MBA programs have been slow to recognize it, but Warren Buffett and William Shakespeare have something in common.
Buffett: “It takes twenty years to build a reputation and five minutes to ruin it.”
Shakespeare: “Who steals my purse steals trash…but he that filches from me my good name robs me of that which not enriches him and makes me poor indeed.”
Both the bard and the sage share an understanding of the value of reputation and the need to do everything possible to guard against damage to it. Those of us who have spent our lives in newsrooms and have dealt with scores of corporations in crisis have long been amazed that most executives caught in a media storm reflexively curl up and wish upon a star that the whole thing will just go away. That wish is rarely granted. Especially when 24-hour cable news will latch onto a story and gnaw it like a dog with a bone until a better one comes along.
As reporters, we worked the phones on many crisis stories and know that attempting to stifle, mislead, or ignore the media is a recipe for public relations disaster. Ask anyone at Hewlett-Packard, where “spygate” rocked the board of directors and toppled the company’s chairman, Patricia C. Dunn.
Given the warp speed of the Internet and the “Ready, Fire, Fire a few more times, Aim” standards of some journalists and many bloggers, the best policy for corporations is to get the fullest possible version of the facts out as quickly and as transparently as possible.
Buffett: “It takes twenty years to build a reputation and five minutes to ruin it.”
The Gold Standard of Crisis Management
Our conviction stems from what we learned from the granddaddy of all corporate reputation crises, the Tylenol affair. It is one of the first nationwide cases where management won praise for handling the threat with immediacy and transparency. Twenty-five years ago this fall, a demented murderer bought bottles of Extra Strength Tylenol, substituted cyanide pills for the popular painkiller, resealed the bottles, and put them on the shelves of half a dozen drugstores in the Chicago area where they were bought by unsuspecting customers. Seven innocent people died.
That was back in 1982, long before the explosion in the number of media outlets. Network newscasts had 50 million daily viewers, twice their audience today and the first night all three led their broadcasts with the Tylenol story.
Owned by corporate giant Johnson & Johnson, Tylenol had a 37 percent market share and accounted for 19 percent of the company’s profit. J&J Chairman James Burke, moving swiftly and decisively, managed to save not only the product, which seemed doomed at the time, but also his company’s reputation. He did so in what has become a textbook case of crisis communication. Acting with what seemed like astonishing speed at that time, he developed a strategy resting on two pillars: protect the public—which he did by getting Tylenol off the shelves fast—and fully communicate what he was doing through the media.
A survey found that within a week, 90 percent of the public had heard about the cyanide killer. Tylenol wasn’t returned to the nation’s pharmacies until new tamper-proof bottles and seals had been developed. The Tylenol response in 1982 is still a classic because even back then Chairman Burke and his Tylenol team realized they didn’t have time to wait for all the facts before jumping out in front of the story. If they had, they’d still be waiting because the cyanide killer was never caught.
Fast forward to this October’s crisis affecting children’s cold medicines. As if following Burke’s playbook, the products were immediately withdrawn from drugstore shelves, while its corporate owner bought full-page ads headlined “Your child’s safety is our number one priority.” The names of two of the medicines? Concentrated Tylenol Infants’ Drops Plus Cold and Concentrated Tylenol Infants’ Drops Plus Cold & Cough. Thanks to adroit handling by Tylenol’s present owner, McNeil-PPC, the fever passed quickly; it was a one-day story.
Corporate crises come in many forms. Think TJX and the 45 million credit-card numbers they allowed to escape from their computer system into the hands of thieves. Consider the New England Patriots, the most successful NFL team of the decade, discovered videotaping the signals of opposing coaches, or toy maker Mattel, whose Chinese suppliers were using lead-based paint on the toys they sell to kids.
The Compensation Trap
Corporate reputation crises do not only emerge after spectacular product recalls or instances of compromised personal information. For many companies there is a ticking time bomb in the rich executive compensation stories journalists extract from SEC filings and Yahoo finance. Any politician with a populist streak seems able to find a company to turn into a personal piñata. Even President George W. Bush joined the chorus when in October he told a Wall Street Journal interviewer, “Do I think some of the salaries are excessive at the top? I do…It’s a role of boards of directors to be very transparent with shareholders about these different [pay] packages.”
With CEO pay quickly becoming a popular news peg, every director is just a phone call away from stepping into a news media crossfire that can come from any direction and at any time in the 24-hour news cycle.
To board members, the media world has become frighteningly more complex. No more is a corporate reputation at the mercy of just the three networks, top newspapers, and wire services with their cadres of trained journalists. Today, anyone with a computer and a blog has a megaphone with the potential to reach as many people as Dan Rather reached on the CBS Evening News 25 years ago when he reported the Tylenol story. One estimate of the number of blogs worldwide: 100 million. And there are few bloggers troubled by the ethical standards of mainstream journalism, or who honor the maxim, “Get it first but first get it right.”
So what’s a director to do when faced with a crisis in the age of The Drudge Report, TMZ.com, and Entertainment Tonight? The first manifestation of the nasties could be a driveway stakeout. Recall Kenneth Starr at the height of the Monica frenzy caught by television cameras as he put out the trash. How about being confronted by an aggrieved customer with the skill to set up a vituperative website as media columnist Bob Garfield recently did. Not one for subtlety, Garfield calls it ComcastMustDie.com.
Follow the Coast Guard
There are scores of public relations agencies and web-based gurus who deal in crisis communications. Their advice is usually the same as what the U.S. Coast Guard gives its sailors: Semper Paratus, Always Ready, or the Boy Scout’s motto, “Be Prepared.” It’s good advice and we agree it’s imperative to have a plan prepared well in advance, with key people briefed on what’s in the plan. It ought to be dusted off and reviewed every few months; one top media-savvy person should be designated as the main contact, and that person or a back-up should be available at all times. All employees should also be warned to refer every inquiry to this person. Add an easily updated website where company statements can be put up quickly, and have a company blog, preferably written by the CEO, where he or she can quickly and informally explain the company’s position to inquiring journalists as well as to the blogosphere.
PR guru Larry Weber worries about old school PR types and gray haired executives jumping into this new world without proper training. In his new book, Marketing to the Social Web, he writes: “Now is the time [for companies] to arrange extensive training for managers, bloggers, corporate communicators, human resource professionals, web strategists, and others who will be engaging in social web activities.”
The corporate world is not alone. Duke University faces a multimillion-dollar lawsuit after its clumsy handling of three lacrosse players falsely accused of raping a stripper hired to perform at an off-campus party. Duke found itself embarrassed on the front pages of the nation’s newspapers, answering questions on 60 Minutes, and serving as fodder for cable talking heads.
And yet Duke had a standing plan in place and was more than ready, or so administrators believed, to respond to any predicament that came its way. One of three spokesmen for the institution was senior vice president John Burness, who found himself dealing with the frenetic 24/7 news environment for well over a year. “It was very difficult, complicated by blogs dealing in misinformation. Mainstream media jumped on them and made it even more difficult,” he says.
The wise director recognizes another maxim of crisis management: When crisis occurs, the media demands facts; when all the facts are not known, they will take what facts they have at hand. By the time the full story is out, the journalists and bloggers are onto another story somewhere else.
Is There a Lawyer in the House?
Putting too much control of communications in the hands of lawyers, whom many executives turn to in a crisis, is a common reputation-management mistake. Lawyers generally fear communication and their advice is often to remain mute, go dark, and generally avoid any situation in which you are faced with the media. That was the case at Duke. Lawyers advised the president not to talk to the families of the players falsely accused and now that communication failure is a flash point in the lawsuit those families have brought against the university.
Lawyers are trained to carefully root out the facts, organize them, and present them in dry but logical fashion. Journalists root out facts too, but they are not paid by the hour; they are paid to meet deadlines and the next deadline is always looming. The possibility of an ill-prepared director or corporate spokesman appearing in a derisive posting on YouTube or as a laugh line on The Daily Show is now just seconds away.
Ed Fouhy has held management positions at CBS News, NBC News, ABC News and the Pew Charitable Trusts. Morton Dean was a network TV anchor and correspondent for CBS and ABC. They are cofounders of M.E. Communications Partners, which provides media training and communications advice to C-level executives.