criminal charges of selling
tainted apple juice and was fined $1.5m - the largest ever assessed in a food industry case
by the US Food and Drug Administration.

So Is Everyone Happy?
• Not quite - the company still has some critics who say that it was not quite the victim it
would have people believe.
• Jon Entine, for instance, says that 'investigators now contend that Odwalla had significant
flaws in its safety procedures and citrus-processing equipment was so poorly maintained
that it was breeding bacteria in "black rotten crud'.
• Before the outbreak, Odwalla had received letters from customers who become violently
ill, but had not addressed the problem.
• "Resisting industry safety standards, Odwalla steadfastly refused to pasteurize its juices
claiming it altered taste and was unnecessary. Yet, the year before the incident, the head of
quality assurance, Dave Stevenson, who was aware of the dangers, proposed using chlorine
rinse as a backstop against bad fruit. Senior executives who feared chlorine would leave an
aftertaste overruled him. They decided to rely on acid wash although its chemical supplier
had informed Odwalla that the wash had killed the E. coli in only 8 percent of tests and
 68

should not be used without chlorine."

Conclusion

• The overwhelming feeling of people who dealt with the company at the time of the crisis
was that here was a community of ordinary people who were devastated at the fact that they
had created an episode of poisoning that ended in a loss of life.
• The company's values spoke of nourishing people - and when the crisis came it was an
adherence to honest, straight talking and accepting responsibility that helped to get the
company through.
• There are critics who refuse to credit the company with any integrity whatsoever - but even
these will concede that as an exercise in crisis management, Odwalla stands as an example
of best practice that few can match.
• The year after the crisis, Odwalla was voted "Best Brand Name in the Bay Area" by San
Francisco Magasine. This was the first indication amongst many that Odwalla's reputation
had survived.

Cadbury THE WORMY CONTROVERSY

RISE OF THE CONTROVERSY

 69

state FDA Commissioner Uttam Khobragade said a group of peopleApproached him with
chocolates that had worms in them. SebastianFernandez had purchased Cadbury Dairy Milk
chocolate from a shop at Pick and Pay, Vile Parle. Fernandez discovered that the chocolate
(Batch28F3I10703) had worms in it.

Fernandes complained to the shopkeeper Jitendra Shah who later informedPravin Marve, vice-
president, Andheri Vyapar Manch.Marve then contacted the FDA and gave them the sample.
FDA Joint Commissioner Hindurao Salunkhe said Cadbury's Talegaon plant will also
be inspected.

Bharat Puri, managing director of Cadbury India will never forget the batchof Dairy Milk
chocolates numbered 28F311 manufactured last year at thecompany's plant in Thane, near
Mumbai.

That was the worm-infested batch that triggered a crisis for the company that had always prided
itself on its squeaky clean image.

EFFECTS OF THE CONTROVERSY ON CADBURY

The state Food and Drug Administration has ordered seizure of Cadbury's Dairy Milk chocolates
from all over Maharashtra after worms were found in two of them in Mumbai.

Cadbury India, whose chocolates had ridden into controversy late last year during the festival
season because worms were discovered in some stocks of its Dairy Milk chocolates is probably
hoping the association with Bachchan will help consumers forget the bad press the company got
on account of the discovery.

The Food and Drug Administration had then seized the company's stocks and the Cadbury India
management had explained it was bad storage practices by retailers and distributors that had led to
the worms. Cadbury India's sales fell following the discovery. And even the government got into
the act with the central health ministry asking for a report on the controversy.

The timing of the controversy couldn't have been worse. Festival season sales (Cadbury sells
almost 1,000 tones of chocolates during Diwali) plummeted 30 per cent.
 70

Until then, in the country's FMCG sector plagued by slow, low single digit top line and bottom-
line growth, Cadbury was a sweet exception. But its net profit in 2003 dipped 37 per cent to Rs
45.6 crore (Rs 456 million) as compared to a 21 per cent increase the previous year.

ROLE OF THE PUBLIC RELATIONS STEPS TAKEN TO SOLVE

THCONTROVERSY

The PR department of Cadbury’s played a very effective role in managing the reputation and
keeping up the goodwill of the company. After being struck with the Worm Controversy it was
not possible to create a very good impact on consumers who trusted the company the most. But
through the efforts and a good PR team Cadbury’s managed to wriggle itself out of the
controversy with a clean chit.
STEPS TAKEN
· NOT DENYING THE FACT

It helped that the Maharashtra Food and Drug Administration had given a clean chit to the
company's two plants in the state.

Cadbury went into overdrive e to tell consumers that improper storage of what is essentially a
perishable commodity might lead to worm infestation.

November Bharat Puri, Cadbury's mild-mannered MD, went to media offices around the country
meeting reporters, answering mostly hostile queries and patiently explaining the company's stand
on the issue.

"Unlike the cola companies which were caught in a controversy just a month earlier and displayed
an ostrich-like attitude, Cadbury did not go into denial mode. It accepted that there was a problem,
which may not have been of its own making, and made a commitment to the consumer that it
would plug all possible safety loopholes," says a Mumbai-based brand consultant. As a result
Cadbury improved the packaging and paid more attention to the way its chocolates were stored by
nearly 650,000 retailers across the country.

· TAKING PRECAUTIONS

In the aftermath of the controversy, the company launched Project Vishwas, a retail education
programmed under which 190,000 retailers in key states were covered. The programmed entailed
generating awareness and providing assistance in improving storage quality.
 71

"What you see now is the most over-engineered packaging for a Dairy Milk chocolate anywhere
in the world. Even our festival packs come with a tamper-proof outer sealing and improved
packaging inside," explains Purohit.

The new double packaging even for the smallest offering, the 13 gmRs 5 Cadbury Dairy Milk, had
the bar wrapped in aluminum foil and enclosed in a polyflow pack, which was sealed on all sides.
The larger Cadbury Dairy Milk packs came in poly-coated aluminum foil, which was heat-sealed
and then wrapped in the branded outer package. Both these initiatives are country specific and
Cadbury invested nearly Rs 25 crore (Rs 250 million) this year on new machinery for the
improved packaging.

The company also carried out quality checks at its facilities as well as its carrying and forwarding
warehouses and distributor warehouses and found products free of infestation.

· GAINING BACK TRUST

The Big B promoted the Big C in the chocolate business – Cadbury in India. Indian cine superstar
Amitabh Bachchan has signed on to become the brand ambassador of the chocolate major for two
years.

AB played a pivotal role in all communication relating to Cadbury’s products and brands, be it in
print, on television or the great outdoors, the company's managing director Bharat Puri has been
quoted as saying in media reports.
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With the help of its Public Relations Dept. and advertising agency O&M, it created a campaign
which aimed for both rational and emotional appeal. One of the ads showed Bachhan visiting a
Cadbury plant, inspecting the systems and processes and finally consuming a bar of chocolate to
be convinced that there's nothing wrong with the brand. The other ad featured Bachhan and his
granddaughter to emphasize that the product was absolutely safe for children.

Cadbury stepped up its advertising spend significantly this year to nearly Rs 40 crore (Rs 400
million). With a turnover of Rs 729 crore(Rs 7.29 billion) in 2003, Cadbury has a 70 per cent
market share in chocolates and Dairy Milk chocolate has 30 per cent market share, despite
competitors like Nestle and Amul.

· BENEFITS OF A GOOD CAMPAIGN

The company bounced back soon after the campaign hit the screens. Between October 2003 and
January 2004, Cadbury's value share melted from 73 per cent in to 69.4 per cent. The recovery
began in May 2004 when Cadbury's value share went up to 71 per cent. Cadbury's Indian
operations are not just the largest in Asia but also the cheapest. In India, Cadbury has the largest
market share anywhere in the world and has been the fastest growing FMCG Company in the
last three years with a compound annual growth rate of 12.5 per cent. So, despite the bitter
moments of the last year, the company is hoping that the future will be much sweeter.

Mumbai

In 2008, 26 November, 9 terrorists attacked Taj hotel, Oberoi Hotel and Nariman House at
Mumbai and killed almost 200 people and about 300 were seriously injured in these three places.
It took three days for NSG commandos to overcome these terrorist. In the three days long fight,
the commandos were able to kill 8 terrorists and captured one injured. Despite the terror attack,
the basic feature of Mumbai as a safe and secure city for everyone, whether he is living in a slum
or is the CEO of a corporate giant, has not changed. Parents in the city don't worry about their
young professional daughters coming home late at night in public transport. Having said that,
there is no guarantee that this -- a better law-and-order situation in the city compared with other
metros -- will protect you from a terror attack

Mattel

Mattel Inc., the country's biggest toy maker, has been plagued with more than 28 product recalls
and in Summer of 2007, amongst problems with exports from China, faced two product recall in
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two weeks. The company “did everything it could to get its message out, earning high marks from
consumers and retailers. Though upset by the situation, they were appreciative of the company's
response. At Mattel, after the 7 a.m. recall announcement by federal officials, a public relations
staff of 16 was set to call reporters at the 40 biggest media outlets. They told each to check their e-
mail for a news release outlining the recalls, invited them to a teleconference call with executives
and scheduled TV appearances or phone conversations with Mattel's chief executive. The Mattel
CEO Robert Eckert did 14 TV interviews on a Tuesday in August and about 20 calls with
individual reporters. By the week's end, Mattel had responded to more than 300 media inquiries in
the U.S. alone” (Goldman and Reckard, 2007).

Bausch and Lomb

Brief Description

This case is about the crisis faced by Bausch & Lomb (B&L), a leading eye care company, in the
wake of reports linking its contact lens cleaner, ReNu with MoistureLoc (ReNu MoistureLoc), to
a fungal infection of the eye called Fusarium keratitis. B&L decided to suspend the US shipments
of this product and asked US retailers to temporarily remove ReNu MoistureLoc from their
shelves. The case discusses the views of some marketing and branding experts who highlighted
the inadequate action taken by B&L when the initial reports of the infection came out in Asia.

However, The company's critics felt that B&L had not handled the crisis well and was likely to
pay the price for it in terms of loss of sales, loss of image, and lawsuits. However, there were
others who pointed out that B&L was not all to blame because there was no clear link established
between B&L's product and the infection.

What did the co. do after the crisis occur.

1. On April 10, 2006, eye care company Bausch & Lomb Inc. (B&L) temporarily suspended the
US shipments of its contact lens4 cleaner, ReNu with MoistureLoc (ReNu MoistureLoc) produced
at its Greenville, South Carolina, U.S.A, manufacturing facility. This was done in order to
facilitate a US Food and Drug Administration (FDA)5 investigation into reports of a fungal
infection, Fusarium keratitis6 (keratitis), among contact lens wearers in the US.

2. B&L's CEO, Ronald Zarella (Zarella), said, "The CDC has not determined if these reports
represent an increase of Fusarium keratitis infections and is continuing to investigate the
association, if any, of these cases with any product. Nonetheless, in the interest of public health,
we will voluntarily suspend U.S. shipments of ReNu with MoistureLoc while we pursue all
appropriate steps to bring this investigation to a definitive conclusion."
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3. When retailers started pulling ReNu MoistureLoc off their shelves, B&L started a public
relations blitz in a bid to limit the damage caused to its reputation. It sent out a clear message
asking all retailers to stop selling ReNu MoistureLoc until the truth had been established. The
company published newspaper ads in USA Today and some regional newspapers which had an
open letter to consumers from Zarella. In the letter, Zarella said that the company was voluntarily
withdrawing the product in the interests of the public. He also apologized for any "inconvenience
or anxiety" caused due to this incident.

4. B&L announced that consumers who wished to return their ReNu MoistureLoc could visit its
website www.bausch.com or call a toll free number to receive a coupon for another B&L eye care
product or to receive their money back. It offered a coupon for up to US$8 toward the purchase of
its other contact lens solutions.

Did B&L Give Itself A Poke In The Eye?

Many analysts believed that B&L had adopted a "self-destructively passive role" in dealing with
customers and investors and had thus broken the basic rule in crisis management. Analysts
criticized B&L for remaining silent even after it had learnt about the health problems associated
with the product after they surfaced in Asia as early as November 2005. Glenn MacDonald,
Professor at John M. Olin School of Business, Washington University, said: “When you have a
problem like this, you should deal with it immediately.

Future Outlook

Analysts expected that ReNu MoistureLoc was unlikely to return to the US market in 2006. Maris
expected B&L's remaining lens care business to witness at least a 10% market share contraction in
2006. Analysts also felt that even if the product were to be cleared soon, it would be difficult to
regain the lost market share quickly. The fallout could also erode the company's brand equity not
only in lens care, but also in the contact lens business itself.

Making a Crisis Worse: The Biggest Mistakes in Crisis Communications

All organizations are vulnerable to crises. You can't serve any population without being subjected
to situations involving lawsuits, accusations of impropriety, sudden changes in ownership or
management, and other volatile situations on which your stakeholders — and the media that
serves them — often focus.
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The cheapest way to turn experience into future profits is to learn from others' mistakes. With that
in mind, I hope that the following examples of inappropriate crisis communications policies,
culled from real-life situations, will provide a tongue-in-cheek guide about what NOT to do when
your organization is faced with a crisis.

To ensure that your crisis will flourish and grow, you should:

1. Play Ostrich

Hope that no one learns about it. Cater to whoever is advising you to say nothing, do
nothing. Assume you'll have time to react when and if necessary, with little or no
preparation time. And while you're playing ostrich, with your head buried firmly in the
sand, don't think about the part that's still hanging out.

2. Only Start Work on a Potential Crisis Situation after It's Public

This is closely related to item 1, of course. Even if you have decided you won't play ostrich,
you can still foster your developing crisis by deciding not to do any advance preparation.
Before the situation becomes public, you still have some proactive options available. You
could, for example, thrash out and even test some planned key messages, but that would
probably mean that you will communicate promptly and credibly when the crisis breaks
publicly, and you don't want to do that, do you? So, in order to allow your crisis to gain a
strong foothold in the public's mind, make sure you address all issues from a defensive
posture — something much easier to do when you don't plan ahead. Shoot from the hip, and
give off the cuff, unrehearsed remarks.

3. Treat the Media Like the Enemy

By all means, tell a reporter that you think he/she has done such a bad job of reporting on
you that you'll never talk to him/her again. Or badmouth him/her in a public forum. Send
nasty emails. Then sit back and have a good time while:

o The reporter gets angry and directs that energy into REALLY going after your
organization.
o The reporter laughs at what he/she sees as validation that you're really up to no good
in some way.
4. Get Stuck in Reaction Mode Versus Getting Proactive

A negative story suddenly breaks about your organization, quoting various sources. You
respond with a statement. There's a follow-up story. You make another statement. Suddenly
you have a public debate, a lose/lose situation. Good work! Instead of looking look at
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methods which could turn the situation into one where you initiate activity that precipitates
news coverage, putting you in the driver's seat and letting others react to what you say, you
continue to look as if you're the guilty party defending yourself.

5. Use Language Your Audience Doesn't Understand

Jargon and arcane acronyms are but two of the ways you can be sure to confuse your
audiences, a surefire way to make most crises worse. Let's check out a few of these taken-
from-real-situations gems::

o I’m proud that my business is ISO 9000 certified.

o The rate went up 10 basis points.
o We're considering development of a SNFF or a CCRC.
o We ask that you submit exculpatory evidence to the grand jury.
o The material has less than 0.65 ppm benzene as measured by the TCLP.

To the average member of the public, and to most of the media who serve them other than
specialists in a particular subject, the general reaction to such statements is "HUH?"

6. Don’t Listen to Your Stakeholders

Make sure that all your decisions are based on your best thinking alone. After all, how
would your clients/customers, employees, referral sources, investors, industry leaders or
other stakeholders’ feedback be at all useful to determining how to communicate with
them?

7. Assume That Truth Will Triumph over All

You have the facts on your side, by golly, and you know the American public will
eventually come around and realize that. Disregard the proven concept that perception is as
damaging as reality — sometimes more so.

8. Address Only Issues and Ignore Feelings

o The green goo which spilled on our property is absolutely harmless to humans.
o Our development plans are all in accordance with appropriate regulations.
o The lawsuit is totally without merit.
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So what if people are scared? Angry? You're not a psychologist...right?

9. Make Only Written Statements

Face it, it's a lot easier to communicate via written statements only. No fear of looking or
sounding foolish. Less chance of being misquoted. Sure, it's impersonal and some people
think it means you're hiding and afraid, but you know they're wrong and that's what's
important.

10. Use "Best Guess" Methods of Assessing Damage

"Oh my God, we're the front page (negative) story, we're ruined!" Congratulations — you
may have just made a mountain out of a molehill....OK, maybe you only made a small
building out of a molehill. See item 7, above, for the best source of information on the real
impact of a crisis.

11. Do the Same Thing Over and Over Again Expecting Different Results

The last time you had negative news coverage you just ignored media calls, perhaps at the
advice of legal counsel or simply because you felt that no matter what you said, the media
would get it wrong. The result was a lot of concern amongst all of your audiences, internal
and external, and the aftermath took quite a while to fade away.

Crisis Management: Danger & Opportunity

February 18, 2010 by Georgios Mavridis

This week’s topic was Crisis Management which I found vey interesting and I learned allot,
especially when we had the case study/role-play practice.

Crises can strike at any time, the most important thing is when crises happen, there needs to be a
plan that ensures a positive, focused and effective response comes out. During a crisis there tends
to be confusion, uncertainty and even fear, as everyone is bombing with questions and asking for
instant answers, which in reality is very hard to correspond to them as the facts are not in your
hands and needs some time to find out what happened, how it happened, what cause it and find a
way to deal with it. So doing a full precise press announcement can be quite tough. However,
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some sort of statement needs to go out and inform the public of the situation, even if it is only a
description in chronological order of what we know so far.

A crisis management plan generates order out of chaos. It needs strong leadership by well-trained
and rehearsed individuals. Everyone within an organisation should know what his or her role is in
a crisis and should be prepare to deal with one.

The Department for Business Innovation and Skills (BIS) suggests a number of benefits of an
effective crisis management which are:

1. Enhanced safety for staff and customers

2. Compliance with regulatory and ethical requirements
3. Effective management of major incidents
4. Increased staff awareness of the organisation
5. Increased confidence and morale within the organisation
6. Protected and often enhanced reputation
7. Reduced risk of litigation
8. Levels of control and authority limits

Also proposes roles of the Crisis Management Team

The role of the Crisis Management Team (CMT) within a business is a straightforward
management process. It should:

1. Establish what has happened

2. Assess the impact
3. Resolve any conflicts of interest
4. Identify and priorities actions required
5. Retain control

There are different ways and tactics that can be use in order to deal with a crisis, some of them
that we discussed in the class was: make sure key spokesmen are media trained, centralise
communications channels, keep communication channels open and reduce isolation.

One of the key points I have learned from this topic was that in order to perform crisis
management, you need to be ready to take control and deal with the media as well as be friendly
with them, which is very important to a company or organization who has been hit with a crisis to
look good and have a soft appeal to the circumstances rather than deal with it in a unfriendly
manor.
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In matter of crisis management and social media I found a very good video, which I believe that
stress out a few positive and negative points of crisis management in relation to social media
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Bibliography
www.google .com
www.bausch.com
www.bhopal.net
www.bernsteincrisismanagement.com
www.hotfrog.in/Products/crisis-management
www.genesisbm.in/crisis-communication-preparedness.html