Damage Control (Revised & Updated). Eric Dezenhall
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company through a crisis are the ones who have already demonstrated strong leadership. Leaving a company in crisis without a leader would likely spin it even deeper into crisis. It should not be the objective of a company under siege to satisfy the bloodlust of the news media or business pundits, who are notorious for equating drastic gestures of self-flagellation with good crisis management.
“Tell it all,” “Get it all out,” went the extreme chants of the scandal’s Greek chorus in the weeks before HP spoke publicly. One problem with these absolutes is that companies in crisis rarely know everything they need to know in order to make immediate and ideal decisions. That’s why it’s a crisis.
Another problem is that complete disclosures, while theoretically desirable, may be admissible in court and can place the company in legal jeopardy. If HP had begun speculating publicly about who did what, innocent people could have been smeared, forcing them to take legal action against the company. Moreover, HP didn’t want to give fodder to prosecutors who were investigating the matter. Herein lies the tension between attorneys, who tend to counsel silence, and communicators, who tend to counsel openness. Who’s right? Both are “right” within the context of their disciplines; however, each crisis has its own special set of considerations. It’s up to the chief crisis officer (usually the CEO) to determine where on the silence-openness continuum public statements must fall.
On Friday, September 22, 2006, HP CEO Mark Hurd held a news conference (but took no questions) in which, for the first time since the affair broke in the press several weeks earlier, he commented at some length on the scandal and announced the resignation of chairman Dunn. Hurd also apologized to those who were spied upon and announced the appointment of former U.S. prosecutor Bart Schwartz to look into the investigative methods that were employed by the company in its attempt to plug leaks. (Presumably, this action will result in a final report on who did what—and pave the way for a clearer policy on corporate investigations.)
Also at the news conference, Michael Holston of Morgan, Lewis & Bockius, a law firm HP retained to investigate what actually transpired, reported on the pathology of the scandal, namely that telephone records of employees, directors, and journalists had been obtained via the use of pretexting.
Was Hurd’s news conference held too late? In a perfect world, sure; but in the real world where a leader needs to know what he’s talking about, it was the best of his bad options.
Hurd was criticized for not taking questions, but he was probably wise not to. When legal issues are at stake—especially when information is so limited—open-ended give-and-take with the news media is laden with mines. In the proverbial battle between lawyers and public relations people, the HP press conference was a thoughtful compromise between the two disciplines.
At the time of the congressional hearings on the scandal in 2006, HP’s shares were up 25 percent. Key corporate units, such as HP’s printing products, which had been faltering, have recovered under Hurd. Analysts rightly remain bullish on the stock despite the leak scandal, which, in the end, had nothing to do with the company’s fundamental businesses.
CHAPTER 3
Blame and Resentment
Fault, n. One of my offenses, as different from one of yours, the latter being crimes.
—AMBROSE BIERCE, THE DEVIL’S DICTIONARY
The media pursue two dueling narratives in organizational crises: the victims’ plight, and the tale of an embattled CEO. Whether it’s Coca-Cola or Hurricane Katrina, these archetypes—a vulnerable victim pitted against an arrogant or incompetent villain—are inevitably polarized to fit the prefabricated format that the mass audience can easily process. There are few emotions more powerful than the urge to blame. If there is a suffering victim, there must be a villain who either purposely caused it, or didn’t do enough to stop it. The contrast is the key to the explosiveness of the story—after all, one cannot simultaneously have innocent victims and villains . . . who are trying their gosh-darned best.
The Scylla and Charybdis of crisis management are blame and resentment, and all crises need to be evaluated against these deadly twins.
As domestic diva Martha Stewart became embroiled in an insider trading scandal, some pundits argued that her alleged crime was minor relative to other scandals that were making their way into the public dockets.
The fact is, even with the steady drumbeat of corporate malfeasance stories, Martha Stewart’s scandal is the only narrative that the public and consumer media understood. Even the amount at stake, $45,000, was easily digestible, as opposed to the $100 billion collapse of WorldCom. As the stock market stalled, corporate scandals multiplied, and ludicrous wealth hemorrhaged into the hands of Silicon Valley upstarts, Martha Stewart was a convenient icon upon whom blame and resentment could be easily projected.
Coca-Cola was widely blamed for mishandling a crisis that germanated from deeper cultural resentments. On June 8, 1999, the head of the St. Mary School in Brussels sent thirty-three of his middle school students to the hospital when they complained of dizziness, nausea, and vomiting. This headmaster, Odilon Hermans, suspected food poisoning. Hermans began to focus on Coca-Cola when he became aware that students were consuming the soft drink in higher numbers thanks to a contest involving a promotional message under the bottle cap. Hermans contacted the plant in Antwerp and requested that the remaining Coke cases be removed from his school. The company sent several representatives but did not remove the bottles. Finally, on day three of the crisis, the company finally removed the remaining cases, although it attributed the illnesses to coincidence. “We had to push them a little bit,” Hermans said.
As Cokes were being taken away from the St. Mary School on June 10, schoolchildren in another Belgian city were falling ill supposedly from canned Coca-Cola and fruit-flavored Fanta. These Coke products were manufactured at a different plant from the one that supplied the St. Mary School. Similar reports began to surface in France, the Netherlands, and Luxemburg. About fifty additional schoolchildren were hospitalized in these countries. Incredibly, a U.S.-based spokesperson said, “It may make you feel sick, but it is not harmful.” Coca-Cola’s chief executive, Douglas Ivester, who was traveling in Europe, was told that the outbreaks were not serious, and he returned to Atlanta as panic swept Europe.
Coca-Cola products were being pulled from stores and vending machines, and the lenses of the worldwide news media were on hand to film the rise of overseas outrage. The narrative essentially juxtaposed sick children with a wealthy American CEO hightailing it out of Europe on a private jet. Ivester remained at corporate headquarters in Atlanta throughout the crisis, and many of the key communications emanated from Atlanta.
Belgian national elections were held three days after the second round of illnesses were reported, and the country tossed its leaders from office, replacing them with a new government. The new Belgian minister of health was notoriously anti-American (and the European public was already alarmed by the prospect of having their beloved food supply “tainted” by U.S.-grown genetically modified foods). The minister established a hotline for consumers to report adverse incidents involving Coke products.
Coca-Cola initiated a massive, multination recall as investigations of contaminated products got under way. Coke products were banned in Belgium, Luxembourg, and the Netherlands.
Coca-Cola attributed the illnesses to causes ranging from contaminated carbon dioxide to psychosomatic hysteria. On a clinical level, they may have been right. On an emotional frequency—the wavelength that matters in times of crisis—they were wrong. The sicknesses occurred during a witch hunt climate against the food industry in Europe. Headlines had already been replete with references to mad cow disease and other concerns.
Coke CEO Ivester issued a vague apology to Belgians in a print advertising campaign. Apologies are often positioned as a panacea in crisis management; however, once they actually happen, people are rarely impressed. “Too little, too late” is often the reaction, as it was in Belgium when Coca-Cola’s self-serving apology was released from Atlanta, in part reading:
We