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What is management crisis?
can strike any company at any time. Microsoft, ValuJet, Chrysler, Pepsi
and the tobacco industry are some of the most recent companies that can
attest to this fact, but they are not the only ones. Crises do not discriminate
based on a company’s size or notoriety, and they can hit when a company
least expects them. They come in many forms – strikes, layoffs, product
recalls or allegations of misconduct, but while some of these may seem
small, every crisis has the potential to damage the reputation of a company.
Regardless of the severity of the situation, crises pose a serious threat
to companies – not only to their reputation but their fiscal health as
well. When Odwalla’s apple juice was thought to be the cause of an outbreak
of E. coli bacteria, the company lost a third of its market value. The
same allegation against Jack in the Box restaurant in 1993 caused the
hamburger chain’s stock price to fall from $14 a share to nearly $3 a
share. On the other hand, some companies emerge from crises unscathed
in the eyes of consumers and investors. Johnson and Johnson is one such
company. After it was discovered that its Tylenol capsules had been laced
with cyanide, Johnson and Johnson reacted in such an effective way that
the case is now well-documented as an example of successful crisis management.
The factor that determines how a company will withstand a crisis is its
ability to respond to the crisis. “The public forgives accidents, but
it doesn’t forgive a corporation if its response to the public is inadequate.”
Once a crisis occurs, the company is suddenly a target for the media,
who are acting on behalf of the public to find out the answers to the
important questions about their own safety. One substantial barrier the
company must overcome is the public’s perception, because it is a well-known
fact in the public relations field that perception is, indeed, reality.
One survey discovered some unsettling facts:
• Three-fourths of the people surveyed said companies do not take
responsibility for crises
• Three-fourths said companies do not usually tell the truth
This high level of cynicism is important to overcome, for it is how the
company is perceived by the public that ultimately will determine the
future of the organization.
Time is at a premium during a crisis, so it is essential for companies
to plan ahead. “In a world where the wrong split-second decision can cost
a company millions in negative publicity, not being prepared is not worth
the risk – to executives or the companies they work for.” Many companies
today recognize this and have in place a crisis communication plan that
outlines the steps to be taken during the first few hours of a crisis.
They spell out the who, what, when, where and how the company should deal
with the crises. The best plans produce many of the materials necessary
ahead of time, including initial official statements, press releases,
fact sheets and backgrounders so that the missing information simply must
be inserted and the materials are ready to go. A good crisis plan is “everything
you need in one place so you don’t have to search – because you may not
have time to search."
Are you prepared ?
Many actions can be taken prior to an actual crisis that can help a company
quickly and effectively respond when it does finally occur. Speed and
efficacy are paramount, so it is important these steps are taken before,
rather than during, a crisis. "If you need to spend the first few
hours creating a plan, you may have missed your window of opportunity
and will always be playing catch-up.
Establish a Crisis Management Team (CMT)
This team should be composed of eight to 10 decision-makers in the organization,
each representing a different background and area of expertise. They should
include members from the public relations department, management, personnel,
security and any specialists that relate to the specific industry. In
addition, this team should select a leader and a spokesperson. This spokesperson
is the only person who should be made available to the media, at least
initially. Although the media often want access to the CEO, this should
be done on a limited basis, and he/she should not be the main spokesperson.
The team members should be creative with strong problem-solving abilities,
for "it is the team concept that brings together the expertise to
understand and evaluate the specific crisis and come up with solutions
that can help your organizations deal with it." This team will make
all the important decisions during the time of crisis and will be intimately
involved in every detail.
Develop a Crisis Response Plan
One of the Crisis Management Team's main responsibilities is to develop
a crisis response plan. This plan should be developed with the assumption
that a crisis is any "event, revelation, allegation or set of circumstances
that threatens the integrity, reputation, or survival of an individual
or an institution." These plans will direct the organization's actions
in dealing with the crisis. Key to the process of developing this plan
is generating a set of "worst-case scenarios" in which the group
lists all the potential crises the company could face. These would include
everything from the CEO resigning to allegations that the company's products
kill people. Many of the scenarios in between the two extremes can be
grouped together and will have similar response processes. Based on each
potential crisis, a specific crisis plan should be developed to outline
the exact response needed. Each plan would require materials, such as
official statements, outlines for press releases, fact sheets and backgrounders,
that deal with the situation to be prepared ahead of time. In addition,
it is essential to speak with one voice, so internal and external messages
should be crafted to adhere to this important guideline. Effective crisis
response plans allow companies to "hit the ground running "because
so much of the legwork is done ahead of time.
Update the Crisis Response Plan and Practice it Regularly
Once the plan is developed, it should not be placed on a shelf and forgotten.
Circumstances change, and so must the plan. To be able to implement the
plan, a company must practice the plan regularly. Role-playing exercises
and seminars by former journalists help to prepare the crisis team for
the pressure of a crisis situation. In addition, the media can be unrelenting,
especially to an ill-prepared spokesperson. It is important this person
be prepped before speaking to the media. Speech patterns, camera presence
and poor body language can all affect the delivery of the message.
Establish a Strong Relationship with the Company's Legal Counsel
During a crisis, there is a natural split between the legal, financial
and communications departments of a company. Each brings to the table
its own unique angle, and these ideas often collide. "To a public
relations professional, saying 'no comment' is akin to death. For an attorney,
it is safety." Despite their conflicting views, it is essential there
is teamwork between these groups. Therefore, it is advisable for communicators
to develop a relationship with both legal and financial decision-makers
to allow for all interests to be represented and a compromise developed
ahead of time.
Putting it into action
Having a complete crisis response plan is the first step to effectively
dealing with a crisis, but implementing that plan is just as important.
In a crisis, companies find themselves under the watchful glare of the
public, and every decision they make gets examined under a microscope.
The first hours following a crisis are crucial, for it is in that time
that the public will form its own opinions. Despite all future actions,
these opinions are nearly impossible to change. Therefore, "operational
response is essential. It is the one that saves lives, property and other
assets. The ability to communication is no less important. It's the one
that saves the business." The public will base their opinions on
both of these elements. So, when presented with a crisis, companies should:
• Communicate early and often.
• Show compassion, and be sure the company is doing everything possible
to improve the situation.
• Be honest and open.
• Be consistent in the message.
• Monitor public opinion using new technology (chat rooms, message boards,
discussion groups, surveys).
.Follow up with public opinion surveys and employee questionnaires to
learn from mistakes.
Many crises cannot be avoided, but effectively responding to the situation
may limit the negative impact the company suffers.
Johnson And Johnson Introduction
Johnson and Johnson is a diversified health care giant with over 250 operations
in sixty countries. The pharmaceutical division makes drugs for an array
of ailments including neurological conditions, blood disorders, autoimmune
diseases, and pain management. Johnson and Johnson has medical and diagnostic
divisions which offer surgical equipment, monitoring devices, orthopedic
products, and contact lenses. Their consumer division produces over the
counter drugs and products for skin and hair care, oral care, first aid,
and women’s health products. Johnson and Johnson’s credo is to meet the
needs of its customers in a responsible manner. Every decision they make
is guided by the values it proclaims. Essentially, their credo challenges
them to put the needs and well being of the customers they serve first.
This credo was instituted more than sixty years ago by Robert Wood Johnson,
who was chairman and a member of the company which was originally family
owned. Today it is a publicly traded company with this pact between the
consumer and the company still in place. This philosophy is a pioneering
example of corporate social responsibility as well as a moral compass
and a receipt for success. This formula has led Johnson & Johnson
to be one of a handful of companies that have flourished through more
than a century of change and is a testimony to its endurance.
As the science of human health and well-being has grown, Johnson and Johnson
has been able to grow along with it. Their belief is that being broadly
based gives them a heads up over other companies. Since they have 250
operating companies, they feel it gives them a local window into emerging
customer needs, scientific developments, and technologies throughout the
world. This allows them to take the information they learn and use that
information to make new products and sometimes create new businesses.
Johnson & Johnson’s Tylenol scare
In 1982, Johnson and Johnson experienced a major crisis when it was discovered
that numerous bottles of its Extra-Strength Tylenol capsules had been
laced with cyanide. By the end of the crisis, seven people had died. How
Johnson and Johnson dealt with this situation set a new precedent for
crisis management. The company was lauded for its quick decisions and
sincere concern for its consumers. Despite initial losses, Johnson and
Johnson regained and exceeded its previous market share within months
of the incident.
Reacting to the News
When Johnson and Johnson was faced with the initial situation, it had
to make some tough decisions that would severely impact the future of
the terms, however, CEO James Burke immediately turned to the company's
Credo. Written by Robert Johnson in 1943, the document defines the focus
of the company as its customers with this as its company. Rather than
think in financial inspiration, Tylenol used the media to promptly begin
alerting people of the potential dangers of the product. It dispatched
scientists to determine the source of the tampering.
Setting a New Standard
Johnson and Johnson then made a decision that would set a new standard
for crises involving product tampering. The company ordered a massive
recall of more than 31 million bottles at a cost of more than $100 million.
It also temporarily ceased all production of capsules and replaced them
with more tamper-resistant caplets. This type of drastic response had
never been attempted, which prompted much criticism. However, Johnson
and Johnson stood firm behind its decision - and for good reason. The
company was able to "use the crisis to demonstrate to [its] customers
[its] commitment to customer safety and to the quality of the Tylenol
product." In addition, the company's willingness to be open with
the public and communicate with the media helped the company maintain
a high level of credibility and customer trust throughout the incident.
Burke also maintained a high profile and repeatedly assured the public
of the company's commitment to its customers' safety.
Regaining Lost Ground
Directly following the incident, Johnson and Johnson's stock fell seven
points, and it dropped from having 35 percent of the nonprescription pain-reliever
market to having only eight percent of the market. However, these tough
times would not last. The company aired commercials within days to regain
the public's trust, and a month after the recall, the company embarked
on an aggressive campaign to rebuild the Tylenol brand. In November, it
promised to have the product back on the shelves in a new triple-tamper-resistant
package - the first of its kind - by the end of the year. It offered incentives,
such as a free replacement of caplets for the capsules and special coupons,
to try to maintain its customer base. The company's attempts were successful,
and by the following spring, Johnson and Johnson had regained its previous
market share. When another poisoning involving a New York woman occurred
four years later, Johnson and Johnson once again had to take action. "Because
the company had been through it before - the tampering, the tragedy, the
scrutiny of news organizations - its executives knew how to handle it."
Despite the fact this case was soon identified as an isolated incident,
Johnson and Johnson decided to permanently discontinue capsule products
- once again demonstrating its commitment to putting safety first.
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